Americans should welcome assistance that flows from banks to struggling homeowners, but a $26 billion settlement between states' attorneys general and five of the nation's biggest lenders - including Bank of America - is neither a salve for the housing crisis nor a rescue for most of the homeowners whose lives were ruined by it.
But for a pair of attorneys general, it could have been worse.
The settlement, announced Thursday by President Barack Obama, will reportedly include $17 billion for homeowner relief and $3 billion for refinancing opportunities. Of the total, $338 million will go to North Carolina and its homeowners, N.C. Attorney General Roy Cooper said. Those numbers each could go up if nine other major servicers sign on to the agreement.
Or, the numbers might end up much lower. Previous attempts at foreclosure assistance have either underperformed or helped a tiny fraction of struggling homeowners, including the Obama administration's Home Affordable Modification Program, which as of late last year had spent only $2.4 billion of $50 billion in assistance promised about three years ago, according to the Washington Post.
Officials say this time, incentives and enforcement mechanisms are in place to ensure that banks distribute the money they agreed to spend. That includes checks for about $2,000 to approximately 750,000 people who had homes foreclosed upon between 2008 and 2011 - a pittance for those among the foreclosed who did all the right things but lost their homes and credit because of bank practices.
Overall, a small percentage of troubled borrowers will be helped by the settlement, and experts are largely skeptical the $26 billion will make a dent in a crisis in which homeowners owe about $700 billion more than their houses are worth. The five banks, meanwhile, will face a somewhat mild sting - $5 billion total in direct cash payments, along with a reported $20 billion in "credits" for principal write-downs and other assistance to homeowners. Banks also get a legal pass on some of their past transgressions, including the widespread practice of robo-signing - foreclosing on homeowners with only a fleeting glance at their documents.
But if not for at least two attorneys general - California's Kamala Harris and New York's Eric Schneiderman - the banks might have been able to buy an even better get out of jail card.
Harris walked away from negotiations at one point, in part because she thought that banks were asking for broad legal forgiveness on practices that included the potentially improper packaging of loans into securities sold to investors. Schneiderman rightly fought to protect a lawsuit he has brought against three banks - Bank of America, Wells Fargo and Chase - alleging deception and fraud in how they used an electronic database.
Each wanted, and apparently has won, the right for states to investigate bank conduct that hasn't been thoroughly examined yet. That's a good thing. Banks aren't solely responsible for the housing and financial crisis, but the attorneys general should be vigilant in exploring how they contributed. They should also make sure as many dollars as possible of this settlement make it into the hands of those who've already been punished - the homeowners.