The WaPo editorial board’s biggest problem with the “rough justice” foreclosure fraud settlement is that robo-signing is a “victimless crime” because all those people were behind on their payments anyway, and that lucky duckies foreclosed upon might be getting $2,000 erroneously. That’s the media we have.
Put aside the looming presence of servicer-driven defaults, fee pyramiding and other forms of abuse that drove people into foreclosure. In the world of WaPo, all defendants in criminal cases “guilty of something” would go to jail, regardless of prosecutorial misconduct. This is a recipe for law enforcement to use any and all means to send suspects to jail: in particular, manufacturing evidence. Well, just substitute bank servicers and their allies for law enforcement and that’s what we’re talking about here.
And to grouse about $2,000 to someone who lost their entire livelihood amid a vast system of criminality… I mean, even Lorne Michaels offered the Beatles $3,000 to reunite. We’re talking about the token of tokens. That’s the bare minimum you would expect to recover for families in any Fair Debt Collection Practices case. It borders on insult. “We stole your home, enjoy the couple months rent.” I haven’t seen one individual, in all the positive comments about the settlement, try to defend that.
I’m aware of the notion that this deal represents a “down payment”. But I don’t think anyone is saying it’s a down payment for those foreclosure victims. People were sold fraudulent mortgages and kicked out of their homes with fraudulent documents. In any criminal case the suspect would be let out of jail based on such prosecutorial negligence. Instead, these people are getting $2,000 and a pat on the head. And they’re only getting it if they sign up expeditiously, so we can expect the clerical errors holding up the payments.
This is the reaction I would expect:
On September 25, 2010, Monica and Ricardo Zapata should have been out celebrating their tenth wedding anniversary, or enjoying a candlelight dinner inside their five-bedroom home 30 minutes inland from West Palm Beach, Fla.
Instead, the couple packed and left their dream house behind. After two failed attempts at a mortgage modification and what the Zapatas describe as a suspiciously timed foreclosure sale, the bank managing their loan ordered the couple and their two children out. That day, the Zapatas lost more than $100,000 in mortgage payments. In the months that led up to the foreclosure and those that followed, they also racked up thousands of dollars in stress-related medical bills and family loans. Ally Financial, whose predecessor, GMAC, handled the Zapatas’ mortgage, declined to comment on the details of the Zapatas’ claims.
Now, under the terms of a government settlement with Ally and four other companies that allegedly mismanaged millions of loans and introduced fraud to the foreclosure process, nearly 2 million homeowners are slated to receive a negotiated measure of justice. About 1 million homeowners who owe their banks more than their homes are worth will be eligible for a principle balance or interest rate reduction, making it less likely that these people will default. Another 775,000 borrowers who lost their homes between 2008 and 2011 will be eligible for a one-time payment of up to $2,000 [...]
“I try to be a grateful person, really I do,” said Monica Zapata. “But it’s almost a slap in the face when you consider everything we’ve been through.”
Go read the whole thing to see the ordeal. The Zapatas are one of many hundreds of thousands of American families who have gone through this. I’ve talked to them. I’ve shared their stories.
The good news is that borrowers do not release claims in exchange for a payment. The bad news is that they have had their financial lives ruined and cannot exactly afford the legal team to actually act on those claims. The money paid directly to states in the settlement could go to legal aid, but it also could go to fill some budget hole.
I’m actually going to have a more constructive piece at some point today, with some ideas for how to make the best of this settlement. But I keep looking at that $2,000. As Yves Smith said yesterday, “We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan.” Yep, upend 300 years of established land title practice, pay $2,000, get out of trouble. It’s a weird, inverted kind of Monopoly.