Thursday, February 09, 2012

Mortgage settlement? Try bank Bailout II

Mortgage settlement? Try bank Bailout II:

At this writing, the federal government and forty-nine state attorneys general (all minus Oklahoma) have agreed to a settlement with the nation's five largest banks for their fraudulent robosigning practices. The banks will pay $5 billion penalty as part of this deal and also provide a vary range of credits which could account for another $20 billion. David Dayen at FireDogLake has the best rundown of what is in the deal, based on his own reporting and mainstream outlets. Dayen gives the breakdown:

$3 billion will go toward refinancing for current borrowers who are underwater on their loans, as well as short sales. $5 billion will go as a hard cash penalty to the states, which can use them for legal aid services, foreclosure mitigation programs, and ongoing fraud investigations in other areas (one official close to the talks feared that much of that hard cash payout will go in some Republican states toward filling their budget holes). The federal government will get a cash penalty as well. Out of that $5 billion, up to 750,000 borrowers wrongfully foreclosed upon will get a $1,800-$2,000 check if they sign up for it, the equivalent of saying to them “sorry we stole your home, here’s two months rent.”

The bulk of the money, around $17 billion, will go to principal reduction credits for troubled borrowers. The banks will not get dollar-for-dollar credit for every write-down; reductions on loans bundled in private-label mortgage-backed securities, for example, will be under 50 cents on the dollar, and write-downs for second liens (mostly home equity lines of credit) will be more like 10 cents. Housing and Urban Development Secretary Shaun Donovan believes that they will be able to get between $35-$40 billion in principal reduction in real dollars out of the settlement. Donovan became the point person on the federal level, along with DoJ, as the Administration pretty much took over the investigation and settlement process from the states, who were led by Iowa AG Tom Miller.

But even this $35-$40 billion number, which is at best a guess since the direction of the principal reduction is mostly at the discretion of the banks, pales in comparison to the negative equity in the country, which sits at $700 billion. And the banks have three years to implement the principal reductions, drawing out the loss on their books. [Emphasis added]

Look at the section in bold. What this settlement says is that if the bank stole your home - and according to the deal, banks did this to 750,000 American families (though in reality the number is much higher) - the banks will get off scot-free for $2,000. Can you imagine the Department of Justice arresting a bank robber who stole $180,000 and letting him go as long as he returned $2,000? Wouldn't we all be bank robbers if such was the state of justice? This is quite possible the most insulting, if not the most problematic, aspect of the deal.

The banksters who perpetrated this fiasco, and sent the economy into the toilet, should be in jail. Anything short of that, especially a "settlement" that does nothing but add insult to injury for the victims, is yet another crime against humanity. This is what the One Percent thinks of us. Thanks a lot. And where are the jobs, by the way?

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