Foreclosuregate Update: A settlement that favors the banksters of Wall Street

Posted by AzBlueMeanie:

I warned you about this back in November. Foreclosuregate Update: 50 State AG settlement to let the banksters of Wall Street off with a slap on the wrist.

Now that warning is coming to fruition. The Washington Post reports $25B deal with banks over deceptive foreclosure practices sent to AGs as settlement nears:

The nation’s five largest mortgage lenders have agreed to overhaul their industry after deceptive foreclosure practices drove homeowners out of their homes, government officials said Monday.

A draft settlement between the banks and U.S. states has been sent to state officials for review.

Those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement, which could be as high [little] as $25 billion. About 750,000 Americans — about half of the households who might be eligible for assistance under the deal — will likely receive checks for about $1,800.

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[The settlement would only apply to privately held mortgages issued between 2008 and 2011, not those held by government-controlled Fannie Mae or Freddie Mac. Fannie and Freddie own about half of all U.S. mortgages, roughly about 31 million U.S. home loans.

As part of the deal, about 1 million homeowners could also get the principal amount of their mortgages written down by an average of $20,000. One in four homeowners with a mortgage — or roughly 11 million people — owe more than their home is worth. These so-called “underwater” borrowers have little chance at refinancing.]

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[Under the deal:

— $17 billion would go toward reducing the principal that struggling homeowners owe on their mortgages.

— $5 billion would be placed in a reserve account for various state and federal programs; a portion of that money would cover the $1,800 checks sent to those homeowners affected by the deceptive practices.

— $3 billion would to help homeowners refinance at 5.25 percent.]

* * *

Five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial — and U.S. state attorneys general could adopt the agreement within weeks, according to two officials briefed on the discussions. They spoke on condition of anonymity because they are not authorized to discuss the agreement publicly.

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Nearly 8 million Americans have faced foreclosure since the housing bubble burst. In some cases, companies that process mortgages failed to verify the information on foreclosure documents. The worst practices, known collectively as “robo-signing,” included employees signing documents they hadn’t read or using fake signatures to sign off on foreclosures. [Criminal fraud]

President Barack Obama is expected to tout the settlement in his State of the Union address Tuesday.

To which I would quote Judge Judy: "Don't pee on my leg and tell me it's raining." This is a settlement that favors the banksters of Wall Street over the victims of systemic financial fraud, American consumers. Sorry, Mr. President, no deal. "Somebody's going to emergency, somebody's going to jail."

[S]ome say the proposed deal doesn’t go far enough. They have argued for a thorough investigation of potentially illegal foreclosure practices before a settlement is hammered out.

New York, Delaware, Nevada and Massachusetts have argued that banks should not be protected from future civil liability. The deal will not fully release banks from future criminal lawsuits by individual states.

Ian McConnell, director of the fraud division for Delaware Attorney General Beau Biden, said Monday that Biden is “opposed to the proposed settlement as drafted.”

“This position, given his prior public comments, should come as no surprise,” McConnell said, adding that Biden will comment further when the still-confidential deal is made public.

California Attorney General Kamala D. Harris said in a statement that her ability to go after potential wrongdoing by mortgage lenders “remains a key lens through which she will evaluate any proposals.” In September, California announced it would not agree to an earlier version of a settlement over foreclosure abuses that state and federal officials have been working on for more than a year.

But her office declined to comment on the proposed deal circulating among the states. And it wouldn’t say whether California, the state with the greatest number of people who lost their homes to foreclosure, would agree to the deal.

New York Attorney General Eric Schneiderman, who has taken a public stance against halting investigations of fraudulent business practices as part of a national settlement, had no immediate comment Monday.

In December, Massachusetts sued the five major banks over deceptive foreclosure practices.

This is not "justice." This is another injustice heaped upon the injustices that the banksters of Wall Street have already been permitted to get away with.

UPDATE: Iowa AG Tom Miller, who's lead the settlement talks, has put out a statement saying, "We have not yet reached an agreement with the nation’s five largest servicers, and we won’t reach a settlement any time this week."

So will President Obama still mention the settlement in his SOTU speech Tuesday night?

UPDATE: Well, well. Here is what the president did have to say in his SOTU speech. Remarks by the President in State of the Union Address:

And I will not go back to the days when Wall Street was allowed to play by its own set of rules.  The new rules we passed restore what should be any financial system’s core purpose:  Getting funding to entrepreneurs with the best ideas, and getting loans to responsible families who want to buy a home, or start a business, or send their kids to college.

So if you are a big bank or financial institution, you’re no longer allowed to make risky bets with your customers’ deposits.  You’re required to write out a “living will” that details exactly how you’ll pay the bills if you fail –- because the rest of us are not bailing you out ever again.  (Applause.)  And if you’re a mortgage lender or a payday lender or a credit card company, the days of signing people up for products they can’t afford with confusing forms and deceptive practices — those days are over.  Today, American consumers finally have a watchdog in Richard Cordray with one job:  To look out for them.  (Applause.)   

We’ll also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people’s investments.  Some financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender.  That’s bad for consumers, and it’s bad for the vast majority of bankers and financial service professionals who do the right thing.  So pass legislation that makes the penalties for fraud count. 

And tonight, I’m asking my Attorney General to create a special unit of federal prosecutors and leading state attorney general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.  (Applause.)  This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.