Realtors hope $25B foreclosure settlement will spark housing revival

The following post was written by John Stodder, The Dolan Company National Affairs Correspondent. Dolan is the parent company of Michigan Lawyers Weekly.

With the residential real estate industry shell-shocked from years of a moribund market, its spokespeople can be forgiven for taking a cautious attitude toward this week’s announcement of a $25 billion settlement with five of the nation’s biggest mortgage lenders over flawed and fraudulent foreclosure practices.

The money in the settlement will mostly go to borrowers and homeowners who are underwater. According to the Washington Post, the settlement “will force lenders to revamp how they interact with troubled homeowners and bar them from trying to foreclose on borrowers while simultaneously negotiating mortgage modifications.”

But could the settlement help get the residential market moving again, even in the face of historic low interest rates and plummeting prices?

“We do hope that the resolution will help more lenders with the certainty they need to kick loose more loans,” said Walter Molony, a spokesman for the National Association of Realtors inWashington,D.C. He cautioned, however, that the impact will be limited because the settlement doesn’t help the millions of borrowers with loans owned by Fannie Mae or Freddie Mac.

Eric Berman, communications director for the Massachusetts Association of Realtors, was pleased that the settlement was designed to help more homeowners stay in their homes because that kind of stability slows the ongoing descent of home values in many markets – though the market isn’t as bad, he hastened to add, inMassachusetts as it is in many other areas.

But even there, he said, “Distress sales impact values of homes of people who are not in a distress situation.”

Realtors also hope the settlement “can give lenders the confidence to start up with loan modifications, short sales and principal write-downs,” Berman said. “We’re going to have to wait and see. From our members’ point of view, short sales take forever. The only thing short about a short sale is the definition.”

While realtors continue to ruminate, the blogosphere reacted quickly:

 

  • Financial blogger Yves Smith at Naked Capitalism gives “The Top Twelve Reasons Why You Should Hate the Mortgage Settlement.”  She is scathing. “We’ve now set a price for forgeries and fabricating documents: It’s $2,000 per loan,” which, as she points out, for an average loan is “less than the price of the title insurance that banks failed to get when they transferred the loans to the trust.”
  • Writing at the Huffington Post, financial reform activist Dennis Kelleher calls the deal a “criminal sell-out,” because the $20 billion in loan forgiveness, though impressive at first blush, only adds up to $20,000 per 1 million homes. According to a Zillow report in November, some 14.6 million home borrowers have fallen into a negative equity position.
  • Reuters’ financial blogger Felix Salmon likes the deal because the attorneys general didn’t give up too much and the banks didn’t get too much. Banks only got immunity from suits over the practice of robosigning, but can still be sued over a range of other alleged misdeeds that contributed to the mortgage default crisis.

 

– John Stodder

 

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BCBSM motion denied in $4.5 million breach-of-contract suit

In our Aug. 16, 2010, edition, we reported about a $4.5 million verdict rendered against Blue Cross Blue Shield of Michigan in a breach-of-contract and tortious interference lawsuit (“Their (Blue) Cross to bear”).

That stemmed from Pontiac-based TheraMatrix Services, Inc. contending BCBSM breached its agreement with the physical-therapy business over a program at Ford Motor Co. that would have saved the auto company millions of dollars in health care costs, and also interfered with TheraMatrix’s business relationship with Chrysler Motor Co. over a similar program.

Now, in a recent development, Oakland County Circuit Court Judge Edward Avadenka on Oct. 5 rejected BCBSM’s motion for judgment notwithstanding the verdict or a new trial.

BCBSM counsel Laurine S. Parmely said in August that “we don’t see this as more than a simple, contractual business dispute between two parties.”

But Rodger D. Young, counsel for TheraMatrix, indicated the possibility of filing another suit to seek damages for money lost during TheraMatrix’s 18-month hiatus from Blue Cross’ provider network – when Blue Cross terminated TheraMatrix as a participating provider for its health plans in Michigan.

As well, he added, there could be counts of anti-trust and anti-competitiveness asserted against Blue Cross, as officials from the Michigan Attorney General’s Office and the U.S. Department of Justice monitored the July 2010 trial.

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At least she wasn’t on Oceanic Flight 815

Attorney Geoffrey Fieger has filed a four-count lawsuit for negligence, false imprisonment, emotional distress and breach of contract, after his client, Ginger McGuire of Ferndale, was locked on an airplane for four hours after it landed.

The Detroit News reports:

[McGuire] flew Monday on a trip for an accounting training session that began in Detroit and ended in Philadelphia. During her travels, she was shuttled to Dulles Airport in Washington, D.C., before heading to Philadelphia, where she was left stranded on the airplane after landing.

McGuire said she was exhausted from traveling and fell asleep as soon as she took her seat on the Philadelphia-bound Trans States airplane — Trans States works in conjunction with United Airlines. She was not taking medication and did not have any alcohol to drink.

McGuire woke up at 3:50 a.m. and found herself alone on the 50-seat plane.

McGuire said she walked up and down the aisle for 15 minutes. She said she panicked and didn’t think of calling for help.

“Then the door to the airplane opened and two Philadelphia police officers were standing there with a TSA officer,” McGuire said. “They wouldn’t let me off the plane until I proved who I was. It was like, ‘Show us your ID, show us your ID.'”

Officials let her go after about 10 minutes. McGuire then checked into a local hotel.