Lafayette The monitor of the $25 billion bank mortgage scandal settlement around mass produced, illegal documentation finally made his report, and the results continue along the same depressing track that has now been deep rutted since the housing collapse in 2008. Once again banks got credit, largely for paying themselves back money out of the settlement, and once again homeowners got almost no relief, especially in terms of debt reduction, principal reduction, or anything that would have secured meaningful modifications allowing people to stay in their homes.
The monitor claims that the scofflaw banks, Chase, Citigroup, Wells Fargo, and Bank of America were the big ones, have earned $15 billion of the $19 billion in credits required in the settlement, but look at how they weaseled around on it. For example they got $2.6 billion in credit for allowing borrowers who were underwater (owing more than the house was worth) to refinance, which is another way of saying they got credit as well as closing costs and income on homes where people weren’t paying. Simpler put, they both got credit on the settlement and made more money by making the loans “performing.” They also got more than $5.4 billion in credit for short sales, which means that the bank took possession of non-performing properties and cashed out or the bank finally swallowed hard and allowed underwater homes to be sold for market prices, rather than having done principal reductions allowing borrowers to stay in their homes. Essentially here, they got credit and money for evictions.
The amount that banks gave homeowners for principal reduction was $4.1billion, which is severely disappointing, but in a pattern we have seen repeated regularly in this mess. I thought I had read that they also got some credit for 2nd mortgages, which would have been even more ridiculous since those should have simply been written off years ago. Overall perhaps 650,000 borrowers got some action, which is way less than the one-million the feds had touted when the settlement was announced.
Kevin Whelan, national campaign director of Home Defenders, an advocacy effort for beleaguered borrowers, made the point that once again the settlement “did nothing to dispel fears that the settlement was giving banks credit for measures that they would have taken anyway, that the aid is not focused on low-or-moderate income families, and that it was not stabilizing communities.” He was further quoted saying, “What’s being counted as relief under this settlement has more families being put out of their homes.”
What can we really say, but “amen” and shame on all of them?