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So, what's happened everyone? First off, good morning/afternoon. I don't
know when you're watching this. It's probably late at night, and you're
sitting at home in your PJs.
Morale of the story. I'm Anton Stetner with the Real Estate Solutions
Group. Today, we're going to talk about the $25 billion mortgage
settlement, robo signing deal, whatever the heck you want to call it, in
relation to what's been going on. Everyone's seen this come out in the
news. I think it came out basically early in February. We're talking about
Ally Financial, Bank of America, the Citigroup, JP Morgan Chase, and Wells
Fargo.
All of them reached an attorney settlement, a settlement over . . . what
was it all about? The Attorney Generals said there were alleged allegations
of foreclosure abuses, and so this was a $25 billion settlement that came
about out of the public outcry after the review from the robo signing.
What does this really mean? So, what does this really mean? It actually
means very little for borrowers that were foreclosed on. It's going to be
pretty small payments that they'll receive, probably as little as $2,000
for people that were foreclosed on incorrectly or just some of the ones
that were foreclosed on during the last four years. Most of the money will
actually go out of that $25 billion in the form of refinances, shorts, and
possibly principal reduction for people who are under water.
The best thing for banks is banks now know how much money they owe. So it's
kind of a definitive number. They say the settlement may actually rise, but
it won't rise a ton from where it's currently at. The banks also have three
years to pay back on their obligations. What's really been happening is
these banks have been gathering up their money. The money has been sitting
on the sidelines, and there's just been this major uncertainty in relation
to this. They weren't really sure what they're going to do, but they've
already had the money. The money's been sitting on the sidelines.
What's it mean? It means rising foreclosures for us, specifically, here in
the state of Washington. I'm going to explain why here in a second. So, the
implications from this are we have reduced uncertainty for the banks
because now they have reached a settlement agreement. They know what's
going on. They can take their capital they've got in reserves and deploy
that over here.
Let me be perfectly clear. I'm not saying I agree with what's happening.
I'm just telling you what I believe is going to happen.
Secondly, this is going to provide some relief to existing homeowners who
are under water, behind on their mortgage. Theoretically, it's going to be
an end to some of the abusive practices. And then, lastly, and I think kind
of the main thing that we want to talk about is it's going to cause an
increase in foreclosures.
So what's happened, here's the graph. So what's happened in this graph is
you can notice that it's trending in a downward direction for notice of
trustee sales. Why is that? Ever since the robo signing thing happened,
we've seen notice of trustee sales decline because banks have been
reviewing their foreclosure process. They've been slowing them down.
However, we have not seen bank owned inventory decline. So, what we're
believing here is that we haven't hit a bottom. What we've actually seen is
just a stall in the process. So with things like lower unemployment,
inflation being higher, it's definitely higher than the target rate of 2%
with GDP growing, the banks are feeling a little bit more confident. So
what they're going to do is they're going back to their foreclosure
processes, and what we'll see is Washington foreclosures rise because of
it. The only reason it went down before was because of an artificial
[inaudible 4:02] effect in the economy. Theoretically, that was the alleged
foreclosure abusive practices.
So, just a final note. The thoughts are, because of this big settlement,
some owners will get help. Some of them are actually going to get re-fi's,
maybe principal reduction. Short sales are going to get easier. But I think
we're going to see an increase in the total number of foreclosures just
because now banks know what they have to deal with. With improving economic
indicators, it makes sense for them to get through this real quick before
any other problems arise. We're not going to see a tidal wave, but we're
going to see a rise from where we're at today in the total number of
foreclosures here in the state of Washington.
Anyway, that's my thoughts. Leave me your thoughts and comments below, and
we'll update more as you go. Thanks a lot, people.