The largest bank in the US, along with other institutions, will pay $8.5 billion to end an intense review of their foreclosure practices. The deal, which was announced earlier this week, will help the lenders move forward from their past problems, but experts say it likely won’t have a major impact on the recovering housing industry.
In a separate deal, Bank of America will pay an additional $11.6 billion to Fannie Mae to put an end to disputes with the government-backed enterprise. This will help BofA scale back its mortgage business, but it isn’t the final page to a rather ugly story. BofA has already paid some $40 billion for mortgage settlements and more could come.
If you recall, five big banks reached a $25 billion deal with the government last February. Under the deal, money was set aside to help provide relief for homeowners by reducing how much they owed on their mortgages. However, a recent report by the Office of Mortgage Settlement Oversight said that despite the extra cash being thrown at the problem, people were still losing their homes.
While some qualifying homeowners will receive somewhere between a couple hundred dollars to around $120,000 from the recent settlement, the housing market relies more on current market conditions rather than on billions of dollars in direct homeowner assistance, according to Zillow Real Estate Research. The indication of true progress is the increasing values of homes around the country. Zillow reported that November marked the 13th consecutive month of national home value increases. It’s a rate of appreciation we haven’t experienced since before the housing bubble burst.
Another piece of news that will more likely impact housing is the finalization of new mortgage lending rules, expected to be completed by the Consumer Financial Protection Bureau by the end of the month. While the new rules will likely increase transparency in the mortgage process, tightened lending restrictions that require higher down payments could wind up hurting the housing recovery if consumers are not willing or able to buy homes.
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Image by Kevin Shorter, used under a Creative Commons license.