Obama Sells Out Homeowners Again: Mortgage Settlement a Sad Joke

Published on Thursday, February 23, 2012 by Common Dreams

Obama Sells Out Homeowners Again: Mortgage Settlement a Sad Joke

by Ted Rall

Joe Nocera, the columnist currently challenging Tom Friedman for the title of Hackiest Militant Centrist Hack--it's a tough job that just about everyone on The New York Times op-ed page has to do--loves the robo-signing settlement announced last week between the Obama Administration, 49 states and the five biggest mortgage banks. "Two cheers!" shouts Nocera.

Too busy to follow the news? Read Nocera. If he likes something, it's probably stupid, evil, or both.(Photo: CNN)

As penance for their sins--securitizing fraudulent mortgages, using forged deeds to foreclose on millions of Americans and oh, yeah, borking the entire world economy--Ally Financial, Bank of America, Citibank, JPMorgan Chase and Wells Fargo have agreed to fork over $5 billion in cash. Under the terms of the new agreement they're supposed to reduce the principal of loans to homeowners who are "underwater" on their mortgages--i.e. they owe more than their house is worth--by $17 billion.

Some homeowners will qualify for $3 billion in interest refinancing, something the banks have resisted since the ongoing depression began in late 2008.

What about those who got kicked out of their homes illegally? They split a pool of $1.5 billion.
Sounds impressive. It's not. Mark Zuckerberg is worth $45 billion.

"That probably nets out to less than $2,000 a person," notes The Times. "There's no doubt that the banks are happy with this deal. You would be, too, if your bill for lying to courts and end-running the law came to less than $2,000 per loan file."

Readers will recall that I paid more than that for a speeding ticket. 68 in a 55.
This is the latest sellout by a corrupt system that would rather line the pockets of felonious bankers than put them where they belong: prison.

Remember TARP, the initial bailout? Democrats and Republicans, George W. Bush and Barack Obama agreed to dole out $700 billion in public--plus $7.7 trillion funneled secretly through the Fed--to the big banks so they could "increase their lending in order to loosen credit markets," in the words of Senator Olympia Snowe, a Maine Republican.

Never happened.

Three years after TARP "tight home loan credit is affecting everything from home sales to household finances," USA Today reported. "Many borrowers are struggling to qualify for loans to buy homes…Those who can get loans need higher credit scores and bigger down payments than they would have in recent years. They face more demands to prove their incomes, verify assets, show steady employment and explain things such as new credit cards and small bank account deposits. Even then, they may not qualify for the lowest interest rates."

Financial experts aren't surprised. TARP was a no-strings-attached deal devoid of any requirement that banks increase lending. You can hardly blame the bankers for taking advantage. They used the cash--money that might have been used to help distressed homeowners--to grow income on their overnight "float" and issue record raises to their CEOs.

Next came Obama's "Home Affordable Modification Program" farce. Another toothless "voluntary" program, HAMP asked banks to do the same things they've just agreed to under the robo-signing settlement: allow homeowners who are struggling to refinance and possibly reduce their principals to reflect the collapse of housing prices in most markets.

Voluntary = worthless.

CNN reported on January 24th: "The HAMP program, which was designed to lower troubled borrowers' mortgage rates to no more than 31% of their monthly income, ran into problems almost immediately. Many lenders lost documents, and many borrowers didn’t qualify. Three years later, it has helped a scant 910,000 homeowners--a far cry from the promised 4 million."

Or the 15 million who needed help.

As usual, state-controlled media is too kind. Banks didn't "lose" documents. They threw them away.

One hopes they recycled.

I wrote about my experience with HAMP: Chase Home Mortgage repeatedly asked for, received, confirmed receiving, then requested the same documents. They elevated the runaround to an art. My favorite part was how Chase wouldn't respond to queries for a month, then request the bank statement for that month. They did this over and over. The final result: losing half my income "did not represent income loss."

It's simple math: in 67 percent of cases, banks make more money through foreclosure than working to keep families in their homes.

This time is different, claims the White House. "No more lost paperwork, no more excuses, no more runaround," HUD secretary Shaun Donovan said February 9th. The new standards will "force the banks to clean up their acts."

Don't bet on it. The Administration promises "a robust enforcement mechanism"--i.e. an independent monitor. Such an agency, which would supervise the handling of million of distressed homeowners, won't be able to handle the workload according to mortgage experts. Anyway, it's not like there isn't already a law. Law Professor Alan White of Valparaiso University notes: "Much of this [agreement] is restating obligations loan servicers already have."

Finally, there's the issue of fairness. "Underwater" is a scary, headline-grabbing word. But it doesn't tell the whole story.

Tens of millions of homeowners have seen the value of their homes plummet since the housing crash. (The average home price fell from $270,000 in 2006 to $165,000 in 2011.) Those who are underwater tended not to have had much equity in their homes in the first place, having put down low downpayments. Why single them out for special assistance? Shouldn't people who owned their homes free and clear and those who had significant equity at the beginning of crisis get as much help as those who lost less in the first place? What about renters? Why should people who were well-off enough to afford to buy a home get a payoff ahead of poor renters?

The biggest fairness issue of all, of course, is one of simple justice. If you steal someone's house, you should go to jail. If your crimes are company policy, that company should be nationalized or forced out of business.

Your victim should get his or her house back, plus interest and penalties.

You shouldn't pay less than a speeding ticket for stealing a house.

© 2012 Ted Rall

Ted Rall is the author of the new books "Silk Road to Ruin: Is Central Asia the New Middle East?," and "The Anti-American Manifesto" . His website is tedrall.com.

Rolling Stone

Why the Foreclosure Deal May Not Be So Hot After All

POSTED: February 9, 12:58 PM ET

New York Attorney General Eric Schneiderman and California Attorney General Kamala Harris, who agreed to join more than 40 other states in a nationwide settlement, announced today.

Mark Wilson/Kevin Winter/Getty Images

So the foreclosure settlement is through.

A few weeks back, I was optimistic about it – I had been worried that it was going to contain broad liability waivers for all sorts of activities, and I was pleasantly surprised when I heard that its scope had essentially been narrowed to robosigning offenses.

However, now that the settlement is finalized, and I've had time to think about it and talk to people who know far more than I do about this, I'm feeling pretty queasy.

It feels an awful lot like what happened here is the nation's criminal justice honchos collectively realized that a thorough investigation of the problem would require resources they simply do not have, or are reluctant to deploy, and decided to accept a superficially face-saving peace offer rather than fight it out.

So they settled the case in a way that reads in headlines like it's a bite out of the banks, but in fact is barely even that. There will be little in the way of real compensation for stuggling homeowners, and there are serious issues in the area of the deal's enforceability. In fact, about the only part of the deal we can be absolutely sure will be honored in full is the liability waiver for the robosigning offenses.

With the rest of it -- collecting on the settlement, enforcement of the decrees, all the stuff put in there to balance the deal in the consumer's direction -- there will be an uphill battle from this point forward to get the banks to comply. The banks meanwhile have no such uphill battle. They will get the full benefit of the deal (a release from costly litigation) from the moment the ink is dry.

Really this looks like America's public prosecutors just wilted before the prospect of a long, drawn-out conflict with an army of highly-paid, determined white-shoe banker lawyers. The message this sends is that if you commit crimes on a large enough scale, and have enough high-priced legal talent sitting at the negotiating table after you get caught, the government will ultimately back down, conceding the inferiority of its resources.

I think the best summation of the settlement is probably Yves Smith's, which can be found here. The piece lists the 12 things that suck the most about the settlement. The most painful is probably #12:

12. We'll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. But the problems will fester and the housing market will continue to suffer. Investors in mortgage-backed securities, who know that services have been screwing them for years, will be hung out to dry and will likely never return to a private MBS market, since the problems won't ever be fixed. This settlement has not only revealed the residential mortgage market to be too big to fail, but puts it on long term, perhaps permanent, government life support.

My mistake in looking at this deal a few weeks ago, when details of it first leaked out, was in focusing on how much worse it could have been, instead of thinking about how bad it still is. The only acceptable foreclosure deal had to bring about a complete end to robosigning and the other similar corrupt practices that grew up around it (like for instance gutter service, the practice of process servers simply signing affidavits saying they delivered summonses, instead of really doing it).

But this deal not only doesn't end robosigning, it officially makes getting caught for it inexpensive. Shame on me for ever thinking that might be a good thing.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/why-the-foreclosure-deal-may-not-be-so-hot-after-all-20120209#ixzz1mUTvUiJ1

Bank Bailout 2: Obama Lets Mortgage Abusers Off the Hook

Published on Thursday, February 9, 2012 by Common Dreams

Bank Bailout 2: Obama Lets Mortgage Abusers Off the Hook

The Obama Administration has followed a predictable pattern: Leave No One Accountable

- Common Dreams staff

The Obama administration announced this morning that the five largest U.S. banks have agreed to a $26 billion 'settlement' to end lawsuits over abusive practices that forced millions of families from their homes and helped bring about the nation’s financial meltdown.

After months of talks with state and federal officials, the banks have reportedly agreed to help some homeowners reduce their mortgage debt or refinance their homes at lower rates. Over 4 million familes lost their homes to foreclosure yet just 750,000 people who lost their homes to foreclosure will receive a one-time check for just $1,800 to $2,000, which for many will barely cover the cost of moving. The deal will only help a fraction of the struggling homeowners affected by the bank’s practices.

New York and California have reportedly signed off on the deal after initially holding it up in protest of lenient treatment of the banks.

The deal gives banks immunity from civil lawsuits for "robosigning," a practice whereby homeowners were rapidly evicted without proper vetting.

In his January 24th State of the Union address, President Obama promised a fresh investigation into mortgage abuses that led to the financial meltdown. Now, before that investigation has even begun, Obama is granting these 5 "too big to fail" banks immunity from "robo-signing" abuses.

* * *

UPDATE: Matt Taibbi writing at Rolling Stone:

...this looks like America's public prosecutors just wilted before the prospect of a long, drawn-out conflict with an army of highly-paid, determined white-shoe banker lawyers. The message this sends is that if you commit crimes on a large enough scale, and have enough high-priced legal talent sitting at the negotiating table after you get caught, the government will ultimately back down, conceding the inferiority of its resources.

* * *

Yves Smith, writing at NakedCapitalism:

The Top Twelve Reasons Why You Should Hate the Mortgage Settlement

[...] As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.

1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

2. "If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating."That $26 billion is actually $5 billion of bank money and the rest is your money. [...]

3. That $5 billion divided among the big banks wouldn’t even represent a significant quarterly hit. [...]

4. That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public.

5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. [...]

6. The past history of servicer consent decrees shows the servicers all fail to comply. Why? Servicer records and systems are terrible in the best of times, and their systems and fee structures aren’t set up to handle much in the way of delinquencies. [...]

7. The cave-in Nevada and Arizona on the Countrywide settlement suit is a special gift for Bank of America, who is by far the worst offender in the chain of title disaster. This move proves that failing to comply with a consent degree has no consequences but will merely be rolled into a new consent degree which will also fail to be enforced. [...]

8. If the new Federal task force were intended to be serious, this deal would have not have been settled. You never settle before investigating. It’s a bad idea to settle obvious, widespread wrongdoing on the cheap. [...]

9. There is plenty of evidence of widespread abuses that appear not to be on the attorney generals’ or media’s radar, such as servicer driven foreclosures and looting of investors’ funds via impermissible and inflated charges. While no serious probe was undertaken, even the limited or peripheral investigations show massive failures (60% of documents had errors in AGs/Fed’s pathetically small sample). [...]

10. A deal on robosigning serves to cover up the much deeper chain of title problem. [...]

11. Don’t bet on a deus ex machina in terms of the new Federal foreclosure task force to improve this picture much. If you think Schneiderman, as a co-chairman who already has a full time day job in New York, is going to outfox a bunch of DC insiders who are part of the problem, I have a bridge I’d like to sell to you.

12. We’ll now have to listen to banks and their sycophant defenders declaring victory despite being wrong on the law and the facts. They will proceed to marginalize and write off criticisms of the servicing practices that hurt homeowners and investors and are devastating communities. [...]

* * *

And at Firedoglake, Scarecrow writes of the 'settlement':

Obama’s Guiding Principle: Leave No One Accountable

Obama’s people have performed this function for America’s looters over and over again. They did it for Wall Street, the banks, the rich tax evaders, the insurance companies, the oil companies, the gas companies, the coal companies, the CIA, the DoD, and numerous torturers and their legal/policy enablers and associated war criminals in the previous administration.[...] The Obama Administration has followed a predictable pattern we now recognize. It has consistently functioned like criminal defense counsel, whose mission is to get their criminal clients, the major corporations and executives who fund their elections, off with no admission of guilt, no forced resignations, and as little harm to their reputation, or that of the counsel, as possible. To do this, they neutralize anyone with an ounce of public purpose in their veins.

Its role is then to convince the public that whatever you thought or feared was going on in America, and whoever you believed had caused the collapse of America’s economy, caused millions to lose their jobs, their homes and their retirements and continued to loot the country, it’s time to look forward. Because everyone who matters — and that’s not you — now agrees, they say, to function in the public interest, even though it’s a bald face lie, since nothing has changed and the looters and their complicit overseers are still in charge.

Obama’s people have performed this function for America’s looters over and over again. They did it for Wall Street, the banks, the rich tax evaders, the insurance companies, the oil companies, the gas companies, the coal companies, the CIA, the DoD, and numerous torturers and their legal/policy enablers and associated war criminals in the previous administration.

Consistent with this strategy, Obama’s team must silence, neutralize or punish anyone who protests or blows the whistle on the massive criminality and corruption involved. It must also emasculate the left and what’s left of the liberal wing of the Dem Party, using the argument that the Administration is not nearly as awful as the other Party’s people, who openly glorify looting and killing and vilifying the victims.

But of course, when we were ruled by the latter, everyone with any humanity was repulsed by the open looting and killing and indifference and was willing to say so. When the Administration sanctions it, however, we are supposed to bite our tongues, because it could be worse.

Well, it’s worse, and it’s more insidious and corrupting of our souls than where we were four years ago. It is evil.

How to Score a Foreclosure Fraud Settlement Deal

Published on Monday, February 6, 2012 by The Huffington Post

How to Score a Foreclosure Fraud Settlement Deal

by Richard Eskow

Once again we're hearing that a foreclosure fraud deal is about to be announced between major banks, the U.S. government and most or all of the states. We've heard that before, only to have the deadline pushed back so that holdout Attorneys General can be brought on board with the agreement.

Deal, or no deal? We're not sure, but it's certainly possible we'll hear something today, tonight or tomorrow.

How will we know if it's a good deal for the American people? After all, this is an issue with a lot of moving parts. It includes all of the states and multiple agencies within the Federal government, and involves a multitude of allegations involving several different kinds of crime that come under different jurisdictions. Even the statutes of limitations are a moving target.

That doesn't mean we don't know enough to judge the deal, if and when it's announced. There are well-established facts to guide us, and the principles involved are clear.

Moral and Legal Context

We keep hearing about what is and isn't possible, practical or politically feasible. Media discussions of the topic keep mixing the quotidien problems of the process with the underlying principles involved. So let's take a second to perform a moral and legal reset and put this issue in the right context.

Legally, banks stand accused of securities fraud, investor fraud, racial discrimination, tax evasion, defrauding borrowers, and perjury (in the filing of false "robo-signed" documents). Each of the major banks has already settled charges with the SEC involving these crimes and more.

Banks committed a number of moral offenses, too, some of which may also have been illegal. Here's a quick overview:

We know that bank executives fueled the housing bubble, convinced borrowers to take out loans based on inflated home values, sold deceptively packaged mortgage-backed securities to investors (including state and local governments and working people's pension funds) concealed their true financial situation from investors while taking massive secret assistance from the Federal Reserve, were bailed out by taxpayers, took huge bonuses anyway...

.... and never even said they were sorry.

That's what we're dealing with here. But if that's the context, how do we evaluate a settlement proposal?

Five Principles

Any deal should be measured against five basic principles: openness, justice, restitution, deterrence and reconciliation.

Openness: Do we know what happened? Has the truth been brought to light? Do we finally understand what happened to us, why it happened and who's responsible?

Justice means exactly what it says: Is the deal just? The American people should be able to review it and know in their hearts that justice has been served. The guilty have been held responsible, laws have been upheld and we know once again that we live in a society of laws.

Restitution: Have those that were wronged been made whole?

Deterrence: Has the punishment been proportional to the crime? Is it severe enough to deter future criminal behavior?

Reconciliation: When major crimes disrupt a nation, the final element is reconciliation -- the restoration of social calm, renewed trust between the parties involved and a return to confidence in the institutions of government.

These goals may be too much to ask of a single settlement deal, although we shouldn't accept that without a convincing argument. Either way, they form the moral constellation by which any deal should be scored. The fact that we can never achieve perfection -- perfect justice, perfect truth, or whatever -- doesn't mean we should abandon our search for justice and truth, does it?

So let's take a look at what we know of the proposed deal so far. (We'll update this as further information becomes available.)

Openness

A great deal of information has come to light about bank misdeeds. Some has come from excellent shoe-leather reporting. The Financial Crisis Inquiry Commission and the Levin Subcommittee have also provided troves of useful information on the subject.

But there's a lot that we don't know about bank malfeasance, and specifically about the roles of individual executives in condoning, approving or encouraging these crimes.

Every time I see a banker on television complaining about his industry's bad reputation -- and by implication his own -- it occurs to me how easy it would be to clear his name: Just subpoena his emails and phone records, especially during the times that his bank was engaged in the fraudulent behavior for which it has already paid huge settlements through the SEC.

Any settlement that prevents further investigation into bank crime should get a much lower score. The ideal settlement would be one where banks agree to cooperate with ongoing investigations as part of the deal.

And remember: Good DAs use information about one or two crimes -- in this case there are more than that -- to sweat their suspects, and especially lower-level ones, into revealing information about all their criminal behavior. Any settlement that removes this leverage should be scored very low on Openness.

Indicators: Continuation of ongoing investigations; commitment of major Federal resources to the Schneiderman co-chaired Task Force and other investigative bodies.

Justice

A lot of people got shafted by the banks: borrowers, mortgage investors and bank shareholders. Housing Secretary Shaun Donovan suggested this weekend that mortgage investors -- many of whom are state and local governments, or the retirement funds of ordinary working Americans -- will have to take the lion's share of the loss as part of the deal.

They've already been screwed once by bankers. That could mean the deal does it to them again. And justice isn't served when third parties pay the price for the misdeeds of others.

What's more, government settlements have almost always been paid by the bank itself, which means that shareholders foot the bill. Many of those shareholders bought bank stocks because they'd been deceived by bank executives, who lied to investors and then pocketed their bonuses. Any settlement should force bankers to pay the cost out of their own pockets.

Neither banks nor individual bankers should be given blanket immunity, either civil or criminal.

And speaking of those deceived shareholders: Why haven't any of them pressed their boards of directors to fire the executives that drove their banks -- and the economy -- into the ground? You were deceived once, folks, but there comes a point when it's caveat emptor time.

Indicators: Immunity/non-immunity from criminal prosecution for individuals; immunity/non-immunity from civil suits; financial penalties for individuals.

Restitution

Borrowers who were misled or defrauded -- all of them -- must have what was taken from them returned to them. Most official estimates say that homeowners are paying $700 billion in nonexistent value back to the banks, as mortgage payments on nonexistent home value. (I think that number could be low.)

We keep hearing that "greedy homeowners" are to blame, but most of these homeowners believed their banks -- and the pundits who reinforced the banks -- when they were told that housing values would keep going up. Many homeowners were also misled by bank-friendly appraisers who overstated the value of their homes.

In that context, how much does $17 or $20 or $25 billion achieve in restitution?

Some will argue that the restitution in this settlement should be limited to the harms caused by robo-signing. The strategy should be this: When you have a wrongdoer dead to rights, clear evidence of a crime is leverage. If this settlement doesn't use that leverage -- or if it can't, for reasons yet to be revealed -- it should leave the door open for future investigations, prosecutions and/or negotiations.

The deal must also insure that banks themselves don't dispense the funds. That's like asking a pickpocket to go back on the subway and give all the wallets back.

Indicators: Scope of settlement relative to misdeeds being settled; ability for further civil suits; as much as possible, avoid having third parties pay for the misdeeds of others; retain as much leverage as possible to obtain additional restitution.

Deterrence

The principle here is simple: Bankers will keep committing crimes and other misdeeds over and over, until some of them pay a price that's severe enough to make them think twice. Those misdeeds will hurt customers, investors and, sooner or later, the entire economy.

What is price is severe enough? Criminal prosecution and the seizure of ill-gotten gains.

Without the threat of prosecution and the certain knowledge that they'll lose the money they've made if they're caught, bankers will never change.

Indicators: Ongoing criminal investigations; added resources to aid criminal probes; deal is structured so that bankers can be personally fined if found guilty.

Reconciliation

South African officials committed many crimes under apartheid. Many observers were astonished by the generosity and clemency displayed by President Mandela and his government after apartheid ended.

But that reconciliation was only made possible because the Truth and Reconciliation Commissions were not empowered to grant forgiveness to anyone who didn't admit what they'd done wrong.

By contrast, banks have repeatedly been able to settle criminal allegations with huge financial settlements in which they "neither admit nor deny wrongdoing." That's unacceptable.

The institutions of government have also been soiled by this process. Most Americans believe that their government has failed them under both political parties, as far as Wall Street is concerned -- and they're right. Our faith in government, and in the political process, will not be restored with another unjust deal for bankers.

Indicators: Agreement requires banks to admit wrongdoing; Federal government pledges additional resources for investigation; rules for ongoing behavior are announced which include improved government oversight.

The Real World

The deal has to be negotiated in the real world, not on some idealized Aristotelian plane. We understand that. A 100-percent deal may be impossible.

But remember this: Right now the only ones who have all the facts are the banks. That means that any deal they sign, no matter how aggressive, is better than what would happen if the truth came out.

So the deal must push them, and push them hard.

More importantly, these principles and ideals offer a way to interpret and measure whatever deal is announced. The deal may not be perfect, but it will have to be a whole lot better than the ones that have been proposed over the past few months or it will be completely unacceptable.

The politicians and others who are negotiating this deal understand the "real world" of bankers, bank influence, and obstacles that make it hard work at times to prosecute bank fraud. But the world of justice is the real world, too. So is the world of morality. And those obstacles didn't prevent the conviction of thousands of people after the much-smaller savings and loan scandal of the 1980s.

Our society hasn't become so debased that people have stopped caring about moral principles. Public outrage over Wall Street greed proves that. These angry Americans are part of the real world, too -- and they'll be watching.

© 2012 Huffington Post

Richard has worked on long-range health policy and forecasting. His predictions are included in the recently-released Rough Guide To the Future in it's review of "the hopes, fears, and best prediction of fifty of the world's leading futurologists." Richard is also a freelance writer and occasional radio host. He's a regular columnist for the science and culture blog 3 Quarks Daily and a Contributing Editor for Tricycle magazine. His reflections on blogging and spiritual principles were included in Best Buddhist Writing of 2008.