There's reason for some satisfaction with the $25 billion settlement addressing robo-signing and other dubious practices by five major mortgage lenders.
Yet for millions of people who already lost their homes, and millions more struggling to avoid foreclosure, the much-heralded deal probably seems like too little, too late.
Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial are covered by the settlement, which relieves them of civil liability.
In return, the lenders agreed to refinance some loans, either reducing the principal or lowering interest rates for about 1 million borrowers. The banks also will pay restitution for foreclosing on homeowners without proper documentation.
The pool could grow to $30 billion if nine other banks sign on to the deal negotiated by the Obama administration and state attorneys general. That's not chump change, but it's still a drop in the $700 billion sea of underwater mortgages in the United States.
Yes, some people took on more debt than they could afford. It's also true that some lenders needlessly steered borrowers into risky loans, then packaged those loans into toxic securities while cashing in on both bonuses and federal bailouts. This settlement is a small price to pay for shady practices that contributed to a worldwide economic catastrophe.
Included is $1.5 billion for people who lost their homes between Jan. 1, 2008 and Dec. 31, 2011. In practice, that adds up to about $2,000 a person.
A larger sum — $17 billion — is earmarked for principal reductions and other relief for distressed borrowers. Here again, only people whose loans are owned or serviced by the lenders covered by the settlement are eligible.
So it's not surprising that consumer advocates aren't thrilled with the settlement.
"It sure doesn't seem like a lot for someone who lost their home maybe illegally, but it is what it is, said Jami Walsh, a foreclosure counselor with Catholic Charities in Santa Rosa. "It's a shot in the arm that we've all been waiting for, and we'll take it, whatever it is."
One positive outcome is that there's likely to be fewer foreclosures, stabilizing the real estate market for the benefit of all homeowners, including those who didn't take on too much debt.
Some credit also goes to California Attorney General Kamala Harris, who walked away from a previous settlement that totaled $20 billion, including<QA0>
$4 billion for the Golden State.
The final deal sets aside $12 billion for principal reduction in California, which is home to seven of the 10 cities with the highest rate of foreclosures. State officials said Sonoma County homeowners could receive $267 million, with $68 million going to homeowners in Mendocino and Lake counties.
Finally, in another concession won by Harris and other critics of the previous settlement proposal, this deal doesn't prevent individual borrowers or prosecutors from pursuing claims for predatory lending practices, securities fraud or other criminal violations.
The test of this agreement is yet to come. Banks have fallen short on past promises of mortgage relief. Yet public help was there when they were on the verge of collapse, and the attorneys general should focus on ensuring that help finally reaches people trying to hang on to the American Dream.