The robo-signing scandal (aka foreclosure fraud, aka lying, cheating and stealing) is being swept under the proverbial rug. The deal, brokered by the Obama administration, prevents the states from enforcing their own laws against fraud and gives banks and mortgage servicers a get-out-of-jail-free card without even having to admit wrongdoing.. The Department of Justice has already decided not to prosecute banks on the federal level. For a while we hoped that some state attorneys general would muster the clout to prevent this from happening. FDL has it covered:
Forty-nine states, every one but Oklahoma, as well as federal regulators will participate in a foreclosure fraud settlement that will release the five biggest banks (Wells Fargo, Citi, Ally/GMAC, JPMorgan Chase and Bank of America) and their mortgage servicing units from liability for robo-signing and other forms of servicer abuse, in exchange for $25 billion in funding for legal aid, refinancing, short sales, restitution for wrongful foreclosures and principal reduction for underwater borrowers. The announcement will be made on Thursday.
This settlement arises from multiple abuses found in the servicing of loans and the foreclosure process over the past several years. At the height of the housing bubble, banks sliced and diced mortgages and traded them with little regard for the rules following land recording or securitization to such a sloppy extent that they lost track of the true owner on potentially millions of homes. To cover up for this massive failure, banks and their servicing units have been found to have routinely forged, back-dated and fabricated documents at county recorder offices and state courts across the country. Furthermore, they employed “robo-signers,” who signed hundreds of thousands (if not millions) of documents and affidavits without any knowledge of the underlying mortgages. In addition, investigations uncovered massive servicing abuses, including illegal fees charged to borrowers, putting borrowers into foreclosure at the same time as they were working out loan modifications, failing to honor previous settlements where promises were made on modifications, and countless other errors that maximized servicer profits and gouged homeowners. There are also cases of wrongful foreclosures where homeowners have been turned out of their homes without just cause, and servicer-driven foreclosures, where servicers illegally added late fees and applied payments inaccurately, pushing the homeowner into foreclosure. This is but a smattering of the examples of foreclosure fraud and servicer abuse found in a series of interlocking investigations, court depositions, reviews of documents in registers of deeds offices, and homeowner testimonials.
…Oklahoma stayed out of the deal because the state’s Attorney General, Scott Pruitt, did not believe that the banks should face any penalty.
[I]t’s over folks. The housing market is not going to recover any time soon and the court system will be permanently corrupted by forged and perjurious documents.
This settlement is an incredible breach of the social contract between the government and the governed.
Kouril suggests calling your state’s Attorney General – Mark Shurtleff, for Utah. Assuming your powers of persuasion are really good, there may be time to stop him from signing on to this rotten deal that lets banks and mortgage servicers off the hook for massive fraud. If he does go along with this betrayal of average Americans, then please remember not to vote for him in November.
This is Bank Bailout 2.0. Instead of going to jail for fraud, the banksters are going to be able to foreclose on homes without proof that they hold the loan, going to court with fake documents. Americans who lose their homes to fraud can still get their own lawyer and sue, taking their chances in a legal system that heavily favors financial institutions over consumers.
UPDATE: Yves Smith: The Top Twelve Reasons Why You Should Hate The Mortgage Settlement
We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.
…As we’ve said before, this settlement is yet another raw demonstration of who wields power in America, and it isn’t you and me. It’s bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.
UPDATE: David Dayen: Analysis: Regulators Want to “Build Second Table” for Financial Fraud Claims
UPDATE: David Dayen: The $2,000 Insult in the Foreclosure Fraud Settlement