Someday the mortgage settlement will be filed in court and thus we will get to see its terms. Which day? Who knows—the latest deadline, the end of February, passed in silence, and annual reports filed at the end of the month with the SEC by Wells Fargo, JPMorgan Chase and Ally Bank, three putative deal signers, unequivocally stated there’s no final deal yet. As Wells put it, 19 days after the deal was announced:
“Furthermore, there can be no assurance as to when or whether a definitive agreement regarding the settlement will be reached and finalized or that it will be on terms consistent with the settlement in principle.”
Still, enough details of the agreement ‘in principle’ have been released, including by Wells in that annual report, for me to write this guide.
The settlement has four basic moving parts: money, lawsuit peace/liability release, mortgage servicing standards, and enforcement. I’m going to look at all four in three different posts. This one focuses on the money in the settlement.
Understanding the Money In the Mortgage Settlement
Since the DOJ failed miserably with mountains of evidence of fraud throughout the loans, lets see what the SEC will do.
CBS-
The SEC appears to be on the verge of doing what the Justice Department has yet to attempt — prosecuting the biggest players responsible for the mortgage securities fiasco that trashed the U.S. economy.
The securities watchdog has sent so-called Wells notices to Goldman Sachs (GS), JPMorgan Chase (JPM), and Wells Fargo (WFC), indicating that the agency may recommend enforcement proceedings against the banking firms. The investigation seems to focus on whether the companies misrepresented the quality of securities based on subprime mortgages that they bundled and sold to investors in the years leading up to the 2008 financial crisis.
I know, I understand…we’re not surprised. They were dangling carrots in front of the banks for better checks.
Republic Report-
This is interesting. In December, 2011, the month before signing on to the mortgage fraud settlement, the entity charged with electing Republican Attorneys General called the Republican State Leadership Committee collected a bunch of large checks from big banks.
As this IRS disclosure form shows, on December 19, 2011, it received a $10,000 donation from Wells Fargo. On December 30, 2011, JP Morgan Chase PAC made a $15,000 donation to the committee.
Even as government officials prepare to unveil new standards this week for how banks treat millions of Americans facing foreclosure, housing advocates and homeowners are skeptical the rules will be able to do something past efforts have not: provide a beleaguered borrower with one individual to help them navigate the mortgage maze.
While the entire process of seeking a mortgage modification is complicated and time-consuming, few elements are as maddening as the inability to get through to a representative at the bank, or being asked for the same documents again and again.
Just wait until they finally figure it out “It’s The Title Stupid”…the banks will get a pardon for this too, just wait and see.
Chaos will break and title companies will go after the banks for all the lemons.
FORBES-
After over a year of wrangling, last week the Obama Administration and 49 state attorneys general announced that they had reached a comprehensive settlement with five large mortgage servicers over claims related to their infamous “robo-signing” foreclosure practices.
The settlement provides $25 billion to state governments and homeowners in the form of principal reductions and cash payments, a figure that would rise if other banks sign on. In addition to imposing punishment and providing recompense for alleged past misbehaviors, the settlement provides much-needed relief and a path to recovery for a housing market paralyzed by the continued uncertainty concerning the ability of lenders to foreclose on nonperforming loans.
U.S. Housing Secretary Shaun Donovan is playing Julie the Cruise Director on the Titanic, telling everyone ‘Don’t worry, there’s no icebergs in these waters. Really, if you see any floating ice in front of us, it’s not the visible tenth of a catastrophe to come.’ Unfortunately ice is visible, it is an iceberg, and the leading edge of the submerged ice is already ripping into our democracy and our economy, leaving deep damage.
The happy talk to distract attention from the iceberg comes from two camps and has two synergistic messages.
Secretary Donovan is trying convince the American public that the what the Obama administration is doing is all that can be done to address our housing and foreclosure crisis. That’s farcically false. Other people are pushing the related message that fraud and forgery by foreclosing bankers isn’t important; the only thing that matters is whether homeowners are in default. Both groups want you to believe that the foreclosure fraud “settlement” is a good and just. Except the “settlement” isn’t. The “settlement” is just the latest in a long line of decisions not to enforce the law and further reinforces the idea that gold-collar criminals are above the law. (I put “settlement” in quotes because we’re now double digit days past the February 9 announcement, and still, there’s no deal submitted to a court for approval. And that means there’s no deal.)
So let’s take a good look at the foreclosure fraud iceberg.
Think you’ll have a free pass from that under water, submerged house that will only continue to sink further.
The so called principal reductions were to be a penalty not a money making scheme!
Your title will still have issues…lots of them!
FT-
The $40bn foreclosure-abuse settlement reached last week between regulators and big US banks gave President Barack Obama another shot at resuscitating his three-year-old initiative to help troubled homeowners.
As details of the agreement dribble out, it appears the deal may also give big banks reason to celebrate and mortgage bond investors and taxpayers reason to pause.
[…]
But in allowing the banks to use taxpayer-funded Hamp to meet their obligations under the settlement, the government presented the banks with an opportunity to reduce their losses, experts said.
“If the banks are doing something under this settlement, and cash flows from taxpayers to the banks, that is fundamentally an upside-down result,” said Neil Barofsky, a former special inspector-general of the troubled asset relief programme.
WASHINGTON–People seeking a review of their mortgage foreclosures under the Federal banking agencies’ Independent Foreclosure Reviewnow have until July 31, 2012, to submit their requests.
The Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (Federal Reserve) today announced that the deadline for submitting requests for review under the Independent Foreclosure Review has been extended. The new deadline, July 31, 2012, provides an additional three months for borrowers to request a review if they believe they suffered financial injury as a result of errors in foreclosure actions on their homes in 2009 or 2010 by one of the servicers covered by enforcement actions issued in April 2011.
The deadline extension provides more time to increase awareness of how eligible people may request a review through the Independent Foreclosure Review process and to encourage the broadest participation possible.
As part of enforcement actions issued in April 2011, the OCC, Federal Reserve, and the Office of Thrift Supervision required 14 large mortgage servicers to retain independent consultants to conduct a comprehensive review of foreclosure activity in 2009 and 2010 to identify borrowers who may have been financially injured due to errors, misrepresentations, or other deficiencies in the foreclosure process. If the review finds that financial injury occurred, the borrower may receive compensation or other remedy.
Borrowers are eligible for an Independent Foreclosure Review if they meet the following basic criteria:
The mortgage loan was active in the foreclosure process between January 1, 2009 and December 31, 2010.
The property securing the mortgage loan was the borrower’s primary residence.
Participating mortgage servicers include: America’s Servicing Company, Aurora Loan Services, BAC Home Loans Servicing, Bank of America, Beneficial, Chase, Citibank, CitiFinancial, CitiMortgage, Countrywide, EMC, Everbank/Everhome Mortgage Company, Financial Freedom, GMAC Mortgage, HFC, HSBC, IndyMac Mortgage Services, MetLife Bank, National City Mortgage, PNC Mortgage, Sovereign Bank, U.S. Bank, Wachovia Mortgage; Washington Mutual, Wells Fargo; and Wilshire Credit Corporation.
They aren’t ready…they’re still figuring out how to add the finishing touches to screw you!
HW-
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.
Rich Andreano, who co-leads the mortgage banking group at law firm Ballard Spahr, said while it will be difficult for analysts and officials to anticipate precisely how much aid each state will get from the deal until the documents are filed, results should not vary too significantly from the announcement made last week.
“I got the sense last week that they weren’t really ready. They weren’t done. It was one of those things where they were moving so fast that they had to announce it because it was getting leaked out,” Andreano said in an interview.
The chief regulator and conservator of Fannie Mae and Freddie Mac is adamantly opposed to principal forgiveness, a key element of the foreclosure settlement. But analyses show he’s wrong.
LA TIMES-
You can love or you can hate the recent $25-billion federal-state mortgage foreclosure settlement, but there’s no getting around one simple fact: There’s a huge, gaping hole right in the middle of it.
The hole is that if your home loan has been bought from your lender by Fannie Mae or Freddie Mac, you’re not eligible for the mortgage relief encompassed by the deal.
Since Fannie and Freddie control well more than half of all outstanding mortgages, this shortcoming looks to be what engineers would call “non-trivial.”
As Neil Barofsky asked Nick Timiraos “So perhaps that’s why the settlement was announced before even a term sheet was hammered out? To cover up FHA budget hole“?
WSJ-
The Federal Housing Administration will exhaust its reserves over the coming year, according to budget projections released Monday, which would require a Treasury infusion for the first time in its 78-year history.
But Obama administration officials said more recent developments, including fines that will go to the FHA from last week’s $25 billion mortgage settlement with five major banks, could cover any shortfall and obviate the need for taxpayer funding.
The FHA has burned through its reserves over the past three years as defaults mount on loans it guaranteed as housing markets deteriorated. FHA-backed mortgages are an attractive option for borrowers because they can make down payments as low as 3.5%. But as home prices continue to fall, many of those borrowers have fallen underwater, where they owe more than their homes are worth and are at greater risk of default if they experience income shocks.
Servicing standards: The 42-page servicing standards “term sheet” lists various requirements for banks’ documents used in foreclosure and bankruptcy proceedings; documentation of borrowers’ account balances; and ensuring integrity of the chain of title. It also includes requirements around how borrowers must be treated when they’re being evaluated for a modification or short sale, as well standards around the appropriateness of servicing fees and the use of force-placed insurance.
Borrower relief: A separate 12-page document outlines how banks have to satisfy the $20 billion portion of the deal that requires them to help homeowners. At least half of that portion must go towards writing down loan balances for homeowners that are at risk of foreclosure. Another $3 billion must be used to help homeowners who owe more than their homes are worth but are current on their loans to refinance. The remaining $7 billion can go towards anti-blight provisions, forbearance for unemployed homeowners, and short sale assistance.
Menu of “credits”: Complex formulas spell out exactly how much credit banks will receive for that aid. For example, every $1 of principal write-downs earns $1 of credit on loans that they own. However, they receive less credit for writing down second-lien mortgages that are severely delinquent.
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION
THERESE DICKOW, on behalf of herself and a class of persons similarly situated, Plaintiffs,
vs.
JPMORGAN CHASE BANK, N.A, Successor in interest from the Federal Deposit Insurance Corporation, as receiver for Washington Mutual Bank; BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM; and OFFICE OF COMPTROLLER OF THE CURRENCY (federal bank regulators), Defendants.
Asking investors in mortgage-backed securities to trust the banks that issued them is like asking Charlie Brown to trust Lucy van Pelt. MBS noteholders are so convinced they’ve been duped by the folks that packaged and sold shoddy mortgage loans that it’s little wonder the banks’ $25 billion settlement with federal and state regulators has been greeted with a tsunami of skepticism. Sure, MBS investors understand that the settlement doesn’t preclude them or regulators from suing over deficient securitizations. But their fear, in the absence of the actual settlement documents, is that the loan modifications the deal calls for will reduce the revenue stream to MBS trusts.
It’s an understandable fear. The five banks that agreed to the settlement — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial — carry some troubled mortgage loans on their own books. Others were bundled into MBS trusts, in which the banks transfer ownership of the mortgages and remain as servicers. MBS noteholders are supposed to receive a stream of income from the principal and interest payments on the underlying mortgage loans. So if a bank agrees to reduce the unpaid principal a homeowner owes on a mortgage that’s been securitized, less money flows to the trust and into MBS investors’ hands.
The proposed Release contains a broad release of the banks’ conduct related to mortgage loan servicing, foreclosure preparation, and mortgage loan origination services. Claims based on these areas of past conduct by the banks cannot be brought by state attorneys general or banking regulators.
The Release applies only to the named bank parties. It does not extend to third parties who may have provided default or foreclosure services for the banks. Notably, claims against MERSCORP, Inc. or Mortgage Electronic Registration Systems, Inc. (MERS) are not released. Securitization claims, including claims of state and local pension funds, and including investor claims related to the formation, marketing or offering of securities, are fully preserved. Other claims that are not released include violations of state fair lending laws, criminal law enforcement, claims of state agencies having independent regulatory jurisdiction, claims of county recorders for fees, and actions to quiet title to foreclosed properties. Of course, the Release does not affect the rights of any individuals or entities to pursue their own claims for relief.
The government’s deal with banks over their foreclosure practices after 16 months of investigations is cheap for the loan servicers while costly for bond investors including pension funds, according to Pacific Investment Management Co.’s Scott Simon.
In what the U.S. called the largest federal-state civil settlement in the nation’s history, five banks including Bank of America Corp. and JPMorgan Chase & Co. yesterday committed $20 billion in various forms of mortgage relief plus payments of $5 billion to state and federal governments.
“This was a relatively cheap resolution for the banks,” said Simon, the mortgage head at Pimco, which runs the world’s largest bond fund. “A lot of the principal reductions would have happened on their loans anyway, and they’re using other people’s money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load.”
FIVE big banks finally reached a deal with government authorities last week over dubious mortgage practices and foreclosure abuses.
After months of talks, Ally Financial, Bank of America, Citibank, JPMorgan Chase and Wells Fargo agreed to pay a total of $5 billion in cash to try to remedy this fiasco. They will also help homeowners who are underwater on their mortgages by reducing the principal on their loans by a combined $17 billion over the next three years.
Borrowers who qualify will get $3 billion in refinancing arrangements. Those who were improperly foreclosed on will get a combined $1.5 billion. That probably nets out to less than $2,000 a person.
If we stole $200k from a bank can we get away from any jail time and only pay back $2K to settle the deal?
Will they still come after you for a deficiency judgment and use this to pay for the % they must pay from the $25 billion dollar settlement? Because as you know taxpayers may have to fork over the % the investors don’t pay for their Fraudulent Activities not to mention having destroyed title to millions of homes.
From the video below I am not certain if Beau knows the settlement terms will get worse because it’s yet to be signed?
I’m beginning to think that the last couple of days were April 1st in disguise. I mean, what a crazy practical joke our Federal Government and State AGs just tried to play! What a parade of press conferences, all touting a deal to trade some $25 billion in mostly more accurate accounting for some kind of release of origination, servicing and foreclosure fraud. But it turns out the deal’s not real.
More than a day after the announcement of a mammoth national mortgage servicing settlement, the actual terms of the deal still aren’t public….That’s because a fully authorized, legally binding deal has not been inked yet.
All I have to say is “Linda Green” is only one person and the missing documents will be put up as soon as MERS gets them signed and notarized!
American Banker-
More than a day after the announcement of a mammoth national mortgage servicing settlement, the actual terms of the deal still aren’t public. The website created for the national settlement lists the document as “coming soon.”
That’s because a fully authorized, legally binding deal has not been inked yet.
The implication of this is hard to say. Spokespersons for both the Iowa attorney general’s office and the Department of Justice both told American Banker that the actual settlement will not be made public until it is submitted to a court. A representative for the North Carolina attorney general downplayed the significance of the document’s non-final status, saying that the terms were already fixed.
“Once the documents are finalized, they’ll be posted to nationalmortgagesettlement.com,” the representative said in an email to American Banker.
Indeed, when the settlement was announced this morning, claims against MERS were explicitly carved out; state attorneys general can go ahead with suits against the mortgage registry. MERS is as exposed as a kid locked out of the house without a coat in a snowstorm.
now have until July 31, 2012, to submit their requests.
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