The New York Times describes the foreclosure fraud settlement in terms of inches. They say that a deal is “closer,” but they give little evidence to back that up. In fact, there’s more evidence here that the key AGs involved, who did not personally attend Monday’s session in Chicago with Shaun Donovan and other Administration officials, aren’t too keen on the terms. (I think I was the very first to report that the key AGs wouldn’t be at the meeting, by the way.)
This month, about 15 Democratic attorneys general who shared concerns about the course of the settlement talks met in Washington, including Ms. Coakley, Mr. Schneiderman, Catherine Cortez Masto of Nevada and Beau Biden of Delaware, who is a son of Vice President Joseph R. Biden Jr.
A week after the meeting, Mr. Donovan announced that a deal was “very close.” But none of those four attorneys general attended the meeting on Monday.
Neither did another important holdout, Kamala Harris, California’s attorney general, who opposed earlier proposed agreements.
In a bid to win support from California officials, Mr. Donovan proposed earmarking $8 billion in aid for beleaguered California homeowners, but that left other state attorneys general incensed, according to an official familiar with the negotiations.
“Attorney General Harris has consistently and repeatedly expressed concern about protecting her ability to investigate wrongdoing in the mortgage arena, and that remains a key lens through which she will evaluate any proposals,” her spokesman said Monday.
There’s a key point. The $8 billion is being dangled in front of Harris. But the other AGs, none of whom have earmarked money guaranteed to them in the deal, object to that element. This puts the brokers of the deal in a real bind. And none of the other Justice Democrats, the AGs mentioned above, had anything good to say about the deal. Beau Biden’s spokesman was the first to say flatly that they “opposed the settlement as drafted.”
This means that I was accurate in describing yesterday’s meeting as giving the illusion of progress without actual progress. That’s why Tom Miller had to back off and say that no settlement would get announced this week. And that means the State of the Union will have, at best, a brief allusion to the talks. There’s nothing to announce. “Very close” won’t cut it.
And I love that the NYT did the same math I did in breaking down this pathetic deal proposal:
About 11 million more own homes that are “underwater,” meaning the amount of money owed now exceeds the value of the home. They owe, on average, $45,000 to $50,000 more than their home is worth, according to Mark Zandi of Moodys Analytics. The deal may help about one million homeowners with an average debt reduction of $20,000.
The proposed settlement is “not going to be enough,” said Kathleen C. Engel, a law professor and a co-author of “The Subprime Virus.” She added that the deal was at least as good for the banks as for homeowners, if not better. “They could be hit with 50 different lawsuits from each of the states, for a lot more money,” she said.
I would add that underwater borrowers with a second lien, like a home equity line of credit, owe more like $84,000 on average. So this barely gets them back a quarter of their equity, and the second will probably remain untouched (because that’s on the bank’s books, usually, even though it’s worthless).
The Washington Post describes those opposed to the deal as activists. Those activists appear to include the Attorneys General of at least five states. They need to keep hearing from their local activists so they remain strong. The Administration and Tom Miller’s gang have a new deadline of February 6. Let’s hope they blow past it like they have every other one.