When I started digging into whether this Monday meeting with HUD and DoJ officials to go over a proposal for a foreclosure fraud settlement was legitimate, I couldn’t find one state Attorney General who mattered actually committed to showing up. When I say AGs who “matter,” I mean the ones who have been critical of a settlement in the past. I mean the Justice Democrats. I mean Eric Schneiderman in New York, Beau Biden in Delaware, Martha Coakley in Massachusetts, Catherine Cortez Masto in Nevada, Kamala Harris in California, not to mention the AGs from Hawaii, New Hampshire, Missouri, Mississippi, Maryland, Kentucky, Minnesota, Oregon and Montana who showed up (either themselves or representatives) at the meeting in DC last week to discuss alternatives to a settlement. I mean them. They aren’t going to Chicago, by all accounts.
That doesn’t mean the negotiators aren’t trying to push a deal, of course. And Shahien Nasiripour reports that the terms of the deal have been set and will get circulated to the AGs for approval.
The proposed pact would potentially reduce mortgage balances and monthly payments by more than $25bn for distressed US homeowners, these five people said.
The tentative agreement still must be approved by all 50 state attorneys-general, and negotiators have previously missed proposed deadlines. Participants described the proposal terms as set, meaning the states will be asked either to agree to them or decline to participate.
The amount of potential aid is contingent on state participation and would decrease significantly if big states do not sign the agreement. New York and California are among several states that have voiced concerns about the terms of the proposed deal with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. New York and California are particularly concerned with the part of the deal that would absolve the banks of civil liability for allegedly illegal mortgage-related conduct.
California borrowers would be eligible to receive more than $10bn in aid if the state were to agree to the terms, according to several people involved in the talks.
But while Shahien, who has been pretty good on the reporting of this, says that Administration officials and the AGs who brokered the deal will meet with Democratic AGs on Monday (with a conference call with Republican AGs set for Monday night), he does not confirm the attendance of any of the AGs involved. My sense is that this settlement proposal comes from the Obama Administration, Iowa AG Tom Miller and the small group of negotiators on the executive committee of state AGs, and pretty much nobody else. There’s just no guarantee that any of the Justice Democrats – or any of the Republicans, for that matter – will agree to any of it.
The Administration is trying to put the squeeze on the state AGs, particularly California, dangling $10 billion in “aid” in the deal. The aim, as Marcy Wheeler writes, is to increase pressure on Kamala Harris to agree to the settlement. The core issues haven’t changed, however. Harris called the settlement inadequate last year and it remains just as inadequate. This is a $25 billion settlement when there is $700 billion in negative equity in the country. This is a settlement that, according to HUD Secretary Shaun Donovan, will help 1 million homeowners, when 10.7 million are underwater and millions of others have been wrongfully foreclosed upon. This is a settlement that could put $17 billion of credits toward principal reduction (the rest of the money would go to legal aid, refis, short sales, token payoffs to foreclosed borrowers, and penalties), when there is more than twice as much sitting unused in an account as part of HAMP.
And these credits would get paid mostly by the owners of mortgage-backed securities, investors rather than the banks themselves.
The proposed settlement is structured as a three-year system, under which banks would receive credit toward a target dollar amount by restructuring mortgages held on their own books or owned by investors through mortgage-backed securities (that do not involve government guarantees).
The banks would receive less credit if they reduce balances for loans packaged in bonds or by reducing monthly payments through cuts in borrowers’ interest rates. In one scenario, the banks would get about 50 cents of credit for every $1 of reduced mortgage principal in home loans used to back bonds. In another scenario, balances on loans held on the banks’ books that are cut in the first year of the deal would receive $1.25 credit. This means, under certain circumstances, the aid to homeowners would be less than the aggregate size of the settlement, people familiar with the matter said.
Investors in US home mortgage bonds may have to swallow significant losses as part of the deal, people familiar with the matter have said. Sherrod Brown, an Ohio Democratic senator, sent a letter to negotiators this week urging them not to allow the banks to pass on the cost of the settlement to pension funds and other investors.
According to previous reports, investors would not have approval on the modifications. So the majority of the settlement, where banks get the release of liability, would get paid with other people’s money. Servicers actually make out because they would reimburse themselves for the loan modifications, taking money that would otherwise go to the investors. The investors, in short, would get massively screwed by this deal.
But again, I’ve seen no evidence that anyone outside of the small circle of the Administration and the AGs on the executive committee negotiating the deal actually agree to it. Call it the 12-state deal, rather than the 50-state one. This is only closer to getting done in the sense that the folks who have wanted to cave all along are ready to do so.




28 Comments

Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About FDL News Desk
In your post on the Monday meeting you quoted someone saying,
Is this FT story an attempt to claim the terms are now set?
It’s refreshing that there are still some people in power who refuse to be purchased by Wall Street. Just wish they would move into the White House.
Thanks you again for your important posts. I have bugged my state AG about this regularly and have been sending your posts and a number of others, including Cynthia’s yesterday, to his office.
I spoke to him in person last Sunday, and he says he does not have Martha Coakley’s larger staff, but he speaks to her and the AG of NV regularly.
Apparently he does not like to be in the spotlight, so he does not want to be a front-bencher, but I have no idea if he will fight for what is best (that is what his staff has e-mailed me) for our people.
Much like Obama’s “American Jobs Act”, which was touted as “creating as many as 1 million new jobs!”…when there are at least 15 million unemployed.
Someone in the (half-)White House *really* likes “1 million” as a symbol for “wow, so many! We’re totally fixing this problem, people!” When in fact it’s just a drop in the bucket. Obama isn’t even proposing half-assed solutions, it’s more like one-tenth-assed.
Apparently, contrary to his ’08 campaign rhetoric, President Traitor does believe in putting lipstick on a pig. Come to think about it, in our filthy and disgusting politico-economic system, Obama IS the lipstick on the pig.
Tom Miller isn’t up for reelection until 2014,
but a progressive priority needs to be to primary this neoliberal.
Is it possible that these AGs are the ones who leaked Holder’s conflicts of interest with the large banks?
My AG is a Republican. Does this mean he goes along with it because he pretty much supports raping the Middle class, or he doesn’t go along with it because Obama supports raping the Middle Class?
It’s so tough to have a political party when they all do the same thing.
I am from Iowa and am shocked by the behavior of Tom Miller.
I have sent him several posts from Yves Smith that challenge his assumptions and failed to receive a reply.
This is Iowa. That isn’t allowed, so he’s a sellout.(hell I got a handwritten response from Chuck Grassley when I asked him why 29 billion taxpayer money went against 1 billion from the bankfor the Bear Stearns bailout).
The bribe in this case is the out of state money(citizen’s united anyone?)
that almost sunk his reelection. He sold out for major campaign contributions from several legal firms who also represent banks.
I’d search for the links but its all in the record.
Anybody taking bets on whether Harris will do an el-foldo here in CA? I’d like to know what the odds are.
Tom has always been a Republicrat. His ties to the Insurance/Banking Corps. has long been known, especially in Iowa. Since there’s been no collapse in housing for Hawkeyers and farm real estate has ” blowed up real good “, he’ll suffer very little politically. The Catholic Church has got his back, anyway! He’d sign legislation overturning Rowe v. Wade in a heartbeat if he could, somehow, get his hand on the Governors’ pen. Tom Miller: Iowa’s Biggest Tool!
Book Salon up with Sylvia Longmire’s Cartel: The Coming Invasion of Mexico’s Drug Wars hosted by Sam Quinones
Yves Smith is not an economist, not a finance expert, not a mortgage person in any way – Susan – writing as Yves Smith – is a business news writer.
There are reasons both for, and against, the settlement – any decision is not “obviously” the ethical one or the one that helps most the people hurt by the mortgage melt down and crash in home prices and what that has done to the economy.
The hedge funds, the ones that pushed the MBS and derivative world into this mess, are against the settlement because they can make still more money from the continuing misery of the foreclosure crisis. That alone may be reason to settle.
Rampant fraud totaling in the hundreds of billions (and much much more in the trillions), violation of property rights, pure theft, a systemic flaw, robo-signing (each is an affidavit that is a lie, because they aren’t reading them), kicking people out of their houses, all that equity NOT lost, but truth it disappeared, never existed thanks to this system (imagine paying thousands and thousands of dollars and one day it’s all just gone), …
And they get 1) to walk away, no indictments, for rampant fraud across the country, 2) pay a pittance fine, amounting to the “cost of doing business” and a small percentage of the amount they stole and the lives they have ruined, and 3) THE BLOODY CORRUPT SYSTEM IS STILL INTACT??? WTF? This is no settlement. This is a travesty of justice (no surprises in this country), and another nail in the coffin of America.
RIP.
The AQ’s get more votes/PR from “I’m fighting the banks” – and more funds from hedge funds for re-elections – by saying no to the settlement. They get very little from joining a massive settlement that, one by one, helps underwater homeowners, and they lose that hedge fund election contribution.
I will be amazed if there is a settlement.
the banks did not create the pretend equity – and the mortgage market post 1995 was driven by the hedge funds and the investment banks – so it is hard to claim a reason to demand the lost value of your home from your non-investment bank bank. Greenspan sold the buy now to folks that never should have made the purchase – so I guess the fraud began at the Fed.
But we have a lot of lawyers in need of fees I guess and this will be a 20 year work program for them – so I guess we want to help the lawyers and the hedge funds.
Don’t know nuttin’ about odds, but there are a couple of things to keep in mind. She is pro Obama, but she does know that mortgage fraud has had a huge impact on CA’s miserable fiscal condition. We need to continue urging her to do the right thing and letting the CA Dems know the same.
I gotta say this papau.
I read european economists all the time at nakedcapitalism.
Go ahead and demean her as “unserious” but I notice that you are the dissent here lately, not dday or her.
Or is it personal?
I shudder when I think about how IA AG Miller played the left prior to his last reelection campaign, hanging out promises of real investigations and real actions against the Banksters.
May he rot somewhere…an Iowa farm manure pile might be a good place.
I wrote her a long diatribe on her Facebook page, urging her to hang in there and warning her the republicans could make this deal look like a sell out now the Holder is involved. The great thing about Facebook is that everyone can read what I wrote and chime in!
http://www.facebook.com/KamalaHarris
I urge everyone to do the same.
Good on you! Thnx.
The fraudclosure settlement will NOT happen. There is now too much pressure coming from homeowners and reporters alike. We know the mouthpieces like Wall Street Journal and Fox News (same company)are sticking to their storylines, but they cannot sway the populace anymore. The cat is out of the bag. And Romney is toast. Every one of the RINO Republicans has lost their credibility. Ron Paul will most likely carry the torch that burns all the bankers’ asses. The Obamster is certainly not interested in the cause. Too many connections. Chris King put up a new “Mortgage Movie” from the Governor’s office in Madison, Wisconsin. Great to watch! I think I’ll be there next. Wisconsin residents only: please call Governor Walker and tell him IT IS TIME FOR AN EXECUTIVE ORDER TO INVESTIGATE FORECLOSURE FRAUD! 608-266-1212. IF he wants to hold his position, HE will have to act in defense of the citizens! Thanks David, you’re right on again, as usual!
Here’s Yves Smith’s resume:
http://www.auroraadvisors.com/resume_webber.html
Looks like a financial type to me, expert or not, I could not say. She’s been very right lately when many economists, finance experts, and mortgage persons have been VERY wrong.
As for the Foreclosure Fraud Settlement, I’m hoping it blows up and each and every State AG throws a bunch of TBTF CEOs in jail. In all honesty, it’s the best thing that could happen for Obama’s Presidency at this point.
Why wasn’t this outrage shown back in the 80s when it would have done something to prevent the bank failures and mortgage fraud of the 80s and then by extension, the repeat in the past 15 years?
These posts are all after the barn has burned down with all the horses caught inside and then everything bulldozed.
But arson was made legal step by step beginning in the 80s and ongoing until at least 2005. It isn’t a crime to be unethical, immoral, or incredibly stupid, and few were able to turn legal arson into a criminal conspiracy with blatant wire tapped phone conversations and emails as was done with the insider trading cases. On insider trading, lack of enforcement convinced many the laws and regulation didn’t need to be changed to legalize insider trading.
Banking regulation requires enforcement officers of multiple kinds, so bankers knew they needed to make fraud legal to be safe, so they found willing conservatives to argue their case for the past half century.
Liberals failed to mount a defense of rule of law and of effective governance, so conservatives wrote the laws.
Think about the court of law. The left is where the state sits, while the right is where you find the fraudsters, thieves, killers,…. Is it any wonder the right demands liberty and being left alone by the state.
My take is that papau is a peculiar sort of troll, obsequious in most contexts, skilled in mis-direction and disinformation in other contexts.
When viewed in isolation, his comments on the causes of the economic mess and on US/Israeli relationship make it clear that he’s here to muddy the waters.
Since Yves blog provides one of the clearest, most easy to understand sources for educating one’s self about the root causes of the mega-recession, papau attacks her credibility at every chance.
His efforts on this issue and Israel/ME peace all tend towards obfuscation and magnifying the level of confusion at the very moment when the stories threaten to become more clear.
I am very suspect of anyone pushing the meme that these problems are too complicated to understand, especially on this board where I regularly find the very most informed opinion available.
Too complicated to understand is a common defense in the Wall St derivatives market too. As an engineer, I equate the too complicated to explain argument as a sign that 1) you don’t know what the fuck you’re talking about or 2) you’re trying to bullshit me, or 3) both. (You obviously not YOU, W4B.)
As for papau trying to blow Yves out of the water – good luck – she has one of the most highly read and rated financial blogs on the net.
If I could get away with stealing 700 dollars and just get hit with a 25 dollar fine with no risk of criminal indictment, sign me up. What a deal for the banksters and vampire capitalists. Certainly a great return on investment so why not steal some more?
~
“Greenspan sold the buy now to folks that never should have made the purchase”
so…you really believe that poor wanna be homeowners fucked up the economy – those folks who ‘should not have bought a home anyway’ papuuu? as opposed to what really did the job, securitization by amoral shits like you. I know that classist argument and those that hold it are both liars and assholes.
I guess you think we should just let them dirty bankers off scott-free and take a ‘settlement’, huh? what you ‘fraid of jackass? – don’t do the crime if you can’t do the time