Tags: Mortgage | foreclosure | Deal | purpose

George Mason Professor: Mortgage Deal Has ‘No Economic Purpose’

By    |   Friday, 10 February 2012 12:16 PM

The $25 billion foreclosure-abuse settlement between major banks and state attorneys general is steeped in politics, Fox Business Network reported.

"It's been a witch hunt from the start. This has been driven by politicians and a desire for blatant retaliation or revenge against the banks," Fox Business Network quoted Anthony B. Sanders, a finance professor at George Mason University, as saying.

"There's no economic purpose to this settlement," he added. "It's not going to undo the damage done by people defaulting."

Allegations of fraud were controversial from the start, Fox Business Network reported. Mortgage processors inundated with paperwork after the housing bubble burst were accused of robo-signing, or signing foreclosure paperwork without checking documents. But most homeowners hadn't been paying their mortgages and would have lost their homes anyway.

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So it's hard to determine how they were harmed or if the robo-signing was just sloppiness or actual fraud.

Signing documents you haven't read, Sanders told Fox Business Network, is "admittedly not a good practice — but no one was harmed."

"Do we owe money to people asked to leave premises they weren’t paying for?” asked Sanders. “And is $1,800 going to get that house back?”

Under the $25 billion settlement announced Thursday, the five largest banks will provide mortgage aide to qualifying borrowers including reducing their principal balances.

Much of the aid, $17 billion, will reduce loan principals, $3 billion will help borrowers refinance to lower rates, and $5 billion will go to state and federal mortgage assistance programs.

The settlement seems based on the false premise that homeowners wrongly lost their homes because of shady foreclosure practices, Fox Business Network reports. Financial reparations to alleged victims will not right alleged misdeeds or improve mortgage lending.

The settlement is a shakedown of banks by politicians, asserts The Wall Street Journal in an editorial.

"The bankers coughed up shareholder money to settle a pseudo-foreclosure scandal, while the White House moved closer to its political goal of guaranteeing every home mortgage. Rarely have so many politicians cashed in so blatantly on so little wrong-doing."

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