The detailed terms of the so called “Robo-Signing” agreement between mortgage servicers and a coalition of state attorneys general and federal agencies were filed this week.
The government’s $25 billion settlement with the nation’s five biggest mortgage servicers over so-called “robo-signing” practices could boost short sales, as loan servicers will receive credit when they approve sales that include forgiveness of a portion of underwater homeowners’ debt, such as is done in a short sale.
The settlement calls for mortgage servicers to pay $5 billion in fines and commit to a minimum of $17 billion in homeowner relief, including principal reductions. Another $3 billion is earmarked for helping underwater borrowers refinance.
Although the settlement is only expected to help a fraction of homeowners who owe more their properties are worth (estimates are one in 20) it will also help bring certainty back to housing markets by removing some of the obstacles that have been keeping homes stuck in the foreclosure pipeline.
We should see an increase in short sales, because lenders and loan servicers will get the same credit for doing a short sale, as if they did a loan modification or principal reduction.