The Wrongologist

What’s
Wrong Today:

On April 9th,
the Office of the Comptroller of the Currency (OCC) announced the payout terms of the Mortgage Fraud/foreclosure settlement
covering 2009 and 2010. Most people get less than $1,000 out of the deal.
 

4.2
million Borrowers are part of this settlement. 

Payments
to the 4.2 million begun on April 12 are part of the agreement reached by the OCC
and the Federal Reserve Board with 13 mortgage servicers. That agreement provides
$3.6 billion in cash payments to borrowers whose homes were in any stage of the
foreclosure process in 2009 or 2010 and whose mortgages were serviced by:
Aurora Bank, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase,
MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank, and Wells
Fargo.

According
to the American
Prospect, the money is a product of the Independent Foreclosure Reviews
(IFRs), part of the enforcement action against 14 banks. The IFRs, shepherded by
the OCC and the Federal Reserve, were supposed to give anyone in foreclosure
during 2009 or 2010 the chance to have their case investigated by an
independent reviewer, and to be compensated if the review revealed harm.

For context,
the banks paid the third-party
consultants who performed the reviews (and according to whistleblowers, helped deliberately minimize evidence of borrower harm)
roughly $20,000 a review, a windfall of $2 billion.

And the peeps got just $3.6
billion total. Borrowers who suffered the loss of their homes
netted less than $1,000 on average. Regulators could not even give Congress an accurate percentage of
borrowers harmed by illegal foreclosure processes, calling into question how they arrived at the $3.6
billion compensation figure in the first place.

The
settlement detail indicates that the banks foreclosed on members of the active military,
even though that is clearly illegal. The best deal under this settlement that a
foreclosed military person can get is a maximum of $125,000.  However, most
people who were illegally foreclosed upon while in bankruptcy are getting much
less than that.  

About 30%
(~1.2 million borrowers) whose properties were foreclosed on by the banks, had
to battle potentially wrongful efforts to seize their homes despite not having defaulted on their
loans, being protected under a host of federal laws, or having been in good
standing under bank-approved plans to either restructure their mortgages or
temporarily delay required payments.

More than
244,000 of those borrowers eventually lost their homes.

The details:

• The banks seized 1.1 million homes
  after they were approved for
  refinancing. Since the average foreclosed home was worth $191,000, the banks stole $210 billion in
  home value. Under the “landmark settlement,” these wrongfully evicted Americans
  will receive $300 or $500 each, or two-tenths of one percent of their loss.
• 900,000 borrowers who were
  entitled to refinancing under Mr. Obama’s Make Home Affordable program were
  denied help and lost their homes. They get $300 or $600.
• 420,000 homeowners who lost their
  homes while the banks intentionally “lost” their paperwork get $400 or
  $800.
• 28,000 families who were entitled
  to protection against foreclosure under federal bankruptcy law, but got thrown
  out of their homes, get $3,750 to $62,500.
• 1,100 soldiers entitled to
  protection against foreclosure because of their military status get
  $125,000.
• 53
  families who weren’t late on their mortgages, never missed a payment, but
  got thrown out anyway, get $125,000.

This is an
astounding number of people that were treated badly by the Too Big To Fail banks.
 Now those same people have added insult to their injury with tiny payouts. The settlement leaves them on their own to sue in
civil court to recover any real damages. Hard to do with the $1000 they just received.

The OCC
and the Federal Reserve allowed the banks to determine who had been harmed and
in what manner. The OCC said it “spot checked” the work by the banks. When
asked how the results could be legitimate if the OCC reviewed only 100,000
foreclosure files out of 4 million for errors or fraud, (not a statistically
reliable sample), the OCC spokesperson said
the injuries were only hypothetical and might have happened.

The Feds
have clearly been captured by the players in the industry they are supposed to
regulate. Who knew you could settle with the government and then write your own
terms, complete with a tally of your victims!!

Some historical
perspective:

The banks entered
the market previously regulated only by the states. They captured the national mortgage
market after the Gramm-Leach-Bliley
Act, passed in 1999. The law said the banks could ignore state mortgage laws
and be free from prosecution.

The banks
had no “fiduciary” duty to anyone unlike
someone licensed under state real estate laws. They hired people to robo-sign,
faked notary stamps and failed to keep records. It was a pass-thru process with
the banks selling unreviewed mortgages to investors who were buying blind.

After ten
years of undocumented mortgage creation, it is impossible to convert this toxic
dump site into a legal process. Those foreclosed on by the sheriff were collateral
damage of no concern to our government which has continued to allow the banks to
write and package mortgages and sell derivatives based on those mortgages.

Between
the government undertaking settlements with the big banks for chump change,
having freedom from future prosecution, and given the statute of limitations,
the banks hope to run out the clock, continuing business as usual.

Most of
the toxic mortgages have now been shifted to the federal government. It is
arguably “the biggest heist in history” and the banks got away with
it.

What would happen to
you if you walked into Tiffany’s and stole a $200,000 watch?

How do we
explain that furious mobs haven’t burned these banks to the ground?

Only in
America can people be fraudulently foreclosed on, lose their homes, have their
credit ruined and be compensated with an average of less than $1,000 for their
trouble.  

Those 53 families
should own Citibank, JPMorgan Chase and Bank of America.