The settlement, in the works since the scandals first broke in the fall of 2010, will call for $25 billion from lenders – including Bank of America, JPMorgan Chase, Wells Fargo, Ally Financial, and Citibank – to go toward reducing the principal for nearly 1 million mortgages, paying 750,000 homeowners $1,800 a piece, and helping homeowners refinance at 5.25% for their current loans (many of which have interest rates much higher than current amounts).

There is also the possibility of mortgage processing reform to come with the package, although nothing definite is set in stone.

The settlement has been a long time in the making, but already several key players have backed away – including California’s Attorney General Kamala Harris, who unequivocally stated that her state will have no part of a deal that is “inadequate for California”. Other attorneys general across the country have issued statements along those lines in the past year, including threats of investigations into the banks and their foreclosure practices.

Most of the criticism toward the settlement revolves around the presence of some degree of civil immunity for the banks from the states – a measure that has not only served as a flashpoint for criticism against the major banks and settlement process, but also single-handedly stalled negotiations for months.

Nothing, though, provides criminal liability immunity, which could come into play with several major probes and investigations planned against certain lenders in the near future.

With nearly 11 million homeowners underwater on their homes, and hundreds of thousands of foreclosure listings on the market, a foreclosure settlement is needed to regain some sense of normalcy to a domestic real estate market weighed down by low prices and an abundance of supply. While it is still doubtful whether or not this settlement will have the impact the Obama administration desires, a solution is more likely to happen with the banks on board than in the courtrooms at this point.

There is no word yet on how many states, exactly, will sign the settlement; at least a handful, including California, New York, Delaware, and Massachusetts, have either balked or refused to sign. Some in the industry doubt the settlement can succeed even with widespread support if key states like California and New York don’t join.

For now, though, the settlement appears to be heading in the right track.

There are numerous reasons to avoid foreclosure prevention companies with scams and fees coming in at the top of the list.

Steep Fees for Sketchy Service

Many people fail to understand that the most legitimate foreclosure assistance is completely free; therefore, if someone is charging you and promising to help you keep your home from undergoing foreclosure then you should immediately be skeptical. Many foreclosure prevention companies charge ridiculously high fees, money that could be used to actually pay on your home and help reduce your chances of losing your home. Plus, most of the services offered by these companies (like foreclosure counseling) can be obtained for free.

Before giving anybody money to assist you with foreclosure, it is highly recommended that you utilize foreclosure resources and information online. In the end, if you decide to go with a foreclosure prevention company despite the risks then make sure to thoroughly research the company both online and with the Better Business Bureau.

The Risk of Scam

Along with paying a lot for services that you can normally receive for free, many foreclosure prevention companies have turned out to be scams. Imagine facing the possibility of losing your home and paying hundreds to thousands of dollars to a foreclosure prevention company that claims it will protect you from foreclosure. A few months later you are not only without your home but you also are out the money you paid the company for the services you never received.

Anytime there is a severe need that is tied to something emotional (such as losing your family’s home) there are scammers that are ready to take advantage of the situation. Unfortunately, these foreclosure prevention companies are simply trying to earn as much money as possible without much concern for your family. As a result it is pertinent that you are aware of the high possibility of being scammed when seeking a foreclosure prevention company.

In the end, facing foreclosure is a very serious process that often leads to uncertainty and fear. Do not put yourself in a worse financial situation and face the possibility of being scammed by relying on a foreclosure prevention company. Instead, find free resources online.

New York officials announced today that they have reached an agreement with Goldman Sachs and two other financial firms tied to Goldman Sachs. In the agreement between these companies and the state’s financial services superintendent, the practice of robo-signing will be ended in the state. Furthermore, Goldman Sachs, Litton Loan Servicing (a subsidiary of Goldman Sachs), and Ocwen Financial Corp agreed to inspect their files for other potential discrepancies and also partly reimburse some New York homeowners by lowering their monthly mortgage payments.

There does not appear to be a fine or penalty associated with this settlement, although the principal reduction amount would total $13 million.

It is interesting to see the parallels between this case and the far-larger case pending currently in Washington. The settlement between the states and the five banks at the heart of the robo-signing scandal – JPMorgan Chase, Wells Fargo, Citigroup, Bank of America, and Ally Financial – has ground to a halt over legal liability from future lawsuits and most recently made news when the New York attorney general, Eric Schneiderman, was unceremoniously booted from the settlement committee.

By contrast, Goldman Sachs worked out what most would consider a favorable agreement with a New York regulator without the same drama or circumstances. Of course, the settlement was largely reached due to the fact that a merger between Ocwen Financial and Goldman Sachs-owned Litton Loan Servicing depended on the state superintendent signing off on the deal. Still, it demonstrates the fact that settlements can be reached if the conditions are right.

At stake are millions of foreclosures and pre-foreclosures hanging in the balance worth billions of dollars, in a market that has become incredibly congested and frustrating for sellers and homeowners. Even buyers would benefit from foreclosure processes starting up again, and that could be what happens in New York with this agreement – at least from one bank.

That’s right – a citizen has put forth a petition in the state of California calling for an outright ban on foreclosures in that state. Instead, as the proposed Foreclosure Modification Act stipulates, lenders would be required to enter into loan modifications with the homeowner. According to the sponsors, this is because lenders rarely engage in helpful and mutually-beneficial loan modification arrangements with homeowners. As a result, thousands lose their homes and the surrounding area’s housing prices take a hit.

The bill still has a ways to go – it needs a little over 807,000 signatures to appear on the ballot, and even then it is not a foregone conclusion that it would be approved. But nevertheless, it is an interesting take on an issue that has reared its head over the past few years. Should foreclosures be outlawed?

It is hard to imagine the government actually mandating that private lenders do anything with money they’ve loaned to homeowners. Doing so could create a dangerous precedent, but it is intriguing to contemplate. The federal government has already created incentives for homeowners to engage in loan modification programs, and state governments, under the Constitution, probably would have the legal authority to mandate the same.

It is probable that the act would have unforeseen consequences that would be detrimental to the market as a whole. This act is one we will follow in the months to come.

Jobs Surge; Unemployment Rate Dips

It was revealed today by the U.S. Department of Labor that unemployment fell slightly, from 9.2% to 9.1%. The economy added a net gain of 117,000 jobs, and the streak of positive gains grows to seven months in a row.

While this appears to be good news, some of the positive results cover up negative ones. Take, for example, the fact that one reason behind the drop in the unemployment rate is because many simply gave up looking for jobs – which removes them from the official government measure of 9.1% (which is called the U3 indicator).

Plus, consumer spending has become stagnant lately, and there are fears that we might move into a double-dip recession.

What does this mean for real estate? In the long run, prospects for a resurgence in real estate value are still very good. In fact, very little can really diminish those prospects; in the end, the market will recover. Whether or not it does so within a year is anyone’s guess. You may have to extend the timeline, but the end result will remain the same.

The next few months should be exciting. We will find out more about the strength of the economy, and will see if California will actually take the drastic step it is considering. Stay tuned.

The housing starts report revealed that the amount of new homes being built in this country rose by 14.6% in the month of June. The new annual level is 629,000 units, which is almost equal to January’s 2011 high of 636,000. Economics expected a much lower figure of 570,000.

Building permits also rose by 2.5%.

This news may seem like it doesn’t have much to do with foreclosures and buying foreclosure deals, but in reality, it does. That is because the housing market in the United States is a complex affair with several different yet related factors and components, all connected to one another.

For example, new home construction is a great stimulator for the economy and adds jobs to a given area. These jobs in turn support homeownership and home purchasing, which in turn provides an upward incentive for prices to rise. Rising prices are what will make foreclosure deals in the market terrific buying opportunities because of the potential for profit that’s there.

New homes also help to raise home prices just by being there. Take an imaginary neighborhood of 10 homes, all priced at $100,000. Two go into foreclosure and have a price of $60,000 each. The average home price is now $92,000.

If two new homes are added to the neighborhood, each priced at $120,000, the average price rises, to $96,667. Even if they are priced more conservatively, at $100,000, the average still rises by $3,300. As a result, you can receive more for your investment if you purchase foreclosure deals and then have the price in the area increased due to new home construction.

In the end, an increase in new home construction is good news for investors and homebuyers alike. It’s actually good for the economy as a whole, since the benefits gained by the economy eventually benefit everyone. Of course, a one month increase is just one month. A long-term, permanent increase will have to take place before we can say with confidence that a housing recovery is underway.

But, at least this report unveils a bit of good news about the housing market and the economy – and, by association, the foreclosure market as a whole.

All of the introspection and discussion has led to one question: Is there a foreclosure bubble growing in the market, just like the real estate bubble that burst in 2007 and dropped the market off of a cliff?

The definition of a bubble is a rapid expansion or valuation in prices to an unsustainable level. Often these bubbles are not really fueled by anything tangible, such as economic improvement; we found, for example, that the 2007 crash was fueled by real estate prices that rose with no real reason why other than people expected them to and bid accordingly.

So, how can we define a foreclosure bubble? In some ways, it is a reverse bubble – or, less like a bubble and more like a mechanical spring. When you depressed a spring, it stays down only as long as you exert pressure on it. When you take your hand off, the spring naturally recoils back up.

Or, to use another example, it is like building a dam on a river. The dam stops the water from flowing, but only for so long – eventually, unless you do something about it, the water builds up and eventually bursts the dam. Dams have sluice gates that help control the pressure behind the wall. In this market, sluice gates are foreclosure auctions – but if foreclosures don’t make it onto the market through filings, they can’t be sold, and no pressure is relieved.

Foreclosure filings were on a tear for three years, until the latter half of 2010. Since then, filings are down dramatically – as much as 35.1% on average across the nation from this time last year. As we’ve stated, this decrease is not due to systemic improvement in the economy. Foreclosure filings haven’t fallen because fewer people are defaulting; they’re being frozen because banks have been extremely reluctant to process them because of the foreclosure fraud scandals that have swept the industry.

This freeze – or building of the dam, or compression of the spring, or whatever metaphor you choose – is also due to loan modification programs, mandatory counseling, and other initiatives designed to help homeowners stave off foreclosure. This has added to the delay in foreclosure processing and has slowed the speed at which foreclosures are processed, sold, and purchased.

All of these factors have culminated in over a million foreclosures waiting in the background, due to be unleashed on the market over the next 12-18 months.

It appears that a reverse bubble is growing, and when it pops, home prices are sure to reach the bottom we’ve all been waiting for over the past five years. That’s good news eventually for homeowners, ironically, since it would at least indicate the beginning of the end of the long slide in home prices. It’s even better news for homebuyers and investors, who could reap enormous profits from rock-bottom prices and a wide swath of available foreclosures to purchase.

Foreclosures, though, are also still impacting the economy. A recent survey released indicates that 74% of Americans polled say their neighborhood is being affected by the foreclosure crisis. This mostly involves lower home prices in a surrounding area because of a multitude of foreclosures pulling down the value of nearby homes.

The survey also reveals that the vast majority of people understand the scope of the foreclosure crisis and the challenges it poses. What would have been interesting to see is how many people view the current crisis as a hotbed of opportunity due to low home price and low interest rates.

In other news, foreclosure filings are still low – down 2% in June from the month of April nationwide – but not due to improvement in the economy. Banks are still holding onto foreclosures and distressed properties because of the mortgage fraud scandals and improper processing scandals that have plagued the industry as of late.

According to the records, home processes are first delayed in the amount of time between the owner becoming delinquent and foreclosure. The second delay comes after the foreclosure process has begun but before the home is sold. Put together, the two could take well over a year, with the national average being 438 days.

It is also clear, though, that foreclosures are proving to be a boon for many investors and homebuyers who have the cash or financing readily available to purchase foreclosed homes, renovate them, and sell them to other investors or hold onto them for better times. No matter how you view it, the foreclosure crisis continues to impact the economy, in both good ways and bad.

This is true for the Greater Houston, Texas area, the sixth-largest metropolitan area in the country. From April to May, the average price of homes in the 6.1-million resident area rose by 6.5%, reaching $220,210. The median home price increased by 3.2% to $157,900.

Plus, homes are being sold at a higher rate; the number of home purchase contracts increased in May by 35% from May of 2010, although there was a 11.9% decrease in home sales from April to May.

The situation in the Greater Houston area may be uncommon when compared to other metro areas, but it is becoming more prevalent across the country – albeit slowly. The same conditions in Houston are being gradually witnessed elsewhere; a steady increase in available jobs and a reduction in foreclosures, as well as an increase in population in the metro area for those who are coming to Houston and other cities for work.

This is good news for the housing market and investors and homeowners looking to enter the market and profit. Rising home values will eventually happen, and when they arrive, investments made now – with cheap properties for sale and even cheaper credit – will pay off. Those who invest in growing areas like Houston and even stricken Sunbelt cities like Atlanta, Phoenix, Charlotte, and Jacksonville are primed to reap benefits when the market returns.

For those in the Houston area, that time may be sooner rather than later.

In many parts of the country, though, foreclosure rates have decreased because foreclosure filings, for a variety of reasons, have largely been put on hold. Plus, lengthy processing times have made foreclosures less frequent than before. But, with the massive shadow inventory that exists in this country, more foreclosure filings is just a matter of time.

In New Jersey and other parts of the country, that time may be now.

New Jersey foreclosures have dropped by 86% to date since last June, mostly due to a ruling in December by the state supreme court that more or less put a stop to foreclosure filings in the state. Since then, lenders have been waiting patiently – and amassing an inventory of 28,500 foreclosures and 55,000 mortgages that are in default.

This inventory, at current rates, represents 49 years’ worth of foreclosures.

The question on everyone’s lips is this: What happens when these homes hit the market?

The immediate impact will be a drop in home values in areas with numerous foreclosures – which is more than likely the entire state. For homeowners, this is bad news, but for investors and homebuyers, the opportunity to score substantial deals with New Jersey foreclosures and foreclosures in states in similar positions is huge.

More foreclosures processed means more opportunities to benefit from large discounts and bargains on homes that, when the market recovers, will regain a substantial portion of their value. And while they may never return to bloated 2006 price levels, it is likely that a price increase of some sort will occur.

Now investors and homebuyers alike are waiting like everyone else to see what happens when the dam breaks and foreclosures once again flood the countryside.

Since then, median home values have plummeted in some places up to 40%, and there seems to be no bottom in sight for the slide that has sent millions into foreclosure and short sales and countless others facing that prospect.

The recovery could take a very long time for some hard-hit areas. In the Tampa-St. Petersburg-Clearwater, Florida metro area, for example, prices have fallen by 41% overall since June, 2006, and it could be 2025 before the median home values that were around in the area in 2006 return again.

Adding fuel to the fire is the fact that certain agencies – such as Moody’s – expect considerable losses to continue before a bottom is reached. In other words, we’re not there yet – and it is unlikely that we will see those values again for some time, if ever, due to the bubble nature of the home.

Due to this, it is more important now than ever to understand the importance of getting into the market at the right time. For those who own a home, it may seem daunting, but for those looking to invest or buy, there are plenty of reasons to consider moving in. Even if home values decline further – in some areas, they won’t – potential homebuyers have historically low interest rates plus a plethora of foreclosures, short sales, REOs, and other distressed properties to purchase at terrific discounts.

In other words, the housing crisis may not be over yet, but as long as it continues, there will still be plenty of opportunities to take advantage of this historic event.