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The Robosigning Mortgage Settlement Rewards the Big Banks

Written by Gary North on February 13, 2012

The proposed settlement of the mortgage fraud rip-offs favors the big banks. Surprise!

Here are 12 reasons why the deal favors the big banks.

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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. . . .

2. 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.

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 (since, according to sworn testimony of its own employee in Kemp v. Countrywide, Countrywide failed to comply with trust delivery requirements). . . .

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. You use the stuff that is easy to prove to gather information and secure cooperation on the stuff that is harder to prove. In Missouri and Nevada, the robosigning investigation led to criminal charges against agents of the servicers. But even though these companies were acting at the express direction and approval of the services, no individuals or entities higher up the food chain will face any sort of meaningful charges.

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. . . .

10. A deal on robosiginging serves to cover up the much deeper chain of title problem. And don’t get too excited about the New York, Massachusetts, and Delaware MERS suits. They put pressure on banks to clean up this monstrous mess only if the AGs go through to trial and get tough penalties. The banks will want to settle their way out of that too. And even if these cases do go to trial and produce significant victories for the AGs, they still do not address the problem of failures to transfer notes correctly.

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. But the problems will fester and the housing market will continue to suffer. . . .

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The media have proclaimed the settlement as a victory for the public. That’s why we can be sure that it’s a victory for the big banks.

The good news is this. You will be able to refinance your 30-year mortgage. At today’s rates, this is a good idea if you still have equity and a loan over 5%. If not, forget about it.

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10 thoughts on “The Robosigning Mortgage Settlement Rewards the Big Banks

  1. More of the gov ripping off the taxpayer for their banking buddies.

  2. I'm not defending the big banks in any way, but I work in the industry as a Realtor… I have yet to hear of any widespread problems of them foreclosing on people who are current with their payments. At the end of the day, regardless of process errors, they're still foreclosing on people who deserve to be foreclosed on. That fact has been lost in the attorney-driven media uproar over the "injustice" of the situation.

  3. American taxpayers should bring a suit against the bailout and take it to the Supreme Court.. This is just another political vote propoganda scheme and political payback to the to big to fail banks and to Fannie and Freddie to hide the real originators Barney Frank, Chris Dodd, the Black Democratic Caucus, Pelosi and Reid. Another redistribution of wealth program.

  4. Bill McCroskey says:

    @John: We are (well …were) a nation of laws. Your statement while factual is akin to the cops changing a little this ..and a little that in the evidence chain (as it really doesn't matter)  to speed up the conviction of a criminal we ALL know is guilty. After all. guilty people 'deserve' to be found guilty. I too (in my second career) am involved with consulting a local Realtor and the mess created by a law firm (now defunct) here in Florida with scurrilous and illegal practices involving policies and procedures that was used in foreclosing on home owners (at the banks behest and full knowledge) here has created a mess beyond description.

  5. I recall the case of the Florida man who owned his house free and clear, yet was notified by BofA last year that they were foreclosing on him anyway. There's also the BofA vp named Linda Greene I believe who was dubbed the queen of robosignatures, because there were at least 8 different bogus examples of her signing off on foreclosure notices.

    In its typically misguided effort to "help", the feds told people with underwater mortgages they could only qualify for modification if they intentionally missed 3 monthly payments. Acting on that advice, the servicers immediately started foreclosure proceedings on them for being delinquent.

    Having worked for two of the "too big to fail" (now "too big to jail") banks during the repeal of Glass-Steagall and during the implementation of Sarbanes-Oxley, I can say we're witnessing fraud and wholesale theft by the financial services industry on a scale most people can't comprehend.

    You probably also think people who were current on their mortgages until Washington tax policy rewarded US companies to offshore high-paying jobs that left these Americans bereft of employment "deserved what they got".

    An infinitestimal fraction of the $100 trllion the feds showered over Wall Street during the media-fanned bailout could have bought back all the underwater mortgages, but in your mind everyone who lost their jobs and homes is a "deadbeat".

  6. As the Tea Party Economist already knows, but most Americans do not, the following article lays out the enormous problem for those facing foreclosure but also those who are diligently making their mortgage payments, on time, each and every month. http://mortgage-home-loan-bank-fraud.com/enormous

  7. Marvin Lewis says:

    You forget why the banks did not keep good records: As long as the deals were not recorded, the banks did not have to send in the taxes to the Feds for the REITs! Hold on the the tax money and do what you want with it for years and years. No paper filed, no taxes to the Fed.

  8. This is outrageous, you have to go through a mountain of paperwork to get a lone, and they are saying the paperwork is to much! Hippocrates, when you sign a document and you lie you break the law, Send them all to jail !
    Fine them so much that there is no "Profit" and watch the scumbags howl.
    You and I would not have this kind of protection.

  9. I think you missed the part where I said "widespread problems". Yes, I know there have been a few cases like that, but I have yet to hear anything that makes me think it's anything to worry about. 99.9% of foreclosure "defense" is all about enabling people to live in houses they aren't paying for for free as long as possible…

    I'm mainly reacting against the predominant story line in the media and in the public opinion portraying the banks as evil monsters out to screw everybody.

    Last I checked, if somebody loans you money, and you stop repaying it, they have the right to take your house back, whether they get all the procedural stuff right or not. You show me where you are still paying, and I say you deserve a lawyer to "defend" you in court against the big evil bank.

  10. Yeah, and the laws were written by attorneys to benefit attorneys… I never said the banks were faultless. I'm just saying they aren't the evil greedy monsters most people seem to think they are. I know all about the David Sterns story, etc. as I am also in South Florida. As wrong as they may have been to ignore proper procedure, I have yet to hear about their errors resulting in very many people getting foreclosed on while they were still paying their bills.

    The big story here is not about the banks or law firms. It is what has happened to our national morality that has resulted in a situation where the predominant thought process in homeowners is how they can screw the entity that loaned them money in good faith that they would repay it.