The foreclosure market has been semi-frozen for the past year as banks negotiated with state and federal government to reach a deal over improper foreclosure paperwork processing.
Now the banks have coughed up $26 billion to partially settle the claims over robo-signing. Californians will get $12 billion of this. Floridians $8 billion.
The foreclosure market should become liquid again and this will mean a dramatic increase in seized properties. Now the free market can get back to work after paying a tribute to the politicians.
The $25 billion settlement with banks over foreclosure abuses may trigger a wave of home seizures, inflicting short-term pain on delinquent U.S. borrowers while making a long-term housing recovery more likely.
Lenders slowed the pace of foreclosures as they negotiated with attorneys general in all 50 states for more than a year over allegations of faulty and fraudulent paperwork used to repossess homes. With today’s agreement, banks are likely to resume property seizures.
“The best thing about the settlement, frankly, is that it will be done,” said Stan Humphries, chief economist for Seattle-based Zillow Inc. (Z), a provider of home-sales data. “The shadow of the settlement hung over the market for a year now.”