The $25 billion foreclosure settlement between the states and five major banks, which will actually come closer to $32 billion in total aid, will have significant impacts. It’s by no means a gamechanger for the housing market, but it’s hardly negligible.
A few details from Ezra Klein at the Washington Post:
About 1 million households will have the size of their home loan reduced. An additional 750,000 families or individuals who lost their homes to foreclosure will receive checks for about $2,000 each. Those who receive these restitution payouts do not give up their right to participate in future lawsuits.
But the settlement is certainly not being distributed evenly around the country.
States that have been hardest hit by the housing bust — and states that have been the toughest negotiators in the dealmaking — are getting the lion’s share of the money. In at least three states, the final figure works out to more than $400 per state resident, which will certainly have a positive economic impact.
Before I get to that, however, take a look at CoreLogic’s estimates (published by Calculated Risk) of negative equity by state in the 3rd quarter of 2011:
This particular data point is fairly representative of where Georgia stands in the housing bust. The states that arguably fared worse comprise a pretty short list: Nevada, Michigan, Arizona, Florida, and California.
Now take a look at this chart from SNL with the settlement figures by state.
Of the $32 billion:
California – $18 billion – 37 million residents – $486 per capita
Florida – $8.4 billion – 19 million residents – $442 per capita
Nevada – $1.5 billion – 2.7 million residents – $555 per capita
Arizona – $1.6 billion – 6.5 million residents – $246 per capita
Michigan – $500 million – 9.9 million residents – $50 per capita
Georgia – $814.7 million – 9.8 million residents – $83 per capita
One could argue that Michigan’s woes had less to do with questionable lending practices than the other hardest hit states. Major Michigan cities have been struggling for decades with population loss and the state as a whole has been affected by structural changes in the auto manufacturing.
But the over-building and rampant real estate speculation in Georgia was fairly similar — if slightly less severe — than in Arizona, Nevada, Florida, and California. All those states are benefiting far more than Georgia in this foreclosure settlement.