There seems to be some disagreement on whether the $25 billion attorney’s general settlement will negatively impact the pocketbooks of private investors. 

Before the terms of the AG settlement came out, Amherst Securities Group said the settlement would worsen servicer conflict of interest by allowing the banks to use investor dollars to foot the bill. The Association of Mortgage Investors said similar things to The Wall Street Journal.

But, Barclay’s Capital sent out a research note that indicated almost exactly the opposite, saying that because Wells Fargo [stock WFC][/stock], Citigroup [stock C][/stock] and Ally Financial have indicated that they will not be applying servicer settlement modifications to nonagency loans, they believe the “effect on private-label securitizations serviced by these three banks will be limited.”

Similar conclusions were drawn by Merrill Lynch, whose researchers said the impact of the settlement to nonagency borrowers “should be minimal given the credit that may be applied for relief of borrowers is much lower for loans in securities versus portfolio loans (45% versus 100%).” 

Merrill Lynch also points out Housing and Urban Development Secretary Shawn Donovan’s estimation that 85% of principal forgiveness from the settlement would be performed on portfolio loans and only 15% of private-label securities.

Call it the nature of knowing all the facts, but the tune seems to have changed from imminent danger to “meh” now that the details of the settlement have emerged.