Would a foreclosure fund work?
TEXT OF STORY
Kai Ryssdal: We’ll begin today with what looks like the start of a fix for the foreclosure mess. State attorneys general who’re looking into accusations of shoddy paperwork are working on a deal with some of the big mortgage lenders.
There are the usual protestations about nothing being agreed to yet. But one idea that’s said to be part of the package is some kind of fund to compensate homeowners who were wrongfully foreclosed upon. A pool of money, the theory goes, may offer quicker relief than the court system would. And the banking industry would probably get behind something like that.
But is there a check big enough to make up for having your home wrongly taken away? Economic-victim funds can turn thin and watery pretty fast. And this one would be especially broad and necessarily complicated.
Marketplace’s Janet Babin explores the goods and bads of a foreclosure fund.
Janet Babin: The foreclosure fund is still a work in progress, but could include compensation for a wide swath of problems — from shoddy paperwork to fraud.
Steptoe & Johnson attorney Bill Hassler has represented homeowners who’ve suffered foreclosure fraud.
Bill Hassler: The goal is admirable. It’s to do rough justice without trying to account for every penny.
But with foreclosures, the pennies will have to spread far and wide. Hassler says companies have used these funds with mixed results.
Hassler: Some funds have worked very well, but in terms of the mortgage situation, unfortunately, it’s a very, very difficult problem. I think you’re going to run into problems with some people be undercompensated, and some people being over compensated.
The money for the fund would come from the banking industry. But that’s probably O.K. with them.
Analyst Nancy Bush with NAB Research says that’s what’s going to happen anyway.
Nancy Bush: I mean the political realities are today, the banking industry gets blamed for something, they pay money, life goes on.
Bush says the industry wants to get out of the spotlight, so legal foreclosures can get back on track.
Georgetown law professor Adam Levitin says the banks have a vested interest in finding a quick resolution.
Adam Levitin: The banks want to settle and have this go away quickly because they’re scared that the attorneys general will dig deeper.
And he says, find even more irregularities. The Iowa Attorney General’s office says a foreclosure fund is just one solution on the table — a settlement in this 50-state probe is still a ways off.
In New York, I’m Janet Babin for Marketplace.
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