Keeping on top of the recent foreclosure settlement, we implore people not to get their hopes up (unless you own a bank) about the $25-billion settlement. Michael Hiltzik of the LA Times does a fantastic job of explaining why with each passing day, the settlement seems to get better for banks and worse for homeowners.
The story brings up several great points:
1- On the positive side, the settlement creates many incentives for the five banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial (the former GMAC) — to be more aggressive in offering relief to millions of distressed underwater mortgage homeowners.
2- Here in hard hit California, it appears that our state specific provisions in the settlement require BofA, JPMorgan Chase and Wells Fargo to meet a $12-billion target in California homeowner relief. State officials believe that the provisions will encourage the banks to do more writing down of principal balances on underwater loans than they will in the rest of the country.
3- Talk about another bailout – consider how federal regulators are helping the banks meet the costs of the settlement. The Office of the Comptroller of the Currency, a major bank regulator, said on the exact day of the settlement announcement that it would give the five banks in the deal a free pass on $394 million in penalties the banks would normally have had to pay for shoddy, and shady (e.g. “robosigning”, mortgage and foreclosure practices.
4- The settlement could have been used to improve HAMP, perhaps by mandating that the banks offer HAMP-eligible borrowers principal forgiveness. Under the current program the principle write down remains optional.
5- One of the worst aspects was actually brought to attention by documentary filmmaker Charles Ferguson in the Academy Award winning feature documentary “Inside Job”. With all of the big Attorney Generals making big statements about how they continue to take on the banks, we haven’t seen one individual for any of the meltdown being held accountable.