Under threats of lawsuits from several states, several banks, Bank of America Corp, JPMorgan Chase & Co, Wells Fargo, Citigroup, and Ally Financial, are negotiating a deal to refinance homes that are underwater. It would include a menu of options to include principal writedowns, cash for transition to rental housing and other forms of assistance. This is something Obama has wanted.
The offensives committed by the banks were allegedly robo-signing of documents to evict people behind on their mortgages and claims that banks made legal errors when first originating loans, such as approving loans for borrowers without verifying income.
In exchange, banks would agree to refinance mortgages for borrowers who are current on their payments but owe more than their homes are currently worth, at a cost of $25 million, and they in turn would receive some limited civil liability. These are not necessarily, and most likely not the people who fell prey to the bank errors.
The question for me is whether or not banks are being bullied, under threat of public lawsuits, to pay the costs of underwater homes, for mistakes employees made? Not to say there weren’t unscrupulous mortgage brokers and there needs to be a price paid for that, but what do underwater homes have to do with that, and are we setting a dangerous precedent? Are the banks culpable and how culpable when people do not read their own mortgage agreements, do not pay their mortgages, and when ACORN groups demand, with the backing of government officials, that banks include a certain number of high risk loans in their portfolio or risk picketing and bad publicity.
Read story here: Reuters