Obama Mortgage Deal: "Makes a mockery of those who pay their bills".

[Soul Crusher]

The $25 billion deal struck with the nation’s five biggest mortgage servicers is no cause for celebration. At its best, the agreement presents the White House with a politically pleasing sound bite. In announcing the settlement, President Obama promised voters that it would “deliver some measure of justice for families that have already been victims of abusive practices.” Unhappily, that measure of “justice” is offset by the very injustices behind the deal. While homeowners who bought properties within their means and have paid down their mortgages will get nothing from the deal, others who borrowed more than they could afford on overvalued properties, and who stopped making their payments, will get a windfall. 

Just to be clear: the banks made foolish (sometimes cynical) mortgages at the height of the real estate bubble, and eager homebuyers accepted those loans. Many had come to see houses as unbeatable investments; cheap money and ever-rising prices fueled enthusiasm, and speculation. In the collapse that followed, the banks responded to the avalanche of foreclosures with sloppy paper work and incomplete record-keeping. To compensate for this misbehavior, banks will pay some 750,000 people who lost their homes through faulty foreclosures approximately $2,000 apiece.

This appears a reasonable penalty, especially if it staves off massive litigation that could forever postpone a bounce-back in home buying. But, it needs to be said - nearly all the foreclosures were justified; there have been few instances in which a homeowner current on his payments was tossed from his house. Generally, those being foreclosed upon were one to two years behind on their payments. While many have pictured the banks as eager to foreclose, the opposite is true. In foreclosure, no one wins: the emptied house immediately plummets in value and the bank takes a large loss.

The Obama administration was eager to clinch this deal because its numerous other approaches to boosting the housing market have conspicuously failed, and the president needs to do all he can to prop up the economy before he runs for reelection. So driven was the White House to put a deal before voters that they removed an obstacle to the settlement – New York Attorney General Eric Schneiderman – by elevating him to a nifty and visible spot in the administration. In his new role as top cop investigating mortgage-backed securities fraud, Mr. Scheiderman can pursue the kind of crowd-pleasing bank bashing that he was loathe to sacrifice on the altar of the 50-state settlement.

New York attorneys general have a history of levitating their careers through pursuit of Wall Street scoundrels; Mr. Schneiderman’s personal ambitions are unchecked. He even got to sit behind Michele Obama at the State of the Union address!

The White House hopes that redirecting $25 billion from bank shareholders to underwater homeowners will help put a floor under still-sliding house prices. (About $17 billion will go to loan modifications.) Another likely deal, with the next nine largest mortgage providers, has sapped further funds from the industry as those institutions have reserved against a possible accord. In the real world, the drain of capital from these institutions that might step forward to finance new home purchases has helped keep a lid on a housing recovery.  Moreover, though the agreement resolved certain outstanding legal problems, more are sure to come – from Mr. Schneiderman, among others. That will continue to keep mortgage providers in a defensive crouch, reluctant to grow their balance sheets.

“Only fools meet their financial commitments; the non-payers are the truly enlightened.”

Possibly the worst aspect of the settlement is that its terms might encourage “homeowners to default in the hopes of getting aid,” as described by the New York Times. That will surely gum up a recovery.

The one possible positive of the accord is that foreclosure activity, which took a sharp dive when the robo-signing scandal broke in late 2010, will revive, and begin to clear the market of the “shadow inventory” of homes that are behind in their payments and hanging over any recovery. As harsh as the process is, only until that mountain of available product disappears will supply and demand begin to converge.

The worst aspect of this agreement is the message that “only fools meet their financial commitments; the non-payers are the truly enlightened,” as bank analyst Dick Bove recently wrote in a note to clients. Mr. Bove is especially horrified that in forcing the banks to renegotiate loans, “the government has taken away the banks’ property rights; rights thought by many to be the basis of capitalism.” Given the damage done to millions of Americans who lost their jobs because of the financial crisis, few may agree that those rights should be protected. 

Still, Americans revolted against bailouts of banks and auto companies who got into trouble because of bad management and stupid investments. The same voices should decry this latest government rescue. About one million out of the country’s 75 million homeowners (1.3%) will benefit – those who the president describes as “hardest-hit.” What he really means is those who got in the farthest over their heads. A New York Times article describing the settlement highlighted a homeowner, Carlos Sandoval de Leon, who owes Wells Fargo $662,000 on a brownstone in Brooklyn. According to his biography posted online, Mr. de Leon is an accomplished artist with a master’s degree from Columbia University. Is this someone who deserves help? Isn’t a highly educated person who borrows that rather large sum of money presumed to be a responsible citizen? 

President Obama said in announcing the pact, “No compensation, no amount of money, no measure of justice is enough to make it right for a family who’s had their piece of the American dream wrongly taken from them.” The families who didn’t win this particular government lottery might disagree.

[JBGRAY]

Wow, 2 grand...thats it?  I know people that stopped paying mortgages and just lives in nice homes for free....while accumulating money they just end up cashing out a nicer home elsewhere when the market collapsed...now these same types of people get a little handout.  Nice.

Meanwhile, honest, hard-working people who bust their ass to pay their bills find themselves with no voice, no representation, no lobbying group, no say in the media. 

This administration should be ashamed.  Rather than working to boost manufacturing, they'd rather give out piddling handouts in the form of a measly 2 grand or a few hundred backs on the payroll tax cut....and Bubba and Leroy happily go out and vote after buying a pair of spinner rims for his '86 Buick and a casket of moonshine.

[Soul Crusher]

Foreclosure Review Program's Regulators Take Pounding From Elizabeth Warren, Sherrod Brown


Posted: 04/11/2013 1:32 pm EDT










 
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Two prominent Democratic senators levied a withering attack on federal bank regulators on Thursday, accusing them at a Senate hearing of putting the interests of banks ahead of consumers in refusing to disclose what they know about the failed foreclosure review program that ended abruptly earlier this year.

Most aggressive was Sen. Elizabeth Warren, a Massachusetts Democrat and longtime consumer advocate who is quickly developing a reputation as perhaps the Senate's most effective cross-examiner. Following a series of probing questions that would not have been out of place in a court room, Warren excoriated the regulators for not immediately turning over case records of borrowers who may be considering private legal action against their bank.

"You have made a decision to protect the banks but not to help the families who were illegally foreclosed on," Warren said. "Families get pennies on the dollar for being the victims of illegal activities."

She continued: "You know of cases where the banks broke the laws, but you are not going to tell the homeowners. People want to know that their regulators are watching out for the American public, not the banks. Without transparency, [we] cannot have any confidence in your oversight or that markets are functioning correctly."

Over the past few months Warren and other legislators have repeatedly asked bank regulators at the Office of the Comptroller of the Currency and the Federal Reserve for more information about the case-by-case review of homeowner loans that was dropped in January in favor of a blanket $9.3 billion settlement.

At the hearing before the Senate Banking Committee, Warren and Sen. Sherrod Brown (D-Ohio) made clear that they were not happy with the answers lawmakers have received thus far about the program, which is widely considered an expensive and lengthy debacle.

Last week, the Government Accountability Office issued a scathing report of the reviews, finding that regulators did not provide proper oversight and that some errors likely went undetected. On Tuesday, regulators released new information suggesting that banks may have made errors in as many as 30 percent of all loans that qualified for a review, a figure far higher than previously reported.




Thursday's hearing was framed by the Senate committee as an opportunity to understand better the relationship between the financial institutions that agreed to the loan reviews nearly two years ago, and the independent consultants -- companies like Promontory Financial and Deloitte -- hired by the banks to conduct the reviews. As HuffPost and others have reported, those reviews were compromised by inconsistent oversight of the often-poorly trained contract employees and by improperly close relationships with the banks themselves.

Under questioning from Sen. Jack Reed, a Rhode Island Democrat, regulators came the closest to acknowledging that the reviews, which resulted more than $2 billion in payments by the banks to consultants, were poorly conceived and supervised.

"The OCC and the Fed greatly underestimated the complexity of the task," said Daniel Stipano, a top lawyer at the OCC. He cited the number of financial institutions, consultants and homeowners involved and the difficulty in negotiating state law as among the challenges that reviewers and regulators had to negotiate.

Asked if he thought the structure of the reviews was appropriate in hindsight, Stipano responded "no."

"We would take a different approach" if the process were done again, he said. He declined to say what changes regulators might make in the future.

Brown led off the committee by asking officials to reveal the name of an independent consultant that regulators had admonished for shoddy work. The officials declined, citing the confidential bank-regulator relationship. They did not rule out the possibility of disclosing the name of the consultant in the future.

Brown seemed to find this response unsatisfactory. "How does disclosing the identity of an underperforming third-party entity damage the relationship with banks?" he asked.

Warren focused many of her questions on the January settlement into which most of the banks conducting the foreclosure reviews entered. That deal requires they distribute $3.6 billion in cash payments to 4.4 million homeowners who received a foreclosure notice in 2009 or 2010 -- a number far greater than the half-million or so who applied for a foreclosure review with a specific complaint. Most borrowers will receive less than $1,000 each.

Warren noted that regulators have given conflicting answers as to the number of loans that reviewers found to contain bank errors. Regulators have said roughly 100,000 reviews were completed, or nearly so, when the program ended. The Federal Reserve, for example, initially said that errors were detected in 6.5 percent of those loans, but subsequent estimates have put the percentage both higher and lower than that figure, Warren said.

"If you had believed that the banks had broken the law in 90 percent of cases, would you have settled for more money?" she asked Daniel Ashton, a top lawyer at the Federal Reserve. "Doesn't it matter how many homeowners were victims of illegal activities by their bank?"

"Our priority was to get cash to borrowers," Ashton responded.

"[It is a] question of getting the right amount of cash to the right people, isn’t that right?" Warren said.

After a few more minutes of back and forth, Warren said, "The number is critical. It tells us how much illegal activity there was ... but 6.5 percent is a made-up number."

She continued: "What is the right number? If you can’t correctly tell how many people were the victims of illegal bank actions, how can you possibly decide what is the appropriate amount for a bank settlement?"

"An estimate would have required additional delay," Ashton answered.

[Soul Crusher]

For 3 Million Homeowners, The Government's Foreclosure Deal Is A Dud
 


Paul Kiel, ProPublica|48 minutes ago|418|5
 



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The government’s largest effort to compensate victims of the banks’ foreclosure practices is finally sputtering to an end.
 
But for most of those eligible – nearly three million borrowers – it won’t be much of an ending: they’ll be receiving a check for $300 to $500.
 

Payments to Homeowners
 
Regulators are dividing $3.6 billion in payments among 3.9 million homeowners. 2.4 million homeowners are receiving $300.
 

For many borrowers, it’s a likely an unsatisfying end to a process defined by years of frustration. If you were a homeowner in danger of losing your home at the height of the foreclosure crisis, chances are you soon discovered that your bank’s mortgage servicing division was a mess. They were hard to reach, gave you misinformation, lost your documents, and generally screwed things up. In some cases, homeowners were even foreclosed on by mistake.
 





ProPublica
 



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In 2011, federal bank regulators announced a process to right these wrongs. The Independent Foreclosure Review had a simple aim. If a borrower had suffered “financial injury” (the emotional toll would not be considered), then the review would make it right. Compensation payments would range as high as $125,000.
 
But for borrowers, it was yet another descent into confusion. Just as so many had waited months and often years for an answer from their servicer, homeowners sent in a pile of documents and watched and waited as 2011 turned into 2012 and then 2013.
 
The review process ended with a whimper early this year. The process was such a mess, regulators announced, that they’d decided it was better to call it quits. No more trying to determine each borrower’s “financial injury.” The banks would just cut a check for millions of homeowners who had been in foreclosure, regardless of whether they were wronged.
 
But even this solution had its complications. Not all borrowers would get the same amount. Instead, regulators said they would break the four million borrowers into various categories. But regulators didn’t announce what the different categories would be or how much borrowers might be receiving. Borrowers would just have to wait a little bit longer.
 
On Tuesday, three months later, the regulators, the Office of the Comptroller of the Currency and the Federal Reserve, finally released a breakdown of the categories.
 

Homeowner Categories
 
All four million homeowners will fit into one of the categories below. Within categories, payments range due to whether the borrower filed a complaint and/or the foreclosure was completed by the end of 2011 (we show those ranges in parentheses).
 
 



ProPublica
 
With the exception of the “Other” categories, this chart uses regulators’ precise wording. They have offered no more description of exactly what situations fall into which categories. The “Other ($3,000 & Up)” category comprises a number of others. For the full list of categories, see the chart regulators released. Source: OCC, Federal Reserve
 
Most borrowers will receive little. To be eligible, a borrower must have been in some stage of the foreclosure process at any time in 2009 or 2010 and had their loan handled by one of the major banks covered by the agreement. That’s about four million borrowers. Most of them, about 2.4 million, will receive $300.
 
Borrowers who took the time to fill out a complaint about their bank receive a small bonus for their efforts: Most of them will get $500 or $600. Only about 11 percent of eligible borrowers filled out complaints, a low response rate both consumer advocates and the Government Accountability Office attributed to borrower confusion and poor outreach by regulators and the banks.
 
Typical of the subpar communication regulators and banks have had with homeowners, it will be hard for homeowners to divine why they were put into a certain category.
 
Many borrowers facing foreclosure dealt with their servicer over months or years, and the errors were legion. Borrowers will likely argue they could be put in several of the regulators’ categories. It was common, for instance, for borrowers to be rejected over and over again for a modification before receiving one. Does that mean such a borrower will be receive a payment based on the denials or the approval? OCC officials have said that borrowers who fit in multiple categories will receive a payment based on whichever category brings the highest payment.
 
It’s also hard to understand some of the differences in payments. In some instances, homeowners who ultimately lost their home are compensated the same as those who did not. In other cases, they reap far more.
 
At least 1.6 million, or 41 percent of the total pool of homeowners, ended up losing their homes. The data is based on information as of the end of 2011, so the actual number is likely higher, because it doesn’t account for foreclosures in 2012.
 
Another example of the confusion: The categories are broken down into types of “possible servicer error,” but all possible servicer errors are not created equal in regulators’ eyes. For instance, a borrower who was denied a loan modification and lost her home to foreclosure (a pool of about 370,000 borrowers) will receive $3,000 or $6,000, depending on whether she submitted a complaint. But in cases where the borrower applied for a modification, and the servicer never made a decision and then foreclosed (196,000 borrowers), the payment could range from $400 to $800. If the servicer never even began the modification process and foreclosed (568,000 borrowers), the payment ranges from $300 to $600.
 
Asked for the rationale behind these decisions, an OCC official explained that regulators deemed the potential for error higher in cases where the servicer actually denied a request. It’s possible, for instance, that a servicer never made a decision because the borrower did not send in the proper documents. Or maybe the borrower never responded to the servicer’s solicitations.
 
Borrowers waiting for their checks can only hope they suffered the right sort of servicer error.
 
“People who managed to get far enough along in the [modification] process, many of them will get a decent payment,” said Alys Cohen of the National Consumer Law Center. “But people who suffered servicer neglect clearly are not getting compensation for the harm they suffered.”
 
Regulators say the first checks will be sent to borrowers at the end of this week, and that almost all payments will have been sent out by the end of April.
 
Meanwhile, homeowners, let us know what you get in the mail and whether you think you’re in the right category.


Read more: http://www.propublica.org/article/for-most-homeowners-govt-foreclosure-deal-brings-a-few-hundred-bucks#ixzz2QH4WWIRD