The failings of the 49-state foreclosure fraud settlement have by now become so obvious that even traditional media cannot ignore it. When half of the $2.5 billion earmarked as a hard-dollar penalty to states for aid and relief for struggling homeowners just gets sucked up into filling state budget holes, you can hardly make any excuses. And the other 90% of the settlement isn’t exactly destined to flow into the hands of homeowners, either; as we know, banks will probably honor up to 1/4 of their “penalty” by doing things they already do as a routine part of their business.

There’s another potential element to this that we’re already starting to see. In relation to a resolution outside the settlement, Wells Fargo has been sending along refund checks to homeowners who overpaid for loans that the bank steered them into. Just one thing, though: the refund checks, if cashed, serve as a legal claim of liability release.

The unsolicited offers of thousands of dollars arrived with a catch — if the borrowers cash the checks, they can’t later sue the No. 1 U.S. home lender. The San Francisco bank said in the letters that borrowers were put into more expensive loans when they could have qualified for cheaper ones [...]

Wells Fargo’s mailed refunds involve government-backed FHA mortgages made from 2009 through 2011. These loans are often made to borrowers with shaky credit or those who can’t come up with the 20% down payments required for conventional loans [...]

“You should understand that by cashing the enclosed check, you agree to release Wells Fargo … from any and all claims relating to Wells Fargo’s origination of a more expensive mortgage loan than the loan for which you may have qualified,” a bold-faced paragraph read.

I guarantee you’re going to see the banks try this with respect to their other settlements. They will give principal relief or a cash offer in exchange for a liability waiver. And that private right of action that was allegedly preserved in the settlements (a dubious claim anyway, considering the expense of mounting a suit of that type) will melt away again.

Keep an eye on this in the coming months.