View Full Version : Foreclosure abuse deal reached in U.S
http://www.cbc.ca/news/world/story/2012/02/09/mortgage-foreclosure-us-settlement.html
Will this help the situation?
Under the agreement, five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial — will reduce loans for nearly 1 million households.
They will also send cheques of $2,000 to about 750,000 Americans who were improperly foreclosed upon. The banks will have three years to fulfill the terms of the deal.
All but one of the 50 states agreed to the deal. Oklahoma, the lone holdout, will receive no money.
The conditions will be overseen by Joseph A. Smith Jr., North Carolina's banking commissioner. Lenders that violate the deal could face $1 million penalties per violation and up to $5 million for repeat violators.
The settlement ends a painful chapter that emerged from the financial crisis, when home values sank and millions edged toward foreclosure.
And what of the poor people who paid off their homes or were not underwater but lost half of their equity anyways? How will this multi-billion dollar deal help them recupe their losses? Will granny, who counted on her home's equity for her future retirement planning and who tapped her home equity to buy a new granite and stainless steel kitchen, Rv or power boat or luxury vacation to Paris, be helped? All homeowners suffered in the economic downturn, not just underwater homes. I say there should be no bail-out financing for anyone. If the banks want to use their money to do it - fine. But don't use tax payer money to bail out an individual's financial mistake.
ApatheticNoMore
2-9-12, 2:32pm
And what of the poor people who paid off their homes or were not underwater but lost half of their equity anyways?
What about renters? It's never going to be fair, and there is a *lot* of social engineering in this country favoring homeowners over renters. But really I have long since stopped expected it to be fair. And between bailing the banks and bailing the homeowners, I know who I'd rather bail. They are trying to prevent people from walking away basically, which they will, becaue there homes are simply not worth what they paid for them! I can't imagine Oklahoma turning it down was much of a sacrifice to Oklahoma, exactly how much of a bubble did they have there? Almost none I bet!
How these deals usually work is ... almost noone actually qualifies for them and they have all kind of gotchas that really end up benefitting the banks rather than the homeowners.
I suppose everything helps, but this sounds a little like peeing in the ocean compared to the trillions of dollars of equity that disappeared in the housing bust. Yes, markets do rise and fall and equity really is nothing more than a number on paper until you actually sell (convert it to cash), but there certainly were entities that cause abnormal fluctuations in the housing market which ended up damaging a lot of folk's futures. These banks were among them.
Of the $25B settlement $1.5B will be paid to homeowners who were "improperly" foreclosed on in the form of $2,000 checks. BFD. If you lost your home how far would $2K go toward getting you reestablished? Another $3.5 billion will go directly to states. For what, exactly, I'm not sure? Even if that were applied 100% (yea, right) to help bring delinquent homeowners current it only amounts to a little over $70 million per state (based on 49 states participating). That doesn't even consider the notion that the banks are basically giving the states money to give to homeowners to give back to the banks. The other $20 billion of the total $25 billion settlement is roughly split between various refinancing programs and the banks "reducing mortgage amounts" (for which they will be able to make up the difference through tax strategies).
Ultimately I still put the primary blame for most foreclosures on speculators and homeowners who were, shall we say, unrealistic. In the end they were the ones who signed on the dotted line and borrowed the money. The problem is those weren't the only people who got hurt. I do hope some of this money finds its way to the honest homeowners who did it all right, but got caught in the vortex their deadbeat neighbors created.
On the other side of the table, all of these banks made immense profits from practices that showed no sign of common sense whatsoever and very little sign of ethical practices. On the lower end they played a shell game with Wall Street and their mortgage backed securities. I don't know the names or have a flow chart, but I can't help but think there are a few hundred people involved that should be wearing orange jump suits for the next 20 years or so. Instead they, the banks, get a proverbial slap on the wrist and pay a fine with the shareholder's money and slide right on through. I'm a dyed in the wool capitalist today and will be on the day I die, but this is one example of the system breaking down. This settlement will do nothing to fix it.
And what of the poor people who paid off their homes or were not underwater but lost half of their equity anyways? How will this multi-billion dollar deal help them recupe their losses? Will granny, who counted on her home's equity for her future retirement planning and who tapped her home equity to buy a new granite and stainless steel kitchen, Rv or power boat or luxury vacation to Paris, be helped? All homeowners suffered in the economic downturn, not just underwater homes. I say there should be no bail-out financing for anyone. If the banks want to use their money to do it - fine. But don't use tax payer money to bail out an individual's financial mistake.
This is bank $$, not taxpayer $$. And, the market dive was not due to individual's financial mistakes, it was due to unregulated and heretofore unimagined bundling & selling of unbacked "securities". The banks KNOWINGLY created a market for a new and completely unsecured set of instruments. It was insane. It involved a rollback of protections put in place by the Feds after the '29 crash (Glass-Steagall), and was engineered by the Fed, big banks, and Clinton rolled over (for the record, I NEVER liked Pres. Clinton).
Here is the description of a Bill Moyers show I heard that laid this out in gruesome and very depressing detail. I will try to find a link to hear the show.
"Moyers & Company #103 "Why Are Big Banks Rewriting the Economy’s Rules?"
Release Date: January 27, 2011
Short: How power and influence helped big banks rewrite the rules of our economy. Next on Moyers & Company.
Long: Big banks are rewriting the rules of our economy to the exclusive benefit of their own bottom line. But how did our political and financial class shift the benefits of the economy to the very top, while saddling us with greater debt and tearing new holes in the safety net? This weekend on Moyers & Company (check your local listings), Bill Moyers talks with former Citigroup Chairman John Reed and former Senator Byron Dorgan to explore a momentous instance: how the mid-90’s merger of Citicorp and Travelers Group – and a friendly Presidential pen -- brought down the Glass-Steagall Act, a crucial firewall between banks and investment firms which had protected consumers from financial calamity since the aftermath of the Great Depression. In effect, says Moyers, they put the watchdog to sleep.
There’s no clearer example of the collusion between government and corporate finance than the Citicorp-Travelers merger, which -- thanks to the removal of Glass-Steagall -- enabled the formation of the financial behemoth known as Citigroup. But even behemoths are vulnerable; when the meltdown hit, the bank cut more than 50,000 jobs, and the taxpayers shelled out more than $45 billion to save it.
Senator Dorgan tells Moyers, “If you were to rank big mistakes in the history of this country, that was one of the bigger ones because it has set back this country in a very significant way.”
Now, John Reed regrets his role in the affair, and says lifting the Glass Steagall protections was a mistake. Given the 2008 meltdown, he’s surprised Wall Street still has so much power over Washington lawmakers.
“I'm quite surprised the political establishment would listen to groups that have been so discredited,” Reed tells Moyers. “It wasn't that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did… And then the whole system came down.”
How Wall Street and Washington got together and stacked the deck against the rest of us. Next on Moyers & Company."
People will still continue to have problems with their lenders. It is true that I have only anecdotal evidence for this, but since I am a lawyer, a lot of people tend to ask me advice on negotiating loan modifications and foreclosures. I hear the same story over and over again of people getting the run around when they try to negotiate with their lenders. Papers get "lost" and have to be re-sent/refaxed over and over again. Nobody ever knows anything. The deals they propose always land up costing consumers more money per month.
I have been trying to get a short sale through for a client on a condo unit for over a year. The lender just outsourced its servicing to a call center in India. Believe me when I tell you that it is impossible to get a short sale approved when you are dealing with abysmal customer service on the part of the lender.
Either the lenders are not dealing in good faith or have been slow to adapt to the market conditions. I don't know if this deal will help or hurt.
Roughly $1.5 billion for direct payouts, in the form of $2,000 checks, for about 750,000 Americans who were unfairly or improperly foreclosed upon; another $3.5 billion will go directly to states.
At least $10 billion for reducing mortgage amounts.
Up to $7 billion for other state homeowner programs.
At least $3 billion for refinancing loans for homeowners who are current on their mortgage payments but who are underwater.
The deal is subject to final approval by a federal judge.
If Madoff had gotten a similar deal he would have gotten a $100 fine, and a free limo ride from the courthouse.
And I expect the banks get to treat these all as losses on the taxes?
This is bank $$, not taxpayer $$. "
Thanks for all the info. While I agree that corporate (banks) greed greatly created the housing crash, I also contend that personal greed played a huge role too.
But, for this thread, I had assumed that this bailout was part of the original $75 Billion in TARP funds (all taxpayer money) for home loan modifications (what happened to that btw??). But if the banks are willing to completely foot the bill, then I'm OK with that. They, along with their loan customers, created this mess and should pay for it. Especially if fraud, improper loans, and foreclosure can be proven. I still think it's unfair to many millions of people but.......
BTW, Calif alone is getting over $4 Billion from this. The biggest chunk.
Top of the hour NPR news had a story about the banks payout deal that was announced yesterday. A new wave of foreclosures will now begin to hit, as banks stopped that process while this deal was negotiated. Now that it's signed, they are poised to move on the suspended foreclosures. This will suppress the market even further, IMHO, especially in lower income neighborhoods like mine. I have a feeling we'll be in this house for some time to come... not my favorite choice, as it's really too large for us, and I want to move into cohousing. Oh well!
Of course california is getting a big chunk.
You can't make everyone happy. There were people who had "paper" gains. They bought before the big spike, saw their homes triple in value on paper, and then drop back down. Ah well. If they took money out...well...
I mean, our house is worth about 2/3 of what we paid for it in 2004. We haven't even tried to refi with the really low rates now because it's worth what's left on the mortgage. We've been paying early, which is the ONLY reason we aren't underwater. But we'd owe money if we sold it because of realtor fees. Oh well, I hope to retire here, so no biggy.
Reports coming out of WI that the Gov there is using a chunk of this settlement to balance his budger instead of allocating it to individuals. If true, that stinks!
I found the Bill Moyers show, wherein he interviews former Citigroup chairman John Reed. I was driving a I listened to this, and it was all I could do to not weep. I view the malfeasance described in this interview as the root of the ruination of at least a generation. I am most interested in everyne's opinions.
http://billmoyers.com/episode/full-show-how-big-banks-are-rewriting-the-rules-of-our-economy/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+moyers+%28Moyers+%26+Company% 29&utm_content=FeedBurner
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