Prolonging a resolution and rewarding deadbeats. With the usual leftist groups and class-action lawyers promising that “this is only the beginning”. I fear that it is.
For the rest of us who fortunately are not in foreclosure, however, the potential value of the settlement will be to [de] lay the foundation for recovery of the housing market and, therefore, the economy at large. According to the research firm LPS Analytics, the average home in foreclosure has been delinquent for 674 days—a delay that has doubled since the exposure of the robo-signing scandal ground the foreclosure process to a halt. In Florida, the time from default to foreclosure now exceeds 1,000 days. During that time the homeowner can live rent-free—or even better, as news reports indicate that some of those in foreclosure will rent out the home to a tenant while the foreclosure is pending (sometimes resulting in a surprise to the unsuspecting tenant when the bank shows up to evict him).
Worse than the delay, however, is the uncertainty of a foreclosure system in chaos. Current occupants have no incentive to engage in a short-sale or otherwise turn the house over to a performing borrower. Buyers have no certainty as to when delinquent properties will finally come available for purchase. Billions of dollars of capital that could be recycled by lenders from liquidating foreclosed properties has instead been tied-up in dead loans with no possibility of repayment and uncertain timing prospects, thereby interfering with the ability of borrowers to obtain mortgages. Settling the claims will help break this logjam, enabling foreclosures to resume, the housing market to find a bottom, and the stock of lending capital to rebound.