Robo signing related debt forgiveness is real and it’s happening. People with loans that were taken out during the robo-signing rush of market inflation, when all kinds of loans were being electronically rubber/robo stamped, are getting their second loans forgiven and first loan principal slashed by their banks such as Bank of America. I can personally attest to this because one of my clients recently had his home equity line of credit erased.
What does this debt forgiveness mean on a macro level? Banks aren’t doing this out of the goodness and kindness of their hearts. They are doing it as part of a national mortgage settlement with the Justice Department and the State Attorneys General. The federal government bailed out the banks during the Great Recession, but they obviously weren’t let of the hook for the actions that arguably brought down the entire economy. This is the federal and state government’s way of standing up for citizens and trying to make things right.
Unfortunately there have been a lot of people who have lost their homes already and for them this action comes too late with very little prospect of recourse. Had the banks taken these actions a few years before, there might have been a lot less foreclosures and the effects of the bottoming out of the economy not so severe, at least for some people. In 2010 this would have helped more people than it will in 2012 and beyond, but it’s still significant and we can be thankful that we live in a society where big business is being held accountable by our governments and judicial system. Plus in 2010 the banks might not have been able to take this big of a hit.
So often we see big business slapped on the wrist for their transgressions. This is no slap on the wrist. According to a Bloomberg Businessweek article this week (http://www.businessweek.com/articles/2012-11-15/about-that-25-billion-robosigning-settlement) Bank of America is providing $15.8 billion in relief as part of the settlement that was signed in February. This settlement will effect and estimated 164,000 B of A customers. The Businessweek article points out that the banks aren’t taking this hit entirely. Investors in bundled mortgages are taking losses too.
On an individual level customers with B of A loans would be well advised to be proactive and figure out if they are slated for this debt relief. If they haven’t heard from the B of A already it would be worth a call. If you or anyone you know is being affected by the robo-signing settlement, please feel free to comment here on Patch.com.