The Kellers are caught up in a little-known horror of the U.S. housing bust: the zombie title. Six years in, thousands of homeowners are finding themselves legally liable for houses they didn't know they still owned after banks decided it wasn't worth their while to complete foreclosures on them. With impunity, banks have been walking away from foreclosures much the way some homeowners walked away from their mortgages when the housing market first crashed.
Federal banking regulators are trumpeting an $8.5 billion settlement this week with 10 banks as quick justice for aggrieved homeowners, but the deal is actually a way to quietly paper over a deeply flawed review of foreclosed loans across America, according to current and former regulators and consultants.Feds Replace Flawed Foreclosure Review With Vague $8.5 Billion Settlement
To avoid criticism as the review stalled and consultants collected more than $1 billion in fees, the regulators, led by the Office of the Comptroller of the Currency, abandoned the effort after examining a sliver of nearly four million loans in foreclosure, the regulators and consultants said.
The Independent Foreclosure Review was supposed to be a full and fair investigation of the big banks’ foreclosure abuses, and it was trumpeted as the government’s largest effort to compensate victimized homeowners. Federal regulators, who designed the review, forced banks to spend billions to carry it out. Millions of homeowners were eligible and hundreds of thousands submitted claims. But Monday morning, the very regulators who launched the program 18 months ago announced that it had all been a massive mistake and shut it down.NC, again:
Instead, 10 banks have agreed to pay a total of $3.3 billion in cash to the 3.8 million borrowers who had been eligible for the review. That’s an average of around $870 per borrower. But typical of a process that’s been characterized by confusion, delays and secrecy, regulators said the details of how the money will be doled out were not yet available.
The failing, as we’ve stressed again and again, was not in the law, the deal design, or the contracts, but that the sell side systematically refused to live up to the terms of its own agreements.Letters To Bank Of America
Anyway, Detroit used to be a really nice place to live. And lots of people would like to buy homes in Detroit and fix them up and make them pretty again, but Bank of America and Countrywide probably wouldn’t stand to make too much money if houses sold cheaply and mortgages were fair and banks were more flexible when the unemployment rate in America is around 9% (here in Detroit, it’s more like 14%—that’s really high, in case you didn’t know).With abandoned houses falling into disrepair, the target of thieves who strip appliances, copper, and bathroom fittings, blighting neighborhoods and posing fire hazards, there may be one solution: Inside the Radical Plan to Fight Foreclosures With Eminent Domain
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