Ed DeMarco

I’m full of warm feelings today so let’s say nice things about the government and government-ish people who are trying to help the housing market. First, the national mortgage settlement people, who are a diffuse group of 49 state attorneys-general1 plus some federal regulatory people. A while back they got mad at some banks that serviced mortgages, because the “service” those banks provided included a whole lot of foreclosing on houses with shoddy paperwork and a certain amount of foreclosing on the wrong houses, etc. So they ended up signing a settlement with some of those banks in which the banks promised to (1) do somewhat less of that and (2) fling billions of dollars at homeowners in various forms of mortgage relief more or less unrelated to the shoddy foreclosure practices.

This was a good idea! The shoddy foreclosure practices were bad, but they were not like a massive macroeconomic problem. They were mostly a paperwork problem. If you fixed the paperwork problem then you’d still have the other problem, the one where millions of people are unable to pay their high-interest-rate underwater mortgages. Flinging billions of dollars at those people addresses that problem, which strikes many people as more important than the paperwork.

So the other day Bank of America, one of the banks that signed the settlement, announced that it is making good progress at flinging out that money, which is nice! Except there is an amusing / amusingly evil footnote to that, which is: they are mostly flinging out other people’s money. This is less nice! Here is the FT: Read more »