“Attorney General Kamala D. Harris Secures $18 Billion California Commitment for Struggling Homeowners,” the headline blares. But wait: the foreclosure fraud settlement is only a total of $25 billion. Even if you believe HUD Secretary Donovan’s figures about principal reduction credits being worth more in actual principal reduction, you don’t get higher than $40 billion. How did Harris get so much?
The California Attorney General breaks it down this way, from the press release:
California secured the $18 billion agreement as part of a national multistate settlement to penalize robo-signing and other bank servicing and foreclosure misconduct. The agreement comes after California departed from the multistate negotiations last September when the estimated relief to California was $4 billion. Attorney General Harris insisted on more relief for the most distressed homeowners, meaningful enforcement, and the ability of California and other states to pursue investigations into misconduct.
Attorney General Harris also obtained separate, enforceable guarantees to ensure that banks will be accountable for their commitments to California. As part of the separate California guarantee, banks must enact a minimum of $12 billion in principal reductions for California homeowners. Failure to achieve this minimum level of reductions will result in substantial cash payments of up to $800 million that the banks will have to pay to the state. Unlike the larger multistate agreement, which is enforceable in a federal court in Washington, D.C., this payment provision empowers the Attorney General to summon the banks to California state court.
This is known as a side deal. California has a separate agreement with the five servicing units at the big banks to achieve this level of commitment. She breaks it down this way:
• $12 billion for either principal reductions or short sales, which she claims will help around 250,000 homeowners;
• $849 million for refis;
• $279 million for those “sorry we stole your home” $2,000 checks;
• $1.1 billion for forbearance, transition assistance, checks to communities to fix blight (which is part of the $2.75 billion distributed to states for foreclosure mitigation);
• $430 million in additional costs
• $3.5 billion to “relieve 32,000 homeowners of unpaid balances remaining when their homes are foreclosed.” That’s essentially to stop deficiency judgments. I assume that the banks will just back off, so this represents money they won’t collect.
So how does this affect the larger settlement? Well, it means that the other states will get less. Period. HUD Secretary Shaun Donovan tried to claim in a conference call over the weekend that this would not impact other states, but you’re talking about $12 billion in principal reduction – out of either $17 billion in credits, or the $32 billion in expected principal reduction dollars – going to one state. Donovan actually said “Do not make the mistake of equating more certainty for some states with taking resources away from other states.” He mused that banks could always go over the minimums set in this agreement for principal reduction. Um, OK.
In addition, there’s supposed to be a part of the agreement that mandates no geographic discrimination on the part of the servicers for any relief. But how is a side deal like this not in violation of that? It’s unclear.
What is clear is that a lot of states will get a largely mythical benefit out of this. It’s true that California and Florida, which have the most homeowners in trouble, should get the most benefit (under the terms I’m seeing, Florida could get up to $7.6 billion for principal reduction). But under the sample term sheet I have, Arizona, a state ravaged by the foreclosure crisis, stands to get just $1.3 billion in principal reductions out of the settlement. The same for Nevada. You would have to basically do the math on underwater borrowers, but it looks inadequate at least for them.
Harris did get guarantees that the hardest-hit counties in the state would get their principal reductions in the first year of the three-year settlement. And she plans to expand her Mortgage Fraud Strike Force, and the investigative alliance with Nevada, to collaborate on more investigations outside what’s given up in the settlement. Plus, she will “continue to fight for principal reductions for the approximately 60 percent of California homeowners whose loans are owned by Fannie Mae and Freddie Mac.” And she expects a legislative menu of bills to deal with servicing in the state.
But with this side deal, it does look like Harris fleeced the rest of the country, although you have to keep it in perspective, because the overall take is so very paltry.




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BANG !
$18B is $3B more than the proffered 60% sweetener — guess I’d better re read
thanks so much NewsDesk !
The skids are now well-greased for Harris. Senator? Governor? She’ll face no opposition from the 1% and will probably pick up a bundle of money now that she’s shown her willingness to fuck over the proles.
And so goes the Union, every state for itself.
This wouldn’t be an issue if the pot was big enough, but it isn’t. And as the pot gets passed down the table, . . . . .
Trickle down bail-o-nomics!
Ummm, Dave, does that smell like RAIN to you?
As I said in other places, she has polished her bona fides with the progressives without causing too much discomfort to the motu. She now has her faucet open for contributions for gov. Shutter, you may be right about the Senator version.
What if she stuck to her guns and said NO because it’s not a fair deal for the Country. Remember the United States of America? We stand on guard for thee but my State first of course.
I hear ya’. There’s NEVER an mashed potatoes by the time the bowl gets to me. Lost of us are getting pretty sick of that.
“We stand on guard for thee…”
——
Dude…you’re in the wrong country. Or…should we take that as a hint???
IOW, she settled for $800M.
eh
I wonder if we will ever get the data behind the numbers.
Oh we can get number of underwater homes and number of foreclosures, but we need the number that have owners that will be able to make payments after a loan reduction to the level of the current market value, given some interest rate on the new loan.
Where wages are way down relative to housing costs there will be no principal reductions because it would be pointless – it would not stop the foreclosures because the loans would still be unaffordable.
Even popular press numbers have stopped making even basic arithmetic sense – 25 B is 33 B but may be 40 B – huh?
W/o CA the agreement was 14 B but with CA it is 25B, but CA 18 B, but then the 18 B is via side agreements never in the 25 B, making the side agreements worth 11 B, but then what was the 3 B of side agreements we were hearing about, or was the 3 B an increase in the main agreement just for CA making the 25 B really 28 B? And the CA 60% sweetener was to what?
If my staff ever brought me the above I’d have new staff in the morning.
Can’t blame the reporting – Susan (calling herself Yves) does not do analysis and indeed is not trained to be a numbers person – and indeed few beyond Krugman could take a blank sheet of paper and come back with an analysis. But we do not expect our popular press to be experts or nerds.
But it sure is sad they did not run the PR releases past a numbers person.
Don’t get too excited. All the settlement peanuts for the peasants will vanish before properly distributed.
copy please. PDF is best. link to Document Cloud please.
Yes. Beautiful take-down.
Dday says he has a “sample term sheet,” so we absolutely must get a copy of that. But based on the marketing propaganda the AGs and DOJ are rolling out, this whole thing just seems to be a clown car. New numbers keep popping out after you thought there couldn’t be any more bogus numbers stuffed into one deal.
“The banks robbed my state of 17,000 homes but all my Attorney General got was a clown car.”
david stop saying the banks will pay. the banks are paying NOTHING. Any money they give will be from Tarp money and Fed loans. So it is the taxpayer and even that money the banks want to keep. What a piece of shit this all is.
She also continues to work with the AG of Nevada according to her page.
But at least they are very, very sorry. /s
please don’t pick on Dday as if he is selling this POS. He is giving us the inside track on the BS the banks and state AGs are using to sell it, he’s not advocating for it himself.
Good point. And not only Nevada. Press release from CA AG at your link indicates CA & NV will seek to persuade “additional states” to join their mutual-aid compact.
Note how Harris describes the deal documents at your link:
To me that says she has at least two separate written agreements. We need to see both ASAP.
Meanwhile, what happened to the Most Favored Nation (MFN) clause? A final sticking point last week was supposedly demands by smaller states for an MFN so they would be guaranteed the same goodies as any other state which bargained for more. Where is the MFN clause?
On the other hand, there were a set of Attorneys General who were out there investigating while there were a lot who were content to settle right off the bat. I think David is being just a bit harsh if those who demanded more and side deals and the right to keep fighting are first to be characterized as selling out (first announcement) and then, when it’s found that they did get somewhere for their states and have secured the right to keep fighting (to which they are beholden) they are accused of “fleecing” the rest of the country.
Uhh, what a quaint notion.
I got my BS in Quaint. I’m working on an MS in sarcasm.
On the “fleecing” meme, I’m fairly sure Dday expects that will be what some of the other state AGs say when they find out exactly how huge California’s share is. I don’t think Dday blames Kamala Harris for getting an advantage for her state. But even $18 Billion in a state the size of California is going to sink without a trace if most of it is mortgage principal writedowns and most of that goes to the “most hard-hit counties.”
I live in DC but my sister lives in CA. She’s a public school teacher, in fact. I can just imagine what she will say when I tell her that the entire state of California will be getting an extra $18 Billion over the next three years. It will be something like “well, even if we got that whole amount in one year, it would be only one-fifth of the Ninety Billion budget deficit our insane legislature had to fix last year.”
We all need to do the math and it’s not an accident that USDOJ and the state AGs are withholding the actual math from us as they roll out their marketing propaganda.
The other thing is the line item for administrative costs. She gets the 42 person investigative team out of this, and the collaboration with Nevada et al. If that’s paid for out of the settlement money, nobody in the governor’s office, the legislature, or the ballot initiative process can attack it by calling it a “costly wild goose chase with the taxpayer’s money” and forcing it be shut down on spending grounds.
Ask your sister. That’s a real possibility here in California, too.
Madoff was a saint compared too these carpetbaggers.