Banks get bailed out, people get sold out in government/bank mortgage settlements
By Jerry Goldberg
January 14, 201
Two settlements were announced Jan. 7 in ongoing legal actions against the
major banks for abuses in placing millions of homes into foreclosure throughout
the U.S. But both only help banks, not homeowners.
In one settlement, the Office of the Controller of the Currency (an agency
of the federal Treasury Department) and Federal Reserve, in exchange for a
meager payment of $8.5 billion by the banks, agreed to lift consent decrees
under which they had placed major mortgage lenders. Under the decrees, the
lenders were required to review 4.3 million foreclosures initiated in 2009 and
2010. The banks involved in the settlement were Aurora, Bank of America,
Citibank, JP Morgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank
and Wells Fargo.
The Office of the Controller had mandated independent foreclosure reviews of
every foreclosure conducted or initiated in 2009 and 2010 for two reasons. One
was due to massive abuses by the banks in placing homeowners not in default
into foreclosure. The other was lenders’ failures in implementing
federal programs mandating evaluations of homeowners for loan modifications
under the Home Affordable Modification Program.
Under the OCC Financial Remediation Framework of June 21, 2012, homeowners
claiming servicing errors on their mortgages were to have their foreclosures
suspended pending review, reversed if violations were discovered, and paid
compensation ranging from $5,000 to $15,000 for those still in their homes and
$125,000 plus lost equity to those who illegally lost their homes.
The OCC paid private contractors $1.5 billion to conduct reviews for the
495,000 homeowners who applied for them. Another 3.8 million homeowners
eligible for review did not apply because they never received applications
or because they were demoralized by the constant bad news they received
from the banks. (huffingtonpost.com, Jan. 7)
Not one homeowner received the promised relief! And despite the published
regulations, not one foreclosure was suspended pending reviews with lawyers
representing the banks. The federal government continues to execute
foreclosures in direct violation of its own regulations.
The settlement provides a pool of $3.3 billion in direct payments to
eligible borrowers. This amounts to only $868 per homeowner, comparable to the
meager payments extended to homeowners under the previous Attorney
General/federal settlement announced several months ago. Another $5.5 billion
will be allocated for loan modifications — probably to
“incentivize” the same banks that refused to carry out the
modifications in the first place — and for forgiveness of deficiency
judgments on foreclosures that never should have happened.
Bank of America & Fannie Mae settlement
In the second mortgage settlement, also revealed Jan. 7, Bank of America
announced it would pay $8.5 billion to Fannie Mae to settle claims by the U.S.
Justice Department that Bank of America and Countrywide, the notorious subprime
lender taken over by Bank of America, had sold Fannie Mae and Freddie Mac
30,000 defective and fraudulent mortgages worth $1.4 trillion from Jan. 1,
2000, through Dec. 31, 2008. The $8.5 billion is a tiny fraction of the $300
billion that was lost on these mortgages as a result of Countrywide’s and
Bank of America’s practices. (Deutsche Well, Jan. 7; huffingtonpost.com,
Because Fannie Mae and Freddie Mac were completely taken over in 2008 by the
federal government as part of the Housing and Economic Recovery Act, this
settlement means that taxpayers will be responsible for $290 billion in losses
not recovered from the banks.
Feds still bail out banks while people suffer
These new mortgage “settlements” reflect the collusion of the
federal government with the banks in the housing debacle that continues to cost
millions of working-class families their homes.
While the corporate-owned media try to make it sound like the foreclosure
crisis has ended, as of the third quarter of 2012 there were 1.17 million homes
in the foreclosure process. (dsnews.com, Dec. 21) In that quarter, mortgage
servicers initiated 252,604 new foreclosures. More than 11 percent of all
mortgages were delinquent, with 4.4 percent seriously delinquent, meaning 60 or
more days past due. (OCC report, Dec. 21) A 1 percent seriously delinquent
rate would have been considered a national crisis 10 years ago.
The federal government has fully nationalized the mortgage industry.
Seventy-five percent of all mortgages originated since 2008 are guaranteed by
Fannie Mae or Freddie Mac. The remainder of the loans are insured by the
Federal Housing Agency. Private mortgage securitization has completely
Taxpayers have already paid $180 billion to cover the losses on payments to
the banks on failed mortgages insured by the government. According to the
January 2010 Congressional Budget Office Report, the CBO estimates the tab for
this taxpayer bailout as $389 billion, with many estimates much higher.
While the banks make record profits by servicing government-backed mortgages
and selling them to borrowers at inflated interest rates, homeowners continue
to be deprived of their homes by the callous and fraudulent practices of the
Homeowners, renters and all concerned activists must continue to organize
and demand that the federal government put the people before the banks. We need
a moratorium on all foreclosures and foreclosure-related evictions and an
immediate reduction in principal, so mortgages reflect the true value of
homes. With the federal takeover of the mortgage industry, President
Barack Obama can implement these policies today through an immediate executive
Goldberg is a people’s attorney in Detroit who fights the banks in
foreclosure cases, as well as a leading organizer in the Moratorium NOW!
Coalition to Stop Foreclosures, Evictions & Utility Shutoffs.