Obviously a refinancing initiative using an existing program, which may net $20 billion but not do much to arrest the foreclosure crisis, is more of a punt than anything as far as housing is concerned in the American Jobs Act. That’s Mike Konczal’s take as well. But the bigger news on the housing/foreclosure front was the final nail in the coffin of this increasingly farcical 50-state AG settlement. The banks are miffed about the FHFA’s lawsuit against them over representations and warrants on mortgage backed securities, particularly because the suit holds over 130 individuals responsible for the crimes, which is just not done. So these banks blew off the latest scheduled meeting with the AGs in a fit of pique.
The five biggest mortgage servicers have cancelled a planned negotiating session with representatives of the 50 State Attorneys General in apparent protest over a federal regulator filing suit against them, a source familiar with the matter tells TIME.
The banks canceled the meeting on Tuesday afternoon in protest over the announcement last Friday that the Federal Housing Finance Agency would bring a broad case against 17 firms, including those in talks with the State AGs. The FHFA, which oversees mortgage giants Fannie Mae and Freddie Mac, alleges the firms violated securities law by misrepresenting the value of bundles of high-risk mortgages they sold. FHFA did not say how much the case might be worth, but outside analysts have said it could potentially produce billions of dollars in compensatory damages from the firms.
Massimo Calabresi intimates that the FHFA suit has ruined the AG settlement, but that’s a bit of 20/20 hindsight. The settlement was already going nowhere well before the FHFA lawsuit. The banks want full immunity on everything, and enough AGs were unwilling to give that up that the two sides could never come together. What’s more, AGs couldn’t possibly release the banks from liability lawsuits from private investors, or even quasi-private ones like Fannie and Freddie.
This is just a hissy fit from the banks, and probably an excuse to end settlement talks that will not give them what they need. Indeed, the banks are probably searching for a Plan B at this point. They don’t want to have to give up a dime on robo-signing, conserving cash for the future legal fights ahead. Some banks, like Bank of America, are engaging in restructuring and firing of top executives, essentially to create a smaller and more focused operation. BofA is actually trying to get itself small enough to fail, because with their exposure they cannot afford to be too big. They plan to cut 30,000 jobs and significantly separate the commercial and investment banking sectors of the business.
Meanwhile, the lawsuits and the exposure keeps coming. In a major appellate court ruling in Florida, one of the most important foreclosure states, a foreclosure was reversed because LaSalle Bank could not prove the proper amount due and owing. Glarum v. LaSalle Bank is a huge ruling with broad implications. Here’s Abigail Field:
When foreclosing, the court said, a bank has to use evidence, not hearsay. In this case, the hearsay was LaSalle’s claim about how much the homeowner owed it–the bank’s “affidavit of indebtedness.”
What is hearsay? Split the word in two and it’s obvious: the witness hears something, and then says it to the court. Hearsay’s prohibited for a basic reason: you can’t trust it to be true, as anyone who has played “telephone” knows. The hearsay rule has a 500+ year pedigree, so it’s not possible that any lawyer or judge in Florida thought it was okay to use hearsay to win a case [...]
Ruling that LaSalle’s affidavit of indebtedness was inadmissible hearsay was unremarkable as a matter of law. But in a state where some judges have displayed pro-bank bias so powerful they don’t require the banks to follow the rules, the decision is stunning. In fact, banks are likely to be far more than stunned by it; they may be stopped in their tracks for a long time.
That’s because the affidavit represented normal business practice: have an employee look at a piece of paper, look at a computer screen, and sign. By rejecting Orsini’s affidavit, the court is forcing the banks to overhaul their basic foreclosure processes. Don’t be too sympathetic to those poor banks, however. The hearsay nature of these affidavits is obvious, and the only way banks could think it would be alright to use them would be to think they are above the law.
If applied broadly, this ruling basically shuts down robo-signing and forces the banks to completely change their broken servicing processes. More here and here.
So if you want to know why banks are nosediving, it’s because of the exact same problems that characterized the 2008 financial crisis. There are still massive housing losses in the system due to criminal fraud, and slowly but surely, the banks are being made to eat them.



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This is just more evidence that laws mean nothing! Banks, in particular, are doing things THEIR way and to hell with what government or those 50 attorneys general want — what an inconvenience!
I doubt it. We will have a false flag attack or something to distract us and rally behind some BS, and when it is all over the banks will still be in control, all their BS fraud wiped out, and some new monetary system that gives them more power and wealth
The banks don’t need to search for plan B. They already have it – write more checks to their whores in the political class.
… probably an excuse to end settlement talks that will not give them what they need.” What they “need” or what they “want”?
“When foreclosing, a bank must use evidence, not hearsay.”
I would have thought (actually, I was taught) that this was so obvious as to barely need stating.
Sigh.
Come on AG’s call the banks’ bluff. Take a page from Masto’s lawsuit and file individually for every citizen affected. Go for holding more than 130 responsible…Triple that.
I couldn’t be more pleased that the banks, especially BofA, are finally discovering some facts of life…as Sinatra once said, That’s Life! Riding high in April; shot down in May.
It seemed to me that an agreement involving 50 AGs, one from each of the states, and at least 17 different banking entities all doing the same illegal things at once in an effort to make the illegal legal, was doomed from the beginning. State laws vary, and it seems to me each state is going to have to decide the extent to which they feel they should prosecute, or not prosecute, on their own to preserve their state’s rights.
You do have to be amazed at the complete arrogance. Would the banks have thought an affidavit from the borrower than he or she is pretty sure this is what was paid and therefore they are not in default? What is wrong with these folks?
There is really little value in settling with the banks at this point. The best thing that can happen for the financial system, the economy and the country is another crisis. This time, several of the big banks won’t survive and that is exactly what the system needs. Capitalism relies on failure. Failures are opportunities for someone else. The banks that fail will deserve their fate. The management of those failed banks will be out, new management and new money will come in. There is trillions of dollars on the sidelines waiting for just this scenario.
I have Tom Miller in my head as Sally Kellerman in MASH, after the shower scene, storming out of the commander’s tent “My Commission . . . My Commission !”
suck it quissling
You know that is not a bad idea. if borrowers in robo courts where the judges are just declaring for banks based on this BS, why not borrower fail similar affidavit. That will force the judges hand and if s/he call one BS then same goes for another.
not sure about that. little provision in dodd/frank that does not let banks fail and those that are restructured will be done in such a way that those left will be even more powerful
“..and you just let them.”
This is still the same crisis.
I was taught this too.
If only my Evidence prof had been as this-is-how-it-works-in-the-real-world as my Contracts prof. On contracts of adhesion, he noted that insurance companies have reams of contracts with terms that wouldn’t withstand a court challenge, but as long as customers didn’t challenge them…
Can’t you see the delicious irony? Obviously this is leading to another run on banks. Bank of America will be Obummer’s Bear Stearns/Lehman Brothers.
At the same time he is demanindg “shared sacrifice” (where working people sacrifice their share to the banksters), the loopholes in the Dodd Financial “Reform” bill will become radically apparent when the call comes to bailout BofA because afterall they are too big to fail.
What you said x 2!
Yeah, and I wish they would “Roll up in a ball, and just die”,too!
Any chance someone can dig out the names, titles, and bank affiliations of the individuals named in the lawsuits? Bet that would be interesting reading!
in the chase to make someone pay it looks like we all lose.
Greenspan, Bush, and the investment banks were never at risk for blowing up loan standards in 2004, the MBS derivatives on those loans, and thus our economy.
But we are allowed to feel happy that BofA’s purchase of Countrywide in 2008 – Countrywide is the mortgage servicer with the criminal activity – a purchase suggested by the Fed – will destroy all shareholder equity in BofA, as it has already sold off 30 of its best operations, including those in China, to get funds to pay any settlement.
But the demand for one more pint of blood, always just one more pint of blood, now means no settlement at all – resulting in a case by case trials, 40 years of trials, that are in effect 3 year delays to foreclosures as banks are told to rebuild the file with “proper” documents – as security hedge funds get rich and there are lots of legal fees, and we get no principal modifications on mortgages and a housing market that never recovers, destroying the economy for a generation.
Damn good thing we killed the AG settlement.
Punishing wrongdoing so that it never happens again often comes with a cost. Maybe the net result of this ill-conceived get-out-of-jail-free-card settlement will be re-regulation of the banks and a clean-up of the toxic financial services industry.
sometimes the cost is so much more misery that wisdom suggests a more modest punishment that does not make the hedge funds rich.
Has the Royal Fraudsters been called on the rug? How ridiculous. Royalty decides the laws, they don’t answer to them. Give them a minute and they’ll pay their puppet and Hos to give them another round of “get out of all responsibility cards” so they can go out and destroy again. And while they’re at it, why not throw in some new bailout money under some pretense or another. Or maybe Obama can trade more tax cuts as a bargain for them only to rape and pillage for x amount of time longer.
I wonder about the money for jobs. Is it going to go the “job creators”. Now wouldn’t that be something.
I agree with BeachPopulist to a point. “Never happening again” is a stretch, though. Theoretically those responsible get frog marched into court, some to jail, or whatever. . .
Theoretically some notables could be prosecuted to set an example while leaving other smaller fry alone. The prosecutors can’t take chances with this — they cannot afford to lose any such case. Considering Angelo Mozilo, one can wonder if ANY individuals will EVER do hard time rather than paying a fine . A rotten system structures to do one thing especially well — keep its principals out of jail and avoiding personal criminal accountability.
Regardless, eventually new fallible humans will replace the miscreants whether those miscreants are prosecuted or not. For awhile the newbies will be ever so cautious. Then the tide will go out a bit, and some of them will test the waters again. Others will follow. It’ll eventually end up the same as before. Ambition brings out the worst in people.
This brings to mind a question I had back during the “crisis” of 2008: exactly what would have happened if the banks hadn’t been “bailed out”?
In a quaint, earlier time, before the advent of securitization, the banks would have been sitting there with “balance sheets” filled with worthless assets — mortgages that were being defaulted upon because of lost jobs and because of shoddy investigation of the credit-worthiness of the borrowers [or outright fraud in encouraging borrowers to sign up for mortgages far beyond their means to pay]; houses whose value had fallen during the recession such that their values were below the amount of the mortgages they secured.
But wait: those masterminds at the banks had thought of all this and developed securitization as a way of getting the mortgages out their door and having someone else [purchasers of the securities] assume the risk. The crap is no longer on their balance sheets, threatening their capital requirements and causing folks to be queasy about a “run on the banks” [which, of course, wouldn't be a problem because of FDIC insurance, right?]
So what’s the banks’ problem? Why did they need billions to be “bailed out”? What would have happened had we NOT give them that money?
I can understand now that banks are foreseeing giant liabilities for their criminal fraud in creating and securitizing these mortgages, and they’d like taxpayer relief from that.
But my question remains: what would have happened if we hadn’t given them the money in 2008, what will happen now if we don’t given in to their demands, and are any of those outcomes so bad?
[Is there a book somewhere that plays out the "we don't save the banks; watch what happens" scenario, circa 2008?]
Two wrongs don’t make it right. First they inflated the home loans to lure the home owner, than they used everyone that lived in the house hold as a source of income, including cats and dogs (if they got an allowance)because there was a tremendous amount of cash being printed to inflate the market. After the house of cards collapsed they refused to adjust the loans, when the tax money was used for the bail out of banks to help the home owner, they gave themselves raises and bonus for compensation of a great job they had done. I guess its better to put people out on the street, let the property go to hell and rot, bring the whole neighborhood prices to the bottom causing further decline in the housing market than work with the home owner on a solution. Common sense his not part of a banks motto, stupidity his!