The $25 billion settlement announced Thursday between state attorneys general and the five banks over foreclosure fraud is certainly one of the biggest in history. But will it make an impact on the Washington area’s housing market?
Early indications are: Not really.
All told, the number of homeowners or borrowers affected would total about 15,000 in Virginia, 40,000 in Maryland and a few thousand in the District, the attorneys general in those areas estimate.
Borrowers who underwent foreclosure with the five banks (Wells Fargo, Bank of America, JP Morgan Chase, Ally Financial and Citi) could receive cash payments up to $2,000.
But the bulk of the $25 billion will help thousands of people underwater on their mortgage to write down principal or refinance. And it’s unclear how exactly that is going to happen and how banks will decide who will qualify.
Still, economists I talked to so far don’t seem to think this settlement will have much impact in Washington because much of the robo-signing scandal was focused in states like California, Florida and Nevada.
In those areas, some economists, like Mark Zandi of Moody’s Analytics, believe a larger shadow inventory of foreclosures will now enter the market, because banks were holding those back while settlement talks were underway.
“These things will help some people,” said Zillow chief economist Stan Humphries. “Expectations should be tempered,” he added.
Local housing expert Lisa Sturdevant said the three-year timeframe by which banks have to implement the settlement “is problematic.” “
There’s going to be so much else to impact the housing market here in that time,” such as federal spending cuts, job growth and the larger economic picture, Sturdevant said.
The settlement, however, could help some underwater homeowners in suburban Maryland. In Prince George’s County, for example, two thirds of the inventory of homes for sale are either short sales or foreclosures.
Related: What the settlement means for you
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