(Mark Your Calendars: RealShare Apartments East, February 15th in Washington, DC).
WASHINGTON, DC-Another ugly chapter in the housing crisis-liquidity crunch-Great Recession has closed. Federal and state government officials have finalized a $26 billion agreement with five major banks to settle alleged foreclosure abuses by these institutions. It is one of the largest government-business settlements in history. Details of the settlement can be accessed here.
The five banks are Ally Financial, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo. Of the $26 billion, the Federal Reserve has included $766.5 million in fines related to problems in the banks’ mortgage servicing businesses. The banks will not pay their fines to the federal government, however. Rather, these payments will be part of the broader state-federal deal.
Besides a sense of comeuppance—finally—for the alleged practices, the greater impact this agreement will have on the housing market is unclear. That the movement of houses in many cities is moribund is amply clear—as illustrated by the January edition of the Housing Scorecard—and few expect that to change any time soon.
One school of thought has it that the pace of foreclosures will actually step up now that an agreement is in place. Before, the banks had been holding off until this particular piece of business with the feds and state AGs had been settled.
On the other end of the spectrum, advocates of the agreement say it will help bring the housing markets back to health. That is hard for David Johnson, principal of Strategic Vision, to swallow.
“It is possible that psychologically it will have a short-term boost—but only short term,” he tells GlobeSt.com. “All of these measures go that way—tax cuts, the stimulus. For about a month people get excited and think they see progress.”
The reality is, Johnson says, the housing market needs to clear out the properties that are languishing at likely painful price points. “No agreement with the country’s biggest banks can speed that along.”
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
