Tough Choices on Foreclosure Settlement

by: Shaun Appleby

Wed Feb 08, 2012 at 17:51:34 PM EST



By the time the robo-signing scandal had spread across all fifty states their attorneys general started looking for a coordinated and comprehensive settlement with the banks:


The current settlement stems from revelations in late 2010 that banks had filed hundreds of thousands of flawed and fraudulent foreclosure documents in their rush to keep up with a tidal wave of delinquent loans wrought by the housing crisis, a practice known as "robosigning."

Under the proposed deal, the five banks involved - Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup - would agree to end those practices and overhaul the often-convoluted way they deal with borrowers trying to stay in their homes. They also would pay about $25 billion that would go toward lowering loan balances for borrowers who owe more than their houses are worth, helping others refinance at lower rates and paying up to $2,000 to hundreds of thousands of people who lost homes to foreclosure.

Brady Dennis - Proposed settlement with banks over foreclosure practices dealt a setback Washington Post 8 Feb 12

The Obama administration also sought some relief for a broad segment of affected homeowners rather than individual prosecutions of specific cases.  Sounds good?  Well, maybe not so much, as the legal ramifications of the settlement are still open to interpretation:


In effect, the White House was willing to sell blanket immunity to the originators and distributors of mortgages over the past decade. The price of this legal protection would have been low. Understandably, bankers are still keen to take the offer.

Simon Johnson - Last chance on mortgage mess Politico 22 Jan 12

Those seeking a tougher stance on bank malfeasance and a broader inquiry, potentially resulting in criminal prosecutions, into the complex mortgage retail and securitisation practices which largely precipitated the 2008 crash have been reluctant to go along with this proposal.

Shaun Appleby :: Tough Choices on Foreclosure Settlement
Here's where it gets a bit messy.  Forty or so state attorneys general have negotiated this settlement proposal with notable dissent from California, New York and other states.  New York Attorney General Eric Schneiderman had become a focus for anti-settlement progressives who agreed that broader investigations, and possible fraud prosecutions, were warranted:


Iowa Attorney General Tom Miller, the top state official leading the negotiations, removed Schneiderman from the coalition's executive committee last summer, saying he had "actively worked to undermine" the efforts to reach a settlement. The move backfired, with some lawmakers, editorial boards and liberal activists rallying behind Schneiderman and praising his skepticism of the talks and his push for more in-depth inquiries.

Brady Dennis - Proposed settlement with banks over foreclosure practices dealt a setback Washington Post 8 Feb 12

Schneiderman has been unequivocal in his objections:


"It's sort of like being in criminal case and having someone say, 'OK, you've got me on this gun charge. I'll plead guilty, but I need you to give me a release from anything else I might have done, before you look into anything else I might have done," Schneiderman said on WNYC last month. "You don't do that."

Loren Berlin - Eric Schneiderman Sues BofA, Wells Fargo, JPMorgan Chase Over Electronic Mortgage Fraud Huffington Post 3 Feb 12

While the settlement deal remains somewhat flexible the negotiating attorneys general and the banks have been increasingly pressing for agreement, threatening to exclude recalcitrant states from a pro-rata settlement.  Then in January Obama made a significant announcement during the SOTU speech:


WASHINGTON -- During his State of the Union address tonight, President Obama will announce the creation of a special unit to investigate misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis.

The office, part of a new Unit on Mortgage Origination and Securitization Abuses, will be chaired by Eric Schneiderman, the New York attorney general, according to a White House official.

Schneiderman is an increasingly beloved figure among progressives for his criticism of a proposed settlement between the 50 state attorneys general and the five largest banks.

Sam Stein - EXCLUSIVE: Obama To Announce Mortgage Crisis Unit Chaired By New York Attorney General Schneiderman Huffington Post 22 Jan 12

This was followed shortly thereafter by a new suit from the New York Attorney General's office:


Three big banks were hit on Friday with yet another lawsuit related to wrongful foreclosures. Democratic New York Attorney General Eric Schneiderman filed suit against Bank of America, JP Morgan Chase and Wells Fargo for deceptive and fraudulent use of a private database used to register mortgages, according to a Friday press release from his office.

Loren Berlin - Eric Schneiderman Sues BofA, Wells Fargo, JPMorgan Chase Over Electronic Mortgage Fraud Huffington Post 3 Feb 12

One interpretation of this is that Schneiderman and the negotiating attorneys general had some convergence on an agreement, on the assumption that New York wouldn't deal themselves out of the proposed settlement:


"If the deal terms had been decided six months ago, a state couldn't have pursued this kind of lawsuit," said the source. "The fact that Schneiderman has filed this case suggests that the terms of the deal have changed since then."

Loren Berlin - Eric Schneiderman Sues BofA, Wells Fargo, JPMorgan Chase Over Electronic Mortgage Fraud Huffington Post 3 Feb 12

On the other hand there has been an interesting hiccup today which may bear watching closely:


New York Attorney General Eric Schneiderman abruptly called off a news conference at which he could have provided a crucial endorsement of a proposed settlement with some of the nation's biggest banks over shoddy foreclosure practices.

Schneiderman's unexplained last-minute postponement cast another cloud of uncertainty over the ongoing negotiations, which have dragged on for more than 16 months. State and federal officials have been intent on finalizing the deal by the end of the week.

Brady Dennis - Proposed settlement with banks over foreclosure practices dealt a setback Washington Post 8 Feb 12

So, what gives?  It seems pretty clear that the Obama administration is trying to stake out some sympathetic territory here for the upcoming election:


The lack of a pursuit of pre-crisis "crimes" remains a big, public frustration. We have no idea if this will go anywhere, but obviously this shows that The White House is still aware of this issue, and also shows that it likely wants to put Wall Street on trial (figuratively and perhaps literally) in the runup to the election.

Joe Weisenthal - Obama Is Announcing A Brand New Group To Go After Fraud That Caused The Financial Crisis Business Insider 24 Jan 12

Given Attorney General Schneiderman's new role and the importance of holdouts California and New York on this settlement, not to mention the apparent "urgency" surrounding closing this deal, it will be interesting to see what developments arise in coming days and weeks.  Robo-signing, while clearly criminal, is merely the tip of the potential fraud iceberg.  Well worth watching.

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One Thought... (2.00 / 2)
On why Schneiderman may have balked:


One person familiar with the negotiations said several banks wanted Schneiderman to withdraw a suit he filed on Friday against prominent financial firms, saying they had acted deceptively by filing erroneous and fraudulent foreclosure documents through a popular electronic mortgage registry designed to allow firms to save time and money by bypassing local property recording requirements.

The person spoke on the condition of anonymity because the talks were ongoing. It was unclear whether Schneiderman had intended on Tuesday to address the status of those lawsuits during the news conference.

Brady Dennis - Proposed settlement with banks over foreclosure practices dealt a setback Washington Post 8 Feb 12

On the other hand he surely would have known that the lawsuit would have precipitated a reaction and may have violated the terms of the proposed settlement.  Seems like he is playing hardball and I hope the Obama administration either backs him up or at least sits on its hands.  This is a critical moment for Obama to choose which side his administration is on.

My only disappointment has been the coddling of the banks; with his Wall Street donation pool shrinking maybe we have an opportunity for a second term without such a heavy influence by Goldman Sachs' alumni club in federal appointments.  Paul Krugman for Treasury Secretary?


Looks Like... (2.00 / 2)
Schneiderman's MERS lawsuit was definitely a shot-across-the-bows of the banks:


Two top concerns have been whether the settlement would prohibit state lawsuits that either had been already launched or were being considering, and whether attorneys general would get relief tailored to their state's needs.Delaware's banking commissioner has come out in support of the deal, while the state's attorney general remains on the sidelines, for now.

Delaware stands to leave up to $40 million in homeowner relief on the table if it does not join the settlement, according to a letter from the state's banking commissioner seen by Reuters on Tuesday.

Delaware Attorney General Beau Biden, who is the son of U.S. Vice President Joe Biden, has said he opposes the settlement as it is drafted, and wants to make sure he can preserve his lawsuit against MERS, the banks' mortgage electronic registry, which he filed last year.

MERS is not a party to the settlement, but the proposed deal is expected in part to resolve claims against the banks for their use of MERS.

In a statement provided to Reuters on Tuesday, Biden's office said he "continues to consider the terms of the settlement and advocate for improvements that address his concerns." New York's Schneiderman also sued three of the banks last week accusing them of fraud in their use of MERS. That lawsuit is based on claims expected to be resolved in the settlement.

Aruna Viswanatha and Karen Freifeld - Eyes on dissident states as mortgage deal nears Reuters 7 Feb 12

Well...  I'm with Biden and Schneiderman on this one.  Also looks like the Obama administration is not backing Schneiderman:


As ongoing administration initiatives to assist distressed homeowners have fallen short and Mr Obama confronts a Congress that has been unwilling to provide for additional aid to troubled borrowers, a settlement that yields fresh relief for the financially strapped represents the White House's best chance to convince sceptical voters that it is attempting all it can to help the ailing US property market.

Garnering support and minimising criticism from left-leaning organisations sympathetic to borrowers' plight in advance of the settlement's announcement will be key, said participants in the White House discussions and separate settlement negotiations.

Shahien Nasiripour - White House courts support for mortgage pact Financial Times 8 Feb 12

Like I said in the diary, some tough choices here.  I'm with dissenting progressives on this but $25B is a lot of relief for homeowners too.


[ Parent ]
Further Into the Weeds... (2.00 / 1)
It seems like the MERS liability was specifically exempted from the settlement, at least according to anonymous White House sources back in January:


No release on legal liability surrounding Mortgage Electronic Registration Systems (MERS).

Mike Lux - Settlement Release Looks Tight Huffington Post 27 Jan 12

And this coincides exactly with AG Schneiderman's press release on the same day:


ALBANY, N.Y. - New York Attorney General Eric Schneiderman says one of his major objections has been resolved in a proposed settlement between U.S. states and the nation's biggest mortgage lenders over deceptive foreclosure practices.

Schneiderman, named Friday to help lead a nationwide probe of wrongdoing in the mortgage-backed securities market, says his issue with the multistate settlement was that it shouldn't interfere with a comprehensive investigation.

He says he's confident those liability releases for the banks have been "narrowed."

Schneiderman: Objection resolved in mortgage deal AP via WSJ 27 Jan 12

So Schneiderman went ahead and sued the banks over MERS in early February and what happened?  The banks cried foul and the whole agreement gets a shakedown.  Good on Schneiderman for testing the terms before signing on.  We'll see how the White House responds but it should come as no surprise that the banks are not interpreting the "narrowing" of the terms of the settlement in the same way that federal and state negotiators have done, if indeed ananymous assurances are correct.  We need some purifying daylight on this deal, it seems to me, before it is pressed forward:


The mysterious thing in all this is the administration's role in all this. I have been assured multiple times by multiple people, and it has been reported by several journalists, that the administration had signed off on giving "no release on legal liability surrounding MERS."

This would certainly suggest that the administration was strongly in Schneiderman's camp on this MERS issue, and the fact that the release news came out on Jan. 27 would indicate that the bankers should have figured out several days back that lawsuits like Schneiderman's were going to be allowed. And I am certain that Schneiderman would have informed the administration of his plans to sue MERS and the banks several days before he filed it, so it isn't like there should be any surprises here.

Some news reports seem to imply, though, that certain administration officials haven't been backing Schneiderman to the hilt on his right to file this lawsuit, which would be disturbing to say the least given the "no release on legal liability surrounding MERS" language that was reported on the Jan. 27. I am hoping I am reading the wrong things into these news reports, and that the administration is standing shoulder to shoulder with Schneiderman on this issue.

Mike Lux - America's Biggest Banks: Poor, Poor Pitiful Us Huffington Post 8 Feb 12

Stay tuned.


[ Parent ]
Missed This... (2.00 / 1)
Contradictory position from a bank spokesperson:


Bank executives argue that New York attorney general Eric Schneiderman is using the [MERS] lawsuit to go after claims already covered under the settlement, said the source. JP Morgan Chase, Ally Financial, Citigroup and Wells Fargo declined to comment. Bank of America could not be reached for comment.

Loren Berlin - National Mortgage Settlement Doesn't Protect Against Future Fraud Charges, Banks Fear Huffington Post 7 Feb 12

The terms of this settlement need to be spelled out in detail, at least to the negotiating parties, it seems.


[ Parent ]
And Now... (2.00 / 2)
The banking lobby suggests they've got a deal:


WASHINGTON - California Attorney General Kamala Harris is expected to join a multi-state settlement with the top five mortgage servicers and New York's AG could soon follow, according to sources familiar with the negotiations.

New York AG Eric Schneiderman and Harris have been the two biggest hold outs on the proposed settlement, which had the backing of more than 40 states as of a Monday night deadline. According to two sources, who requested anonymity because they were not authorized to speak publicly about the deal, Harris is now prepared to sign on.

New York, meanwhile, appears increasingly likely to join the settlement, according to the sources.

Kate Davidson - Calif. Expected to Join Mortgage Settlement, N.Y. Likely to Follow American Banker 8 Feb 12

There have already been a few false alarms and much wishful thinking along these lines and it is reasonable to remember AG Beau Biden's perspective, "Delaware's timeline for agreeing to the settlement is dictated by whether our concerns are met."  I'm guessing he has a "lobbyist" in the White House.

Still, there seems to be some arm-twisting going on here.  We'll see if the Obama administration's electoral concerns trump those of Democratic attorneys general in California, New York, Massachusetts, Nevada and Delaware.


In Other News... (2.00 / 2)
A somewhat related criminal investigation results in an indictment:


A grand jury in Missouri handed up the 136-count indictment late last week charging Georgia-based DocX -- a subsidiary of the massive mortgage processor Lender Processing Services -- and its founder and former president Lorraine O. Brown, with forgery. The indictment alleges that DocX employees fabricated signatures on hundreds of real estate documents, some used in foreclosures.

"This is the first time any grand jury in the country has indicted a corporation or a high-level executive at a corporation for 'robo-signing,'" Missouri Attorney General Chris Koster told The Huffington Post. "The grand jury is alleging that the documents have false signatures on them, that the notarizations are fraudulent and that it was all done with an intent to deceive. If that's true, it makes the [foreclosure] documents forgeries."

David Levine - In DocX Case, Robo-Signing Forgery Charge Hits Top Executive Huffington Post 8 Feb 12

Might go some way toward explaining the "urgency" of the settlement, doncha' think?  Maybe the bank executives need to sharpen their pencils instead of digging a hole for themselves:


"I think it's fair to say that the banks are becoming an obstacle to completing this settlement now," said the source, who spoke on condition of anonymity.

Loren Berlin - National Mortgage Settlement Doesn't Protect Against Future Fraud Charges, Banks Fear Huffington Post 8 Feb 12

Hmmm...  Tough choices all around.  Nobody looks good in an orange jumpsuit.


Just In (2.00 / 2)
Unofficial claim the deal is sealed:


New York Attorney General Eric Schneiderman and California Attorney General Kamala Harris are joining the national mortgage servicing settlement, making a deal that includes all 50 states all but inevitable, according to a source who spoke Wednesday evening on condition of anonymity.

"It's hard to see any state staying out of the deal if California is in," said the source.

Loren Berlin - National Mortgage Settlement All But Inevitable As California, New York Join Deal Huffington Post 8 Feb 12

The devil, as always, is in the detail.  We'll see that soon apparently.


And Just For the Record (2.00 / 2)
It just isn't in the DNA of banks to act in good faith:


Some of the [foreclosure] cases had already been taken up in the settlement conferences as many as nine times, over many months, only to be delayed each time until yet another meeting.

"We don't have the full file," said a bank's lawyer during one of the conferences.

"Unfortunately, I wasn't able to review the documents," said another lender's lawyer in another case a few minutes later.

"We should have received it, but it didn't get into our system," said a third.

A fourth lawyer conceded that the homeowners had mailed information to the bank, but said that "only fax and e-mail" were acceptable.

On several occasions the court official who conducted the conferences that day, Tracy Catapano-Fox, mentioned to homeowners the system's Catch-22: as they rush to gather newly demanded tax forms and bank records, information they supplied earlier to address other questions grows too old to be useful.

William Glaberson - Push to Avert Foreclosures Hits Court Logjam NYT 8 Feb 12

Who will remove this stone from our collective shoes?


[ Parent ]
Perhaps a Win? (2.00 / 2)
For Attorney General Schneiderman?:


Mr. Schneiderman was able to win significant concessions from the banks in recent days.

In the agreement's expected final form, the amnesty is mostly limited to the foreclosure process, like the eviction of homeowners after only a cursory examination of documents, a practice known as robo-signing.

The prosecutors and regulators still have the right to investigate other elements that contributed to the housing bubble, like the assembly of risky mortgages into securities that were sold to investors and later soured, as well as insurance and tax fraud.

Officials will also be able to pursue any allegations of criminal wrongdoing. In addition, a lawsuit Mr. Schneiderman filed Friday against MERS, an electronic mortgage registry responsible for much of the robo-signing that has marred the foreclosure process nationwide, and three banks, Bank of America, JP Morgan Chase and Wells Fargo, will also go forward.

Nelson D Schwartz and Shaila Dewan - States Negotiate $25 Billion Deal for Homeowners NYT 8 Feb 12

We'll see.  Cold comfort to those already foreclosed or whom were hoping that prosecutions would alleviate their pending foreclosures.  The sooner a wooden stake is driven through the heart of MERS the better.


[ Parent ]
Dude (2.00 / 2)
Can anyone get a word in edgewise?

(Should have been a liveblog.)  /smile

"When Fascism comes to America, it will come wrapped in teh stupid and waving a gun" ~ Esteev on Wonkette


Sorry (2.00 / 3)
Sometimes I get a diary confused with a whiteboard.

[ Parent ]
I'm just kidding. (2.00 / 2)
I'm in my diary talking to myself.  :)

"When Fascism comes to America, it will come wrapped in teh stupid and waving a gun" ~ Esteev on Wonkette

[ Parent ]
Don't interrupt him, (2.00 / 2)
I'm waiting to see which one of him wins the debate...

John Askren - "Never get into a pissing match with a skunk."

[ Parent ]
Here's my dumb question: (2.00 / 1)
why is the White House involved in negotiations between the states' Attorneys General and the banks in the first place?

"When Fascism comes to America, it will come wrapped in teh stupid and waving a gun" ~ Esteev on Wonkette

Good Question (2.00 / 1)
At some point the deal would probably need to address federal issues but in this case the states initiated the process.  I'm guessing the banks wanted to insure they were also covering interstate jurisdictions; like where fraudulent documents submitted in Florida were forged in Georgia but I really don't know.

[ Parent ]
Then it would seem a DOJ question I would think. (2.00 / 2)
I'm not trying to be contrary just trying to understand.

I'm guessing there's a reason, beyond "he's a sell-out" that the Administration is involved I'm just not clear on it.

"When Fascism comes to America, it will come wrapped in teh stupid and waving a gun" ~ Esteev on Wonkette


[ Parent ]
noteworthy: (2.00 / 5)
Schneiderman to left: "Take yes for an answer."

Asked if progressives should be skeptical of the administration's assurances, given the lack of accountability so far, Schneiderman insisted that Obama's private and public assurances have left him convinced he is serious about a real accounting.

"He took ownership of this," Schneiderman. "Sometimes people on the left have to take yes for an answer. The President is accepting the challenge. It's time for progressives to say, `okay, he's moving with us now, he's using resources of government to aggressively pursue the malefactors of great wealth, as Teddy Roosevelt put it.'"

http://www.washingtonpost.com/...

Earth is the best vacation place for advanced clowns. --Gary Busey
 


Well... (2.00 / 4)
One can understand the resistance but in Schneiderman Obama has a credible spokesperson.  The part I like is the exemption of other possible avenues for prosecution and redress:


This agreement holds the banks accountable for their wrongdoing on robo-signing and mortgage servicing.  This settlement does not seek to hold them responsible for all their wrongs over the  years and the agreement and its release preserve legal options for others to pursue.  Specifically, this settlement does not:

   Release any criminal liability or grant any criminal immunity.
   Release any private claims by individuals or any class action claims.
   Release claims related to the securitization of mortgage backed securities that were at the heart of the financial crisis.
   Release claims against Mortgage Electronic Registration Systems or MERSCORP.
   Release any claims by a state that chooses not to sign the settlement.
   End state attorneys general investigations of Wall Street related to financial fraud or the financial crisis.  

The agreement settles only some aspects of the banks conduct related to the financial crisis (foreclosure practices, loan servicing, and origination of loans) in return for the second largest state attorneys general recovery in history and direct relief to distressed borrowers while they can still use it.  

National Mortgage Settlement 9 Feb 12

I think we have a lot to thank Schneiderman for in this, he's a fighter and a realist.  We will be watching his career with great interest.  The banks really made a mess of all of this.


[ Parent ]
I was just coming to post on this. (2.00 / 3)
I like this part,, too, from the same article:

Interestingly, Schneiderman vowed that if the task force to probe mortgage practices set up by the president - which he co-chairs - stalls or drags its feet, he would speak out publicly against it. Some critics, such as David Dayen, have expressed skepticism that it would have the resources and leeway it needs to secure real accountability.

Seems like this settlement is the first step and doesn't unduly limit future actions.

"When Fascism comes to America, it will come wrapped in teh stupid and waving a gun" ~ Esteev on Wonkette


[ Parent ]
Yeah, Well... (2.00 / 3)
We need to keep a close eye on these folks:



[ Parent ]
On cue... (2.00 / 5)
GOShacks have determined all invloved to be sell-outs, especially Harris and Schneiderman.  They're now just puppets in EvilObama's grand scheme.

Earth is the best vacation place for advanced clowns. --Gary Busey
 


[ Parent ]
Yes... (2.00 / 4)
There are some fairly cogent concerns about this which are not getting much of an airing:


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.

Yves Smith - The Top Twelve Reasons Why You Should Hate the Mortgage Settlement Naked Capitalism 9 Feb 12

If you read the twelve reasons she cites they are fairly compelling, and I admire Yves for taking an unequivocal stand on probity and the rule of law.  She's got a strong point.  On the other hand, a certain amount of realism is sadly necessary given the way things currently tilt in our political system.  And driving a major financial institution into failure may not actually be a winning strategy whatever the justice of the claims against them.

As I said, it is a bunch of tough choices.  Personally I would prefer to stand with the rule of law and let the chips fall where they may but I wonder if the majority of Americans would agree, under the circumstances.

The interesting thing is that $17B of this is really a haircut for investors, not a penalty to the banks.  It is basically a privatised bailout and if that includes your pension fund or 401(k) well, bad luck to you.  But maybe that's the best that could be achieved.


[ Parent ]
Not so sure about pension hair cuts (2.00 / 3)
From the NYT:

Along with how broad the releases would be, California's attorney general, Kamala Harris, also pushed for her state to be able to use the state's False Claims Act. That would enable state officials and huge pension funds like Calpers to collect sizable monetary damages from the banks if officials could prove mortgages were improperly packaged into securities that later dropped in value.

So it appears the pension funds, SWFs, GSEs and other buyers of MBS retain their rights to putbacks based on fraud in the representations made in the security offerings.

My take on this is it cuts the Gordian Knot of MERS and the banks culpability in it. What it does not do is magically repair broken chains of title. The banks will have to remedy these in well known processes before a skeptical judiciary. This will take significant bank time and money.

There was only one joker in L.A. sensitive enough to wear that scent...and I had to find out who he was!


[ Parent ]
Yes (2.00 / 3)
Although that $17B is principal writedowns not putbacks:


That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401(k)s. Refis of performing loans also reduce income to those very same investors.

Yves Smith - The Top Twelve Reasons Why You Should Hate the Mortgage Settlement Naked Capitalism 9 Feb 12

You're correct that under the terms of the settlement, insofar as we have seen the detail, further putbacks are on the table.  But this looks like a one-off devaluation of the securitised trusts; a different kettle of fish.

And as for the MERS thing, I sure hope this isn't the last word on MERS.  Not only is it a fraudulent failure but it has taken revenue away from local government; I would hope to see further settlements on these matters and restitution.

But the chain of title is broken for tens of millions of homes and it will take a generation to put that Humpty Dumpty back together again.


[ Parent ]
The theory is that the mortgage losses (2.00 / 3)
due to principal writedowns and refis to 4% will offset the sure (and likely larger) losses due to foreclosures. An added benefit to the refis is it moves us away from the Rentier Economy of the last 30 years.

But the potential putbacks move the ultimate bagholder losses to the banks.

Re the chain of title issue: the banks have huge incentives to remedy them via the Million Lawyer Mobilization Act. Title insurance will not be issued for used home sales until they do, freezing the resale market. And all that money for remedial action comes straight from the banks bottom line.

There was only one joker in L.A. sensitive enough to wear that scent...and I had to find out who he was!


[ Parent ]
Well... (2.00 / 3)
We certainly need to get the housing market moving again and it shouldn't take much, I read somewhere that getting rid of 6-8% of the overhang should help.  In that respect the settlement is probably a good thing.

And I agree about the putbacks, which have already cost the banks, collectively, billions.  I have a funny feeling the banks are going to have to be walked through the remedial action on chain of title, however.  The whole justification of MERS was as a cost-saving end run around the local county clerks' offices.  I realise that MERS has been dropped since 2010 from acting directly in foreclosure cases but am not aware of any move to re-establish the previous process by banks; as far as I am aware they are still using MERS as a clearinghouse for determining note-holders.


[ Parent ]
While avoidance of county filing fees (2.00 / 3)
was part of the rationale for MERS, I think process flow was more the goal. They needed to keep the pipeline full and moving toward the end point of securitization. I'm guessing a global settlement with counties wrt fees is another shoe that will drop in the future.

There was only one joker in L.A. sensitive enough to wear that scent...and I had to find out who he was!

[ Parent ]
Process Flow? (2.00 / 4)
If so it was performed with unusual incompetence, speaking as a database designer.  It may not have dawned on them that having a built-in external check on transactions, like a two-phase commit, however sluggish or costly, was an essential part of the process which protected all parties, vendor, buyer and underwriter, from the considerably more unfortunate consequences we now all face with chain-of-title issues.

And if that had prevented the exponential securitisation of mortgages in a period of less than a decade I would submit it would be an example of a time-honoured process enforcing wise prudence on a pioneering innovation.  It took two hundred years to establish and a few years to demolish, much to our detriment.


[ Parent ]
Well, speaking (2.00 / 4)
as a database programmer, I would agree with you if they shared your prudent goals. They didn't. All they were concerned with was checking the box and clicking the OK button.

Their arrogance was that they could lawyer or lobby their way around any future problems and this years bonus trumped potential future consequences. Well, the future is now and it's truth or consequences time.

Some of the consequences are that bank revenues are down across the board, meaning the TBTFs are shrinking. Bonuses and CEO compensation are declining (in some cases spectacularly) as well. I have a long list of bookmarks documenting this that would make b**-o-link weep.

There was only one joker in L.A. sensitive enough to wear that scent...and I had to find out who he was!


[ Parent ]
Interesting... (2.00 / 3)
You should write something about that.  Heh, another IT person.  It occurs to me a lot of us blog because we are among the last group on Earth who can still touch-type.

[ Parent ]
I probably will next week (2.00 / 3)
But I have to do a promised diary about Obama's (not so) secret weapon to hype the economy this year similar to Nixon '72. Bookmarking the charts and graphs now.

Yeah, touch typing. I'm old school, learned on Royal manuals in the mid 60s. You can spot us by the way we hammer our keyboards.

There was only one joker in L.A. sensitive enough to wear that scent...and I had to find out who he was!


[ Parent ]
you old timers! (2.00 / 3)
memes - Steamboat Trolly
see more Memebase and check out our Troll Face lols!

Earth is the best vacation place for advanced clowns. --Gary Busey
 


[ Parent ]
shc@#$@%man (can't spell it) on Maddow tonight: (2.00 / 1)

Visit msnbc.com for breaking news, world news, and news about the economy



Earth is the best vacation place for advanced clowns. --Gary Busey
 


Heh (2.00 / 2)
"A down payment..."  Banks just love hearing that.  The Rudy Guiliani of the Left.  If he busts the bankers like Rudy did the mob he'll be mayor sooner or later.  We'll see.  New York Attorneys General have a lot of leverage against these buggers.

[ Parent ]
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