While the mortgage market continues to flounder, Washington is going full-steam-ahead in an attempt to reach a mortgage settlement with big banks. Any settlement will be another bailout, and I would encourage you to call your state AG to voice your objection. Banks want immunity for their criminal behavior in creating, securitizing and selling faulty mortgages. They also want immunity on robosigning and other fraudulent servicing practices. That’s what the settlement is all about, and it appears Obama is all too willing to let the banks off the hook when there has been no real investigation of the crimes committed.
1. There have been virtually no investigations, and the Administration has engaged in cover-ups rather than trying to get to the bottom of the mortgage mess
2. The big argument made in favor of the deal, that it will help borrowers, is patently false. Remember, Countrywide entered into a deal with attorney generals just like this, where they agreed to do mods in return for a settlement on abuses. Guess what? They didn’t do the mods. To add insult to injury, they actually abused homeowners who should have gotten mods. Nevada AG is suing Countrywide now over its failure to comply with the terms of its settlement. And even if some mods miraculously did get done, the settlement is designed to have banks hit a dollar amount. That means they will focus on the biggest loans, which means any relief will go to a comparatively small number of people in (originally) big ticket houses.
3. The Administration has only one chance to get this right. Now you might argue that Team Obama has no intention of getting the mortgage mess right, but the tectonic plates suddenly seem to be moving in elite circles. The Fed realizes that housing is a BIG problem and has even started making noise about it. Yet Obama is moving forward with a plan cooked up in late 2010 that is completely out of whack with the urgency and severity of the problem. Note that this settlement will NOT stop private actions, such as borrowers fighting foreclosures. And we will continue to banks refuse to take losses and drag out foreclosures to maximize fees. That will lead to continued pressure on housing prices in many markets as buyers stay on the sidelines, fearful of buying before a large shadow inventory clears.
Pushing a settlement through will not stop the criminal behavior; it will make it worse. You can call your state attorney general and tell them you want an investigation and prosecutions, not a settlement for pennies on the dollar. We don’t need another Red Roof Inn. In case you dont’ know the story, Alan Grayson details how American taxpayers, courtesy of the Federal Reserve, became the proud owners of the bankrupt hotel chain.
On a related note, there’s also a push underway to draft a new foreclosure statute by the Uniform Law Commission. Apparently Washington thinks we need new legislation to solve foreclosure issues when we haven’t even utilized the tools we do have available, namely prosecuting the bastards who violated the law while looting American taxpayers and their own companies! Bending the rule of law to help banks is not a solution. Tom Cox explains why there is nothing preventing existing laws from addressing the problem (excluding captured regulators). He even prepared this memorandum in response to a recent meeting in Washington covering mortgage foreclosure procedures.