Mortgage Deal for 10% of Homeowners & Bank of America Win Big

California to Get $18 Billion Under Mortgage Deal

The mortgage deal has some questionable elements: Bank of America gets paid off for being corrupt, bankrupt Cali gets an enormous portion, only 10% of homeowners will be helped, Fannie and Freddie skate (for now anyway), some of the burden is on the taxpayer, and states get $2.6 billion to spend however they want (why?).

When you look into the details of Obama’s bank settlement, it’s $25 billion of a whole lot of nothing for the common man.

I thought about taking out a home improvement loan several years back with WAMU (no longer in existence). The mortgage rep was aggressive and told me I could not see the loan agreement until I came in to sign it. Of course I found that absurd and made her print it out. I decided not to proceed because I didn’t trust them frankly.

When I hear there were unfair bank practices, I believe it to be true. The stories about soldiers being foreclosed on is unacceptable to me. However, how do people take out mortgages and claim they were duped and whose fault is that? Don’t they read the agreements or hire lawyers? There is no personal responsibility here at all.

The robo-signing crime we keep hearing about and which is now in the forefront is apparently a term made up last year to describe some inefficient and perhaps deliberately negligent bookkeeping practices the banks engaged in when foreclosing. The fact that it was invented last year makes the accusation seem somewhat dubious.

The banks that have settled will now be freed up to foreclose on homes – quickly. Banks slowed down the pace of foreclosures as the negotiations went on with the AG’s in the 50 states who brought the complaints.

Many believe the settlement will trigger a wave of home seizures with short-term pain on delinquent U.S. borrowers while making a long-term housing recovery more likely. People are in homes they cannot afford. Prices were depressed because the foreclosures were being sold below market and the foreclosures have to be sold before any other homes can be sold. The increased number of abandoned properties caused banks to tighten mortgage credit standards out of fear of their potential liability.

At least the Sword of Damocles has been lifted from the banks. Banks are allowed to foreclose on people who fail to live up to the agreement they made when they borrowed the banks money.

Litigation still looms, and banks will still have to struggle with investors in mortgage-backed securities who demand that the banks buy back soured loans.

Financially, at least, shareholders likely won’t have to bear new costs for Thursday’s settlement and it’s a relief to investors.

According to Forbes, $1.5 billion has been allocated to 750,000 people who were foreclosed out of their homes between 2008 and 2011. Some will receive $500 – $2000. I thought this was a joke when I heard it, but it’s not. We are putting the already fragile banks into more jeopardy for the paltry sum we awarded to the people.

This settlement will only affect 10% of the mortgages of the country and does not include Fannie and Freddie. Fannie and Freddie holds 89% of the mortgages and are responsible for the housing crisis. They gave risky mortgages and then bundled them and sold them [credit default swaps]. How much they were forced to give mortgages to the poor who could not afford them is continually debated.

The total settlement is for $25 billion and the Feds are getting over $766 million. Since the Feds are part of the problem, this is obviously a very political decision.

California will get most of the money because they have the most homes underwater. I frankly don’t believe the taxpayer should be responsible for underwater homes. My home has gone WAY down in value and I do not believe the taxpayer is responsible. My home is not an investment – it’s my home – and I will live with the loss.

Another problem for me is that one of the banks that settled for $207 million is Ally Financial, formerly GMAC (you know, GM), which we bailed out so basically we are bailing them out again. J.P. Morgan’s share of the settlement is $5.3 billion, the same as for Wells Fargo. Bank of America Corp. is bearing the biggest share, $11.8 billion; Citigroup has to pay $2.2 billion. We bailed them all out.

The settlement also requires the lenders to offer principal reductions and lower interest rates worth as much as $32 billion over the next three years in an effort to keep as many borrowers in their homes as possible.

The gluttonous states saved $2.6 billion for themselves. Not as general revenue to be allocated by legislators, but as funds the AGs can distribute as they see fit. This was controversial in the tobacco settlement, when some state legislators argued the money raised through higher prices on cigarettes was properly considered tax revenue. Why isn’t this going to the homeowners they claim they are so concerned about?

To make it worse, $1 billion is going to pay for Bank of America/Countrywide misdeeds.  We wrote a check to make Bank of America’s lawsuits go away.

Holder’s statement: ….the origination and underwriting of Federal Housing Administration (FHA)-insured mortgage loans, and systematic inflation of appraisal values concerning these loans, from Jan. 1, 2003 through April 30, 2009. Payment of $500 million of this $1 billion will be deferred to partially fund a loan modification program for Countrywide borrowers throughout the nation who are underwater on their mortgages. This investigation was conducted by the U.S. Attorney’s Office for the Eastern District of New York, with the Civil Division’s Commercial Litigation Branch of the Department of Justice, HUD and HUD-OIG. The settlement also resolves an investigation by the Eastern District of New York, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the Federal Housing Finance Agency-Office of the Inspector General (FHFA-OIG) into allegations that Bank of America defrauded the Home Affordable Modification Program. 

Information from: ReutersBloombergWSJForbesBusiness Insider