Those of you who have read our previous coverage of the back and forth between the state attorneys general and five major mortgage servicers know that the settlement announced on Thursday is a massive, complicated, multi-year deal negotiated by the country’s most ambitious public prosecutors, its most powerful financial institutions and some of the highest-paid lawyers in New York City. There are several levels to judge it on: the help it gives homeowners; its benefit for various political players; and what it may do for the economy. But overall, it’s a clear win for Obama and Democrats, a qualified win for the banks, and a minor, belated victory for homeowners.
On the surface it may seem like a windfall for some homeowners. Banks are going to be sending checks for $1,500 to $2,000 to up to a million people who were kicked out of their houses and have claimed that “servicing abuse” occurred during the process. The payouts will be nearly instantaneous–”we don’t read anything, it’s check the box,” says one state AG negotiator. And while that money isn’t going to make much difference to someone who lost their house years ago, it certainly can’t hurt a struggling family–or, for that matter, Obama and his party in an election year. Furthermore, you’ll hear Obama aides say that the deal represents the biggest principal write down since the housing collapse. That’s a modest statement, since government programs aimed at encouraging principal write downs have fallen way short of their initial targets. But being able to make the claim is convenient for Obama’s re-election effort.
