Snippets From the 50 State Mortgage Settlement

mersAs expected, states were strong armed by the administration and have agreed to a $25 billion, 50 state mortgage fraud settlement with five banks for robo-signing and mortgage fraud. According to the Wall Street Journal:

The agreement covers five banks: Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. Together, the five firms handle payments on 55% of all home loans outstanding, or about 27 million mortgages, according to Inside Mortgage Finance.

While the banks pony up $25 billion, they are the ones who made out like bandits.

About $5 billion would be cash payments to states and federal authorities, $17 billion would be pegged for homeowner relief, roughly $3 billion would go for refinancing and $1 billion would be paid to the Federal Housing Administration.

Earlier were covered the mixed messages coming from state attorney generals on this settlement. Now here it is. You wanna know how much victims of fraudulent foreclosure practices get? peanuts, $1.5 billion, or at best about $2000 bucks per ex-homeowner. That's basically 750,000 people who lost their homes in fraudulent foreclosure proceedings receiving a whopping $2 grand. Once again we have drop in the bucket Obama.

drop in bucket

An additional $5 billion is being allocated in cash to the states and federal government, of which $1.5 billion is being allocated to a fund to be used to provide restitution to homeowners who have lost their home between 2008 to 2011 because they experienced some form of mortgage servicer abuses.

Naked Capitalism has posted the actual settlement documents for your review and scoffing. Here is the meat of the agreement:

  • Servicers commit a minimum of $17 billion directly to borrowersthrough a series of national homeowner relief effort options, includingprincipal reduction. Servicers will likely provide up to an estimated $32 billion in direct homeowner relief.
  • Servicers commit $3 billion to an underwater mortgage refinancingprogram.
  • Servicers pay $5 billion to the states and federal government ($4.25billion to the states and $750 million to the federal government).
  • Homeowners receive comprehensive new protections from newmortgage loan servicing and foreclosure standards.•An independent monitor will ensure mortgage servicer compliance.
  • States can pursue civil claims outside of the agreement includingsecuritization claims as well as criminal cases.
  • Borrowers and investors can pursue individual, institutional or classaction cases regardless of agreement.

Ya gotta love this Bloomberg headline, Foreclosure Deal to Spur New Wave of U.S. Home Seizures, Help Heal Market. Awesome, we get to start throwing people out of their homes much faster in order to heal the housing market? Heal for whom? Somehow I don't think investors are using these properties for personal shelter. I'm sorry, that's just cold that this is the agenda.

FireDogLake is on fire, parsing through the settlement details in a flurry of blog posts. Already Massachusetts' civil lawsuit, was reduced by the settlement.

Coakley says in a release that she got a carve-out over certain types of claims in the suit. Others, however, were extinguished in the settlement.

The breakdown of settlement monies by States is not even or proportional to the number of foreclosures or even robo-signing. Bloomberg is also parsing the settlement and discovered how unfair it is. California gets more than their lion's share, about $12-$18 billion.

Why should a taxpayer in Houston or Wichita bail out irresponsible California homeowners, banks and the state’s public employees’ retirement fund?

Yet that’s exactly what the Obama administration is looking to do in its latest effort to shore up a housing market that continues to sag as large percentages of Americans remain underwater in their mortgages.

Rely on ZeroHedge to provide the outlinear by calling the settlement a shadow bail out for broke California:

Just over a week ago we highlighted the desperate plight of cash-strapped California. With a $3.3bn short-term 'hole', they were looking for cash-management solutions under every rock and hard place they could find. Today we hear that California joins the Obama bank foreclosure settlement enabling $18bn of bank-funded cash (implicitly via Federal Reserve/Government coffers) can flow to the left coast. Los Angeles alone will receive $4bn which while eventually wending its way down to the consumer (to be spent and implicitly spurring further economic activity or perhaps more likely to pay down other debt in this balance sheet recessionary environment).

Technically the settlement is with 49 states, with lone holdout, Oklahoma, negotiating their own seperate deal of $18.6 million. Gee wiz, so if one holds out for principle, one gets diddly-squat, we see. Poor Nevada got a paultry $1.5 billion.

In Tulsa—one in every 72 homes were in foreclosure. Let’s say only half of those houses had predatory loans under them. That’s about 2,726 homes, and a very generous figure. In Oklahoma’s settlement of $18.6M, each one of those 2,726 homes would only receive $6,823, which is $13,000 less than everyone else in America in that settlement will get.

Who has been hit the worst by the housing crisis?  Nevada is #1 in foreclosures, with proceedings happening on 1 in 180 homes. Of course nevada then gets a smaller piece of the pie? Tell me this settlement isn't political.

What's the huge bank fine on these banks for committing systemic mortgage fraud and abuse? $766.5 million. Yet another wrist slap. The banks actually made $2 billion from robo-signing alone.

The Huffington Post has an article title spanning their site, which puts the settlement as a top ten list of....falling short.

  1. It will not punish the banks much
  2. It will not dramatically affect the housing market
  3. It will not be much help to underwater homeowners

The New York Times quotes some underwater mortgage statistics.

About one in five Americans with mortgages are underwater, which means they owe more than their home is worth. Collectively, their negative equity is almost $700 billion. On average, these homeowners are underwater by $50,000 each.

A recent estimate from the settlement negotiations put the average aid for homeowners at $20,000.

KrakenBasically that leaves homeowners still $30k in the hole, plus the settlement does not cover mortgages held by Fannie Mae and Freddie Mac.

Seems Bloomberg is right, this is all about releasing the foreclosure Kraken to run amok among those still not foreclosed on.



after all of this, the deal is not done

There is a missing final document, unsigned, plus others are reporting the final real deal will be much, much worse than the advertised one.

The settlement

I love the term foreclosure Kraken.

I also love how the banks can commit $17 billion to delivering $32 billion of value. What does that mean? Is it like my wife buying cosmetics: spend $50 and get this gift that's a $24 value? Who assesses what the value is? If you have an 8% loan, and I write off $1000 from it, do I get to call it a $2000 value because that's the total principal and interest you would have to have paid by the end of the loan?

When lawyers use words without real meaning, watch out!