National Mortgage Settlement | What It Means to the Real Estate Market in 2012

Real Estate Agent with AcklesWilliams of Semonin Realtors #70813

National Mortgage Settlement Kentucky
Last week, the Federal government and 49 state governments (Oklahoma being the exception) agreed to a $25 billion settlement regarding robo-signing and the challenges it created in the foreclosure process. I want to give a synopsis of the settlement and some perspective on what effect it will have on the housing market in 2012...

The Basics

The $25 billion in funds will be dispersed as follows:

$17 Billion National Commitment to Foreclosure Relief Efforts
The servicers collectively agree to commit a minimum of $17 billion directly to borrowers through foreclosure relief effort options, including principal reduction for qualifying borrowers, short sales, anti-blight measures, and enhanced homeowner transition programs.

$3 Billion National Commitment to Underwater Mortgage Refinancing Program
The servicers collectively agree to commit $3 billion to refinance “underwater” homes (when a homeowner owes more on a mortgage than a home’s current market value). To qualify, borrowers must be current on their mortgage payments on a mortgage owned by one of the five banks.

$5 Billion Payment to States and Federal Government
The servicers’ $4.25 billion payment to the states includes $1.5 billion for payments to borrowers who lost their home to foreclosure by one of the five servicers…$750 million of the state-federal payment will go to the federal government to resolve federal claims.

Will the Settlement Have a Major Impact on a Housing Recovery?

Probably not. Though it is a step in the right direction, it may be too little too late. Here are some opinions on the settlement:

What about Foreclosures Moving Forward?Foreclosures Louisville Kentucky

The settlement did bring clarity to one major issue – foreclosures. Banks have been holding off the foreclosure process on millions of homes over the last 18 months as they waited for the particulars of the settlement. They now know how they can move forward without penalty. The result will be an increase in foreclosures coming to the housing market.

Housing Wire

“It will speed up processing, and perhaps mean that foreclosures that have been waiting around since robo-signing came to light in 2010 will now gain legitimacy.”

Calculated Risk

“It does appear the number of completed foreclosures will increase following this settlement – especially in some judicial states with large backlogs – so there will probably be more REOs (lender Real Estate Owned) for sale.”

Wells Fargo

“Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement helps the housing market in the long run because it allows banks to proceed with millions of foreclosures that have been stalled. Many lenders have refrained from foreclosing on homes as they awaited the settlement.”

Posted by

Sean S. Williams
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®, ABR®, e-Pro®
1st Time Buyer & Relocation Specialist
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Semonin Realtors
of Louisville, Kentucky
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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Paul Campbell Realtor Lexington 02/19/2012 08:29 AM
Lending / Financial
Kentucky Jefferson County Louisville
Semonin Realtors - Kentuckiana
home buying
home selling
short sales
semonin realtors
national mortgage settlement

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Edward & Celia Maddox
The Celtic Connection Realty - Queen Creek, AZ

Think it is a waster of money and effort, as usual, if thought up by goverment is a waste of resources.

Feb 14, 2012 03:06 AM #1
Sean Williams
AcklesWilliams of Semonin Realtors - Louisville, KY
Your Louisville Realtor

Edward & Celia,

I would agree that 99% of the time anything thought up by the government when it comes to the housing market is usually a BOMB and a great waste of money.

At this point, I am not 100% sure what to think about the settlement and if it will hurt and help the market. Immediately, I think it will obviously hurt the market with the greater influx of foreclosures but could help in the long run by helping banks clear out their inventory...but talking about banks is awhole other monkey!

Feb 14, 2012 03:11 AM #2
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I have two thoughts on it.  None of the money will find its way to me or for that matter the right people.

If Oklahoma did not sign off on it there is probably something wrong.  Oklahomans have more common sense that most people give them credit for.

Feb 14, 2012 07:18 AM #3
Paul Campbell Realtor Lexington
Rector Hayden, Lexington, Ky - Lexington, KY
Kentucky Homes for Sale


Thanks so much for taking the time to write a very good post explaining this settlement.  I have not had the time to look at it carefully  so I really appreciate the effort you put out on this post.  Have a great year. 

Feb 19, 2012 08:26 AM #4
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Sean - thanks. Got some clarity (to a point) here. Will the foreclosures increase here? Willbe interesting to watch

Feb 19, 2012 08:40 AM #5
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