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October 22, 2014

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Banks near mortgage deal with state AGs

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Christopher DeVargas

Two foreclosed and unoccupied homes in the 4500 block of East Sun Valley Drive sit across from each other Dec. 15, 2011.

Updated Thursday, Feb. 9, 2012 | 1:07 a.m.

The nation’s five largest banks and a consortium of state attorneys general are closing in on finalizing a settlement of at least $25 billion for the roles the banks played in the mortgage meltdown, Politico has confirmed.

If completed, the deal would be the largest of its kind in history, rivaling the 1998 settlement states reached with the tobacco industry, and the largest civil action ever against the housing industry. The agreement would cap a yearlong series of negotiations designed to hold banks accountable for falsifying documents related to home foreclosures in several states.

Under the proposed terms, mortgage debt would be cut for about 1 million homeowners, while another 300,000 would have their loans refinanced at lower interest rates. Roughly 750,000 who were foreclosed on would each be compensated for their loss with $2,000.

More than 2 million Americans could benefit from the settlement, according to a source familiar with the negotiations.

The bulk of the settlement would be set aside for struggling homeowners, including loan modifications, refinancing and principal reduction — rewriting the mortgage to reflect the current value of the home. Another portion of the money would fund a reserve account for state and federal programs and for payments to homeowners whose mortgages were improperly processed.

The consortium effort between the Justice Department and the 50 state attorneys general, led by Iowa Attorney General Tom Miller, has been looking to strike the deal with Bank of America, Citigroup, JPMorgan Chase, Ally Financial and Wells Fargo.

A deal had been widely anticipated at several points, but hit snags as several attorneys general — including Eric Schneiderman of New York, Kamala Harris of California and Beau Biden of Delaware, son of Vice President Joe Biden — raised concerns that the proposal was too small and would grant the banks immunity from possible prosecution for fraud. On Monday night, the Huffington Post, citing sources, reported that Harris and Biden agreed to join the settlement.

Others expressing reservations had included the attorneys general of Minnesota, Nevada, Massachusetts and Kentucky.

The pressure to strike a deal had produced an intense backlash from liberals last summer. But several moves appeared to change the mood, including President Barack Obama’s creation of a new mortgage crisis unit headed by Schneiderman, announced in his Jan. 24 State of the Union address. That unit is working with the Consumer Financial Protection Bureau.

Obama signaled that he intended to move aggressively against banks and lenders via the new unit, with Schneiderman leading the investigation into whether banks committed fraud by issuing risky subprime mortgages and reselling them as securities on Wall Street.

In a recent MSNBC interview, Schneiderman said the initial proposed settlement “has a lot of good stuff in it,” but he objected to the banks’ request for immunity from prosecution in exchange.

“I drew a hard line — there’s absolutely no way I will join you if you give these guys a release from other conduct that hasn’t even been investigated yet,” Schneiderman said. “I was absolutely adamant that you do not release [the banks] from claims for the conduct that blew up the economy.”

In naming him to the task force, “the president has been absolutely clear: We’re going after the stuff that blew up the economy,” Schneiderman told MSNBC’s Chris Hayes. “We’re going after the possibilities of tax fraud, insurance fraud, securities fraud. We’re going to look at this stuff very carefully.”

Schneiderman's office declined comment on the current negotiations.

The settlement is a critical step in sorting out a housing mess that many industry economists say won’t return to normal until 2015. Fannie Mae chief economist Doug Duncan projects that home prices nationwide could drop by as much as 7 percent this year, a serious drag on the economic recovery.

The amount of homeowner beneficiaries from the deal would still represent a fraction of the estimated 14 million borrowers who would benefit from a refinancing plan outlined last month by Glen Hubbard, dean of the Columbia University School of Business and an adviser to Mitt Romney’s presidential campaign.

Even with the settlement, uncertainties about the housing market still remain. Few lawmakers and lobbyists expect to resolve the status of Fannie Mae and Freddie Mac, the mortgage giants the government took control of when the mortgage crisis boiled over in 2008.

But there are significant political considerations in play, since the crisis is at its worst in three major swing states: Florida, Michigan and Nevada — and the foreclosure rates are also high in battlegrounds Michigan, Virginia, North Carolina and Indiana.

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  1. Chump change.

  2. Take Billions in Fraud, then pay off millions in a Hand Slap, while the Public Bails Them out. This just demonstrates that elections only exist to make you think you have a choice, when BOTH Political Parties are in the Wall Street Pockets. It will not get better unless we require all Money to leave Politics with a Constitutional Amendment. I hope the AG from Nevada stand her ground while the others are just taking a pittance and selling out their residents.

  3. Why is the Attorney General only applying the laws to the lenders? Most of the borrowers lied on their applications which is a criminal act. Anyone who lied about their "stated income" should be held responsible, not rewarded with modification programs.

  4. "Chump change."

    lericgoodman -- $2k in exchange for having your home stolen isn't even hush money. As if any of those former homeowners will ever actually see it.

    "...the biggest offender of them all, Goldman Sachs, again, is not being held accountable."

    rwal -- and MERS, and Fannie Mae, and all their parasites who do their dirty work. I have friends locally who started with BofA last July asking the simple question "where's our note? Who's the holder?" So far they've dealt with 7 different entities and not one of them have answered those questions -- answers our Supreme Court said last July they're entitled to.

    "I hope the AG from Nevada stand her ground while the others are just taking a pittance and selling out their residents."

    newnvres -- nope. See http://www.lasvegassun.com/news/2012/feb...

    "This settlement is a complete joke."

    unlv702 -- amen to that

    "The regulators got bailed out, the middle class lose their jobs and their houses. All this desire to trust in the government to make sure that big corporations won't hurt them actually is a backfire on them." -- Rep. Ron Paul to Jon Stewart 9/26/11, citing the example of the real estate crash as example of government regulation gone bad

  5. According to the Lied Institute of Real Estate Studies at UNLV there has been a loss of $91B in equity here.

    Harry Reid says we could get as much as $1.5B from this deal.

    This agreement isn't even a joke, it is tantamount to saying "go away little boy, you bother me."

    I understand that no investment is ever guaranteed, but I can't help but wonder if homeowner who have done nothing wrong whatsoever can't make a case for being intentionally harmed by the fiscal mismanagement practiced by the various parties involved that resulted in loss of equity.

    By "nothing wrong" I mean those who made their payments, didn't use their home for an ATM, paid a reasonable down payment, etc. In other words, the ones who have been hurt the most and have no relief available at all.

  6. This is the worst thing I have ever seen, paying people who did not pay their mortgage! Most of these people had little down and did not pay payments, insurance, taxes, HOA fees for a year or two and got free rent, so they got foreclosed maybe some paperwork was not perfect but the fact is THEY are the ones who caused the foreclosure because if they paid the payments the process would have never started. Now the deal is to turn around and give them $2000? And what about all the homeowners that are current or paid cash for their homes, they are just as affected by the decline in value, what do they get? This could only be fair if the settlement was split to every person who has a tittle to a property regardless of mortgage. If there was ever a reason to get rid of Obama this is it. This is a vote buying deal at best and a horrible deal for those who actually pay their debts and are responsible, and of course a crush to retirees who often have paid cash for their retirement home and may never see that cash again. The only person who was rational was the Oklahoma Attorney General Scott Pruitt, who declined to sign the settlement and said he was concerned the settlement "greatly overreached" the authority of the states and could be unfair to homeowners who continued to pay their mortgage.

  7. "This is the worst thing I have ever seen, paying people who did not pay their mortgage!"

    petef -- still proclaiming to all how profoundly ignorant you are. Try looking up NRS 104, Article 3 -- the part about negotiable instruments. Then look at what the Nevada Supreme Court decided last July in the Pasillas and Leyva cases.

    "The note is the cow and the mortgage the tail. The cow can survive without the tail, but the tail cannot survive without the cow." -- the late Professor Chester Smith of the University of Arizona College of Law, as cited in Restatement (Third) of Property, Mortgages 5.4, Reporters' Notes

  8. KillerB.....I love when i see your posts on here. You always are spot on and hit the nail on the head. Keep disseminating the truth. Im with ya!

  9. "KillerB....."

    sounddude -- gosh. Just messin' with the herd.

    "...how little does the common herd know of the nature of right and truth." - Socrates in Plato's "Euthyphro" (399 B.C.E.?)