Shafted: Foreclosure Settlements May Doom Homeowners
When federal and state officials pledged to help homeowners victimized by wrongful foreclosures after last year's "robo-signing" scandal, it seemed almost too good to be true. And it was. As with other recent government settlements with Wall Street firms, a proposed agreement with the nation's largest mortgage lenders over their abuses would insulate them from legal responsibility for their crimes. Reports HuffPo's Shahien Nasiripour:
The deal with the mortgage companies would broadly absolve the firms of wrongdoing in exchange for penalties reaching $30 billion and assurances that the firms will adhere to better practices going forward, these sources told The Huffington Post....Absolving Wall Street firms for their role in the foreclosure (and, while we're at it, the subprime lending and municipal bond) crisis is like letting auto companies off the hook for making cars with bad brakes. Even that $30 billion figure is in question. Financial pundit Yves Smith says that only a small fraction of that penalty, which is supposed to go toward loan modifications, will consist of cash -- most of it will come in the form of unspecified credits, including for mods already granted by the banks. Such settlements are also tax-deductible, minimizing their financial impact.The Justice Department is pressing state attorneys general to release the banks from liability for a host of alleged violations in exchange for a far-reaching settlement, people familiar with internal discussions said
Another federal settlement, this one to resolve investor lawsuits against Bank of America (BAC) for packaging bad loans into mortgage securities, would result in "tens of thousands" of B of A borrowers losing their homes. While investors would get restitution under the $8.5 billion pact, many homeowners would get a notice to move the hell out.
B of A's executioner
No doubt, under these agreements the servicers will make vague promises about improving their loan "mitigation" procedures and offering more modifications. Pledges of the sort they've made time and again, even as more homeowners sink under water and that the feds refuse to enforce. As one B of A exec tells the NYT about the mortgage-security settlement's impact on bank customers:
"The goal is to reinstate as many borrowers in a modification that performs well," said Tony Meola, a servicing executive with Bank of America. "It also is likely to lead to faster resolution in those unfortunate situations where foreclosure is inevitable. While not a desirable outcome, the recovery of the housing markets depends on moving through the foreclosure process as quickly and fairly as possible."The definition of whether a modification "performs well" will likely be left to banks, resulting in many more "unfortunate situations where foreclosure is inevitable." That's the kind of undesirable outcome Meola knows well. According to his resume, he was a senior lending executive at New Century Mortgage when the subprime lending firm went bankrupt. As he describes it, Meola was "responsible for managing and expanding the company's national production franchise." Make that ex-franchise. His previous gig? An executive vice president in lending at another unfortunate situation, Washington Mutual. Homeowners might have better luck with a hangman.
The settlements aren't final, which means we have to reserve judgment. From the details that have emerged so far, however, it's hard to escape the conclusion that homeowners are getting the shaft. If so, a national tragedy will have deepened into a national disgrace.
Image from Flickr user Respres via Wikimedia Commons, CC 2.0
Related:
- Foreclosure Settlement Near: Another Victory for Wall Street?
- Facing Foreclosure? Bank of America Thumbs Its Nose at You
- Obama vs. Mortgage Servicers: It's Like Preemptive Surrender All Over Again
- How Bank of America Is Trying to Kill Any Chance of a Foreclosure Settlement
- House Poor: How Home Foreclosures Cost Taxpayers a Bundle