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Better Believe It

(18,630 posts) Mon Feb 13, 2012, 11:35 PM Feb 2012

Mortgage settlement is great — for politicians and banks

Mortgage settlement is great — for politicians and banks
By Michael Hiltzik
February 11, 2012

There certainly are some big winners in the deal, which has the approval of 49 of the 50 state attorneys general. Start with its godfathers. President Obama took to the podium a couple of hours after the deal's announcement to declare that it will "speed relief to the hardest-hit homeowners."

Then there are the banks. The signatories to the deal are Bank of America, Citibank, Wells Fargo & Co., JPMorgan Chase and Ally Financial (formerly GMAC), which handle payments on more than half the nation's outstanding 27 million home loans and therefore have been at the center of the servicing and foreclosure abuses the settlement is supposed to end.

If you don't listen too closely, it sounds as if they're putting up the $25 billion. Not so. The only cold cash the banks are paying is a combined $5 billion, including $1.5 billion to compensate borrowers whose homes were foreclosed on from 2008 through the end of last year, with the rest going to the federal and state governments to pay for regulatory programs.

In the words of business consultant Susan Webber, who blogs expertly on financial matters under the pen name Yves Smith, "We've now set a price for forgeries and fabricating documents. It's $2,000 per loan." She observes, quite properly, that the payoff is a minuscule fraction of the costs these practices have imposed on borrowers, the court system and the economy.

Read the full article at:

http://www.latimes.com/business/realestate/la-fi-hiltzik-20120212,0,7852934.column

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States Settle for…a Poke in the Eye
by Maria Tomchick
February 13, 2012

The $26 billion settlement that state authorities wrangled out of the nation’s five biggest banks amounts to peanuts compared to the damage that was done to homeowners across the country.

All of these banks have been the recipient of federal bailout funds and some, like Ally Financial, are still dependent on US taxpayers. Nevertheless, they’ve stockpiled enough cash that they could pay the $26 billion settlement today and not take a hit to their bottom lines. But that’s not what they’ll have to do. The settlement terms are much sweeter than that.

Over three years, the banks will help about one million homeowners who owe more than their homes are worth to restructure their mortgages. This is estimated to provide about $20,000 in debt relief per homeowner. Unfortunately, most homeowners in that situation are underwater on their mortgages by an average of $50,000 each, so this provision won’t be enough to stop the rise in foreclosures and bankruptcies. Furthermore, the three-year timeline is too long; people are in debt and in financial trouble right now, and in three years a lot of people could lose their homes before they see any debt relief from the big five banks.

The settlement also sets aside funds for people who lost their homes to foreclosure: about 750,000 people will receive between $1,500 to $2,000 in cash. Whoopee. When you’ve lost your home, a $2,000 check doesn’t mean very much, especially when the bank that foreclosed on you has been accused of forging documents and was completely unresponsive to your requests to refinance or negotiate better payment terms. And these banks will be released from prosecution by the states for their criminal activity, which makes the settlement that much more painful for the American people.

Read the full article at:

http://www.commondreams.org/view/2012/02/13-2