Housing Wire reports that we’re not going to see foreclosure fraud settlement terms until the end of the month, at best:
The state attorneys general and federal prosecutors will likely file the actual $25 billion foreclosure settlement documents in court by the end of the month, according to a source familiar with the deal.
The top five servicers agreed to general terms in the settlement last week, which would include billions in principal reduction, refinances, and even pay outs to homeowners affected by missteps in the process.
Questions arose recently over whether the finalization of the deal would its change the scope.
They certainly did. It’s really amazing to me that nobody bothers to address this. We are a week removed from every Attorney General in America, save Oklahoma, “agreeing” to a landmark “settlement” on a raft of fraud-related issues, with all the attendant assurances on the financial compensation and the tight liability release and the stiff enforcement monitoring. And a week later, there is no piece of paper to point to as the settlement. It was all an agreement in principle. Lawyer Rich Andreano, quoted in the Housing Wire piece, claims that “I got the sense last week that they weren’t really ready […] It was one of those things where they were moving so fast that they had to announce it because it was getting leaked out.” But the negotiators had 16 months of talks on this deal, it’s not like they put it together over a weekend.
Andreano, by the way, expects the deal to net $30-$35 billion, less than the $40 billion promised by state and federal regulators. I don’t know how he can say that, since the story goes on to say that “servicers and AGs are working out exactly how much credit will be distributed and for what loans.” There are no terms on that yet. The entire principal reduction numbers are based on educated guesses. It’s funny money.
Lawmakers are still walking out in front of cameras and explaining “what the deal does,” even though no deal exists. Delaware AG Beau Biden explained yesterday how service members would benefit from the settlement, for example. As we’ve seen, service members wrongfully foreclosed upon will get $116,785 plus lost equity and interest, light years more than the $2,000 for ordinary foreclosure victims. In the case of JPMorgan Chase loans, service members hit with wrongful foreclosure will get “their home free and clear of debt or the cash equivalent of the full value of the home at the time of sale.” That sounds, er, equitable.
Meanwhile, there’s this:
Four years after rotten mortgages helped trigger a global financial crisis, Sherry Hunt said her Citigroup Inc. quality-control team was still finding flaws in new loans that included altered tax forms, straw buyers and borrowers who listed fictitious employers.
Instead of reporting the defects to the Federal Housing Administration, the bank saddled the agency with losses by falsely declaring the loans fit for its federal insurance program, according to a complaint filed yesterday by the U.S. Attorney’s Office in Manhattan. Citigroup agreed to pay $158.3 million to settle the claims, and admitted that it certified loans for FHA backing that didn’t qualify […]
Hunt’s co-workers, instead of checking for fraud or making reports about underwriting defects to the FHA as required, argued with her over the soundness of the loans, she said. Employees who acted as “gatekeepers” applied “what they describe as ‘brute force’ to pressure Citi’s quality control managers” into downplaying defects, according to the government’s complaint.
Some colleagues had pay incentives tied to reducing the number of reported problems, and they spent hours trying to get her to relax her warnings, including those about the most basic deficiencies, Hunt said.
The most important part of this story is where Hunt alleges that this is still happening. And yet the government settled on these issues to get back some cash for FHA.