A multimillion-dollar deal between the federal government and the five biggest mortgage banks provides a yearned-for feeling of justice in the middle of the disaster of a mortgage crisis that made some rich and is leaving millions on the street.
Let’s not mince words. This deal is only a settlement for the institutions’ inappropriate actions in automatically signing foreclosures without a notary being present and not knowing whether the facts surrounding the operations were truthful. It has nothing to do with the complex facts that led to the crisis and that are also under investigation.
In any case, this is a very important step because it will help reduce loan principals for homeowners who are underwater, among other specific requirements, and because state attorneys general will play a role in bank oversight.
Separately, it is good to have recognition of the fact that California is one of the most negatively affected states in the mortgage crisis. It also fell victim to an irresponsible and greedy lending practice, in which banks processed foreclosures without proper documentation and with inadequate evaluations.
We hope this deal leads homeowners to be able to negotiate with banks, and banks act in good faith, meaning without evasions and obstacles. Banks also should not be hypocritical, negotiating with a homeowner on the one hand while at the same time planning the foreclosure.
The $25 billion settlement will help many homeowners, while for others-like those who already lost their homes-it will represent meager compensation. What matters is that the banking industry, like any other, does not go unpunished for irresponsible behavior that was detrimental to its customers.