The beginning of what?

Binyamin Appelbaum of the New York Times today tweeted what many real estate and financial writers have been thinking since Thursday’s announcement of the “robo-signing” settlement:

“My mind is blown by this talk about the foreclosure settlement as 'just the beginning,' Appelbaum said. “This crisis is SIX YEARS OLD.”

Will this settlement make any difference?

Fed chairman Ben Bernanke didn’t even mention the settlement in his less-than-upbeat speech this afternoon to the National Association of Home Builders, so where it fits in the scheme of the government efforts to fix the housing market is uncertain.

Few appear enamored of the deal.

National Mortgage News said flat out in a story Friday morning that: “Depending on who you talked to, the massive mortgage servicer settlement announced Thursday was either a ‘criminal sell out’ or a much-needed shot in the arm for the housing market.”

On the Daily Ticker on Yahoo! Finance, Rochdale Securities analyst Dick Bove called this “the mortgage deal from hell” and a “socialist option,” complains it rewards “irresponsible” borrower behavior and punishes people who have paid their mortgages for years.

For economists, including Patrick Newport of IHS Global Insight, the math doesn’t work.

“Like many previous plans to stem foreclosures, this agreement will help at the edges,” he said. “The problem is too big for it to have a large impact, however.”

Newport’s breakdown of the numbers shows why. About $5 billion of the $25 billion will go to homeowners who have already lost their homes, to the states, and to the federal government.

“This is mostly a transfer of purchasing power from Peter to Paul, and helps neither the economy nor the housing market,” he said.
An additional $3 billion will help underwater homeowners refinance.

“This helps at the edges, as does the $10 billion in principal reduction,” he said. “But the program will not get underway for another six-to-nine months and it is spread over three years, diminishing its effect.”

Some say $25 billion spread among the five banks is pocket change, and Bove suggests that it won’t buy the banks immunity from litigation anyway.

“This didn't clear up anything,” he said. “The government is emboldened to go further. This issue will be with us for a while.”