Attorneys general in all 50 states negotiated a deal with lenders to resolve
Now that the settlement is done, foreclosures will likely pick up steam. Borrowers who have been sitting in their houses waiting for the bank to
foreclose may see banks starting to move much faster to finalize foreclosures
and resell foreclosed homes.
I had wondered why banks seem to take so long to foreclose. I assumed it
had something to do with not wanting to flood the market with foreclosed. But
according to some news sources, the main reason is that the banks have been fending off litigation brought
by all 50 state attorneys general and were waiting until that matter had
been settled before moving more quickly to foreclose.
The settlement should help some homeowners stay in their homes and California
is set to get about $12 billion of the settlement funds which would help
an estimated 250,000 homeowners.
Economists are prognosticating that this will result in a short-term hit
on the economy, but will be positive long-term as the excess inventory
of over encumbered homes are sold and prices stabilize.
As banks begin moving faster to foreclose on homes, it is possible that
more debtors will need to file Chapter 13 to try to save their homes.
Because the anticipated uptick in foreclosures will have the short term
effect of driving down home prices, debtors may also be able to take advantage
of the Chapter 13 provisions allowing junior mortgages to be stripped
from the home where there is no equity to support the junior mortgage.