Zywicki in Forbes: Finalize Robo-Signing Settlement

In Forbes magazine op-ed, Professor Todd Zywicki urges finalization of the robo-signing settlement, saying, "There has been sufficient political grandstanding about the robo-signing settlement to last a lifetime of Sunday news shows. But now it is time to subordinate the political grandstanding to the needs of economic recovery."

"The size and scope of the problem is now well known and it seems straightforward to sign on to a final settlement that wraps up most of the claims, helps some genuinely needy borrowers, and protects lenders from still additional liability arising out of the same conduct. By contrast, walking away from the settlement will prolong uncertainty for little or no gain and at great cost to would-be homeowners and blighted neighborhoods that are caught in the current limbo," Zywicki says.

It's Time to Finalize the Robo-Signing Settlement, Forbes, October 17, 2011. By Todd Zywicki.

"The continued delay and specter of liability has haunted a housing recovery. Long, unpredictable delays ripple through the housing market, frustrating short sales, foreclosure sales, and other devices that would turn dead property into performing loans and squatting homeowners into real residents. Potential homeowners are reluctant to bid on homes in foreclosure or negotiate a short-sale in light of the continued uncertainty of the legal regime. Banks are reluctant to approve mortgages for homes in foreclosure. The result is a sagging housing recovery.

"To be sure, there is reason to question some of the details of the settlement—but not necessarily for the reasons put forth by Attorney General Harris. Among its terms is a reported $20 billion fund to finance principal reduction for delinquent homeowners.

"While this will be helpful in reducing foreclosures in the short run, if not handled carefully it may also create perverse incentives for increased delinquencies in the future if the terms require borrowers to be delinquent in order to receive the windfall of principal reduction."

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