The pending settlement from federal regulators and the 50 state attorneys general could stretch foreclosure timelines out by almost another year, swelling the foreclosure inventory and pushing mortgage rates higher, according to a study from three economists provided to HousingWire.
The study was published this week by Charles Calomiris, a professor at Columbia Business School, Eric Higgins, a professor of finance at Kansas State University, and Joseph Mason, a finance professor at Louisiana State University. They said the servicer settlement, which could reportedly force lenders to accept principal writedowns, mandatory modifications and fines totaling as high as $25 billion, would only entice more borrowers to strategically default and further cramp a still limping housing recovery.
Felix Salmon, a financial blogger for Reuters, calls the claims "ridiculous" and pointed out that a footnote in the study shows funding for the research came from the financial services industry, including those "affected by the proposed settlement." Salmon went on to claim that some of the points used by the economists are not accurate, including the proposal to write down modifications for those not in default. However, the negotiations are still ongoing.
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