Where one investigation ends another begins.
Representatives from mortgage banks, trade groups and organizations expressed relief throughout the day Thursday as the settlement with state attorneys general and federal prosecutors finally arrived.
The banks involved, Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), Ally Financial (GJM) and Citigroup (C), each for the most part accounted for the penalties under reserves set aside last year.
The servicers will provide long desired principal reduction relief, $2,000 borrower restitution payments, refinancing and even short sale deficiency forgiveness over the next three years.
BofA will pay out roughly $11.8 billion in total relief. The price for Wells and Chase is $5.3 billion each; $2.2 billion for Citi and roughly $310 million for Ally.
"You work and you save your entire life to buy a home. That's where you raise your family. That's where your kids' memories are formed. That's your stake, your claim on the American Dream. And the person signing the document couldn't take enough time to even make sure that the foreclosure was legitimate," said President Obama in one of many press conferences officials gave throughout the day.
Still much work remains for the servicers.
"This has been a momentous drain on intellectual capital for the servicers, so getting through it is a positive. And it should help the industry get more focused on cleaning out the pipeline of foreclosures and getting back to the business of lending," said Terry Moore, global managing director for Accenture Credit Services. "That said the settlement calls for a quick dispensation, so servicers will be under a lot of pressure to ramp up under already constrained resources."
But industry executives were most pleased with the significant step taken toward a uniformed set of servicing standards based on the previous consent orders signed with federal regulators.
"A final agreement can play an important role stabilizing and providing certainty and confidence to the housing and mortgage markets," said David Stevens, the CEO for the Mortgage Bankers Association. "With all the rumors and speculation surrounding these negotiations behind us, it is now imperative that policymakers, lenders, servicers and other stakeholders work together on policies and initiatives that will allow us to get the housing market on the road to recovery."
"Borrowers, servicers and the economy itself will benefit from uniform national rules," said members of The Financial Services Roundtable, an industry trade group.
One mortgage backed-securities trader said there was actually "little to no reaction," in the secondary market, according to one trader, even as some of the principal write downs could occur on a small portion of these holdings.
Analysts at Barclays Capital (BCS) expect foreclosures to remain slow for the next six to 12 months.
"Overall we expect that this settlement will have a relatively modest effect on nonagencies in terms of the pace and composition of modifications," the analysts said.
Laurie Goodman, senior analyst at Amherst Securities, said the AGs made a grave error in allowing banks to dump any losses from their mistakes onto MBS holders.
"We believe that the attorneys general settlement does a disservice to private-label investors, and exacerbates the conflicts of interest for badly conflicted servicers," Goodman said. "In particular, it forces private label investors to bear the costs of shoddy documentation through longer timelines."
Leaders on the government side of the deal spent much of Wednesday night negotiating with California AG Kamala Harris, in order to get the state onboard. It paid off for her. The state will receive the largest amount of relief, nearly $18 billion of the estimated $35 billion impacted based on the way workouts under the deal will be structured.
To many even those within the state, such lengths will not be enough to cover the $700 billion negative equity hole in the housing market.
"Finally, we would caution that while the settlement should help restore some level of certainty and confidence to the market, it is not the solution to every problem," according to a statement from the California Mortgage Bankers Association. "Servicers will continue to improve their efforts to work with homeowners, while preserving access to affordable credit for the next generation of borrowers."
"The bigger picture is that the settlement is not large enough to dramatically alter the outlook for either the housing market or the wider economy," said analysts at Capital Economics.
But officials roundly said the conclusion of the robo-signing settlement will lead into the start of a new task force headed by the Justice Department again and the New York Attorney General Eric Schneiderman to investigate mortgage-backed securities fraud. Schneiderman was once banished from the robo-signing settlement committee, but eventually signed the deal after assurances that it would not release the banks from claims he was pursuing.
Obama first announced the new MBS task force in his State of the Union address in January. The group has already subpoenaed 11 banks while hunting for fraud among the reams of MBS issued over the past decade.
"This investigation is already well under way. And working closely with state attorneys general, we're going to keep at it until we hold those who broke the law fully accountable," Obama said.
Stevens at the MBA said there are even more problems put off for months, even years by a gridlocked Congress, that desperately need solutions.
"There are a number of other issues that we need to resolve," Stevens said. "This includes striking the appropriate balance between consumer protection and access to affordable credit for qualified borrowers in the QM and QRM rulemakings, and facilitating the return of private capital to the mortgage market by comprehensively addressing the future of the GSEs and the government's role in the secondary market."
Still, Carmen Mercado, president of the National Association Hispanic Real Estate Professionals, said maybe the settlement conclusion could help an industry that has held back the economy for too long.
"This settlement eliminates a great deal of the uncertainty that has continued to hang over the market for more than a year," Mercado said. "We are pleased that most of the settlement will be focused on reducing the displacement of families due to foreclosure and hope that it will allow mortgage lenders to refocus on what they do best, which is helping families purchase homes."