With more rumblings of a foreclosure fraud settlement in the air (you’ll notice that the New York Post’s not-believable figure of a $60 billion settlement has been revised down to $25 billion, and that none of the AGs who have repudiated the deal are quoted here), the more significant actions are happening, paradoxically, at the federal regulatory level. Take note of these developments, from today:
• Federal regulators at the FDIC are scrutinizing class-action mortgage lawsuits, perhaps to actually get data on mortgage servicer abuse. Bank of America just lost a bid to throw out one of these lawsuits, an important one alleging that homeowners did not get HAMP modifications when they were qualified borrowers. An FDIC official indicated that 90,000 homeowners are contesting their foreclosures in court, which is probably a low number.
• The FDIC sued Michael Perry, the former CEO of IndyMac, for $600 million, related to the sale of toxic mortgages.
• JPMorgan chase settled a $228 million suit over market-rigging for municipal bond derivatives, a separate issue but one that shows actual pressure on the banks.
So, I don’t think the Obama Administration got balls overnight, and is aggressively pursuing lawsuits against the lords of finance. A couple agencies may be doing some work, but it’s middling. And for the most part, regulators like OCC, which will release the results of their foreclosure review without naming the banks involved, still rule the roost. I do, however, think there’s a recognition inside the Administration that the housing market is a lead weight on the economy, and that they need to think harder about ways to fix the foreclosure crisis. Part of that are these new initiatives to give distressed borrowers a fighting chance through forbearance or no-interest loans. But another part is extracting the best settlement they think they can get by putting external pressure on the banks on these issues.
It’s still a meaningless settlement without an actual examination of the facts and the depth of the problem, however. Remember that as it gets announced, which could be in the next few weeks.