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#housing

After months of painstaking talks, government authorities and five of the nation’s biggest banks have agreed to a $26 billion settlement that could provide relief to nearly two million current and former American homeowners harmed by the bursting of the housing bubble, state and federal officials said. It is part of a broad national settlement aimed at halting the housing market’s downward slide and holding the banks accountable for foreclosure abuses.

Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is carried out because earlier efforts by Washington aimed at troubled borrowers helped far fewer than had been expected.

Still, the agreement is the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders or able to refinance their homes at lower rates. Another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000. The aid is to be distributed over three years.

An announcement was scheduled in Washington for Thursday morning. The final details of the pact, including how many states would participate, were expected to be announced then. The two biggest holdouts, California and New York, now plan to sign on, according to the officials with knowledge of the matter who did not want to be identified because the negotiations were not completed.

The deal grew out of an investigation into mortgage servicing by all 50 state attorneys general that was introduced in the fall of 2010 amid an uproar over revelations that banks evicted people with false or incomplete documentation. In the 14 months since then, the scope of the accord has broadened from an examination of foreclosure abuses to a broad effort to lift the housing market out of its biggest slump since the Great Depression. Four million Americans have been foreclosed upon since the beginning of 2007, and the huge overhang of abandoned homes has swamped many regions, like California, Florida and Arizona.

The New York Times, “States Negotiate $26 Billion Settlement for Homeowners.”

This is good news, obviously.  But there’s still bad news in all the red tape homeowners will have to try to cut through to get this relief — not to mention the banks willfully choosing not to actively assist their customers navigate through the process.

The Obama administration is trying to fix a stubborn drag on the economy by making it easier for millions of additional homeowners to refinance their mortgages at lower interest rates even if they owe more than their homes are worth, tackling a difficult issue of vital concern in states key to President Barack Obama’s re-election.

Obama on Wednesday was to draw attention to a proposal he outlined in his State of the Union address to give homeowners with privately held mortgages a shot at record low rates, for an annual savings of about $3,000 for the average borrower. Obama was detailing his plan during a visit to a Northern Virginia community center.

The program is the latest administration effort to help homeowners in the face of a massive number of foreclosures and plunging home values that have left millions of borrowers owing more than their homes are worth. The administration plan aims to ease the way toward refinancing for borrowers, who despite good credit have been unable to take advantage of lower rates because they are underwater on their loans or because banks fear they will be left taking losses.

The administration proposal faces a major hurdle in Congress. The program would cost between $5 billion and $10 billion, depending on participation, and the administration proposes to pay for it with a fee on large banks. The administration has tried unsuccessfully before to win support for such a tax on large banks.

The plan would expand the administration’s Home Affordable Refinance Program, which allows borrowers with loans backed by government-affiliated mortgage giants Fannie Mae and Freddie Mac to refinance at lower rates. About 1 million homeowners have used it, well short of the 4 million to 5 million the Obama administration had expected. Moreover, many “underwater” borrowers — those who owe more than their homes are worth — couldn’t qualify.

The AP via the New York Post, “Obama to Detail Broader Housing Refinance Plan.”

I assure you that the main reason fewer homeowner took advantage of HARP was because lenders made it near-impossible to do so, and the same thing will happen here — regardless of what the President’s proposing.