This is a joint blog post with Marc Morial, President and CEO, National Urban League
Yesterday, state Attorneys General (AG) announced that they arrived at a $25 billion agreement with mortgage servicers in response to the "robosigning" scandal that broke 18 months ago. When New York AG Eric Schneiderman, California AG Kamala Harris, or Nevada AG Catherine Masto signed onto the agreement for their hardest hit states, it was a clear indication that this is a strong settlement for our families. We at the National Urban League (NUL) and National Council of La Raza (NCLR) celebrate this significant move as one in a series of enforcement steps that are essential to restoring the public's faith in our housing system. The closure of these proceedings is incredibly important to healing our families and neighborhoods.
The entire nation has felt the burden of the enduring foreclosure crisis. Black and Hispanic homeowners have been especially hard hit. One in four Black and Hispanic borrowers in the U.S. lost homes or are at serious risk of losing their homes, more than half the number of White borrowers. Asian, Black, and Hispanic families were 1.7, 3, and 2.2 (respectively) times as likely as White borrowers to receive subprime loans even after accounting for similar credit profiles. Through foreclosures, our families have battled substantial wealth loss, emotional distress, and an uncertain financial future.
The AG settlement will bring relief to our families, with approximately $17 billion dedicated to principal reductions. Writing down principal has proven to be a win for both borrower and lender alike, especially when compared with the costs of foreclosure, property maintenance, and a sheriff's sale for pennies on the dollar. Up until this point, however, servicers have not made it a priority. This settlement and a recent announcement to increase incentives for principal reductions should compel servicers to help families and clear the logjam on write-downs. Also, we are confident that rapid uptake of these new resources will soon generate the empirical information needed to convince naysayers that write-downs are vital to stabilizing the market.
We are encouraged by the AG settlement and plan to do everything we can to ensure that affected families have access to these new resources. Finding homeowners is no small endeavor, especially finding those who have slipped through the cracks. Outreach will be an enormous undertaking in its own right and NUL and NCLR hope to deploy their housing programs to seek out eligible clients. Despite the challenges, we believe this AG settlement will set families up for success and will bring true accountability and systemic improvement to our housing market.