There Will be 25 Billion Dollars Unavailable to Homebuyers

The Obama Administration has successfully overseen a settlement that will require five of the nation's largest banks to pay 25 billion dollars (combined) for having committed the sin of using a robo-pen on mortgage documents. The federal government and 49 of the states reached a settlement in which J.P. Morgan Chase, Ally Bank, Wells Fargo, Citigroup and Bank of America will pay 25 billion dollars to clean up the banking industry so that tragic actions - like the use of a robo-pen - will not again occur. The theory promulgated by the federal government was that the use of the robo-pen implied that serious review of mortgage documents was not had prior to the banks instituting foreclosure proceedings. The theory would have us believe that the improper review process led to banks instituting foreclosure proceedings against borrowers not in default. There is a problem with the theory. Those who would have us believe that there was an improper review process have been unable to trot out even a single individual against whom one of the banks wrongfully commenced a foreclosure action. When President Obama took to the podium and the teleprompter to chasten the banks and bask in the success of this settlement - would not it have been more effective if he could have pointed to poor Mary Smith from Peoria, Illinois who almost lost her home due to these shoddy practices? Of course it would have. The problem for the theory is that there are no Mary Smiths. News reports indicate that 1.5 billion dollars will be spent cleaning up the banking industry's process in instituting foreclosures. The other 23.5 billion? Well.....that is a more difficult question. The one thing we know for sure is this - presently there is a housing crisis. There are many, many foreclosed homes sitting vacant. Banks don't know what to do with them and so they sit vacant - a blight on the community and a contributor to crime. Home prices are not rising. New construction is almost at a standstill. While a house is a commodity that is bought and sold, it is much more than that. It is where a person and/or a family lives. Most people when buying that first home need a mortgage to pay for it. Five of the nations larger banks now have 25 billion fewer dollars to lend to homeowners. That means less income for mortgage brokers, less income for real estate brokers, fewer homes being purchased, and there being one more impediment to an economic recovery.