Obama Administration And Banks Near Deal On Mortgage Fraud Legal Liability

WASHINGTON -- The Obama administration, state attorneys general, and, perhaps, the nation's largest banks are close to a final settlement on the years-long struggle over allegations of massive foreclosure fraud, according to several sources familiar with the talks. And the final details of the arrangement, according to the source who revealed them, will apparently not preclude prosecutors and regulators from taking legal action against many of the common abuses during the house bubble. It remains to be seen whether all parties will ultimately sign off on the language.

The settlement is worth $25 billion, a sum which will be distributed to homeowners who were wrongfully foreclosed on as well as those who remain underwater. In addition, banks could still face future legal action over 12 specific violations.

According to someone intimate with the negotiations, there will be no legal release of the banks with respect to:

1. Criminal liability.
2. Tax liability
3. Fair lending, fair housing, or any other civil rights claim.
4. Federal Housing Finance Agency or the GSEs [Fannie Mae and Freddie Mac]
5. CFPB claims for the period after they came into existence in July 2011
6. SEC claims
7. National Credit Union Association Claims
8. FDIC claims
9. Federal Reserve Board claims
10. MERS claims

In addition, the source said, there will be preservation of the vast majority of securitization claims including all claims regarding state pension funds as well as the vast majority of the origination fraud claims from HUD, the VA and the USDA.

According to Mike Lux, who originally reported the settlement for The Huffington Post, the release will be "almost entirely confined to robosigning cases" -- meaning that banks will likely not see further punishment from the states for foreclosure fraud. Robosigning fraud is perhaps the easiest type of misconduct for prosecutors to target.

That said, their legal liabilities on the federal level remain vast, even after handing over $25 billion for homeowner relief.

The announcement is, in some regards, a victory for the few state attorneys general who, over the course of several months, refused to sign off on a quick and limited settlement with the big banks.

"I think it is fair to give [New York Attorney General] Eric Schneiderman and the other progressive attorneys general a lot of credit for holding the line," said a source intimate with the negotiations. "This is a big victory for them."

The announcement comes just two days after President Obama announced the creation of a mortgage crisis unit to be headed by Schneiderman and other prosecutors. Federal claims, such as those that will be permissible under the negotiated settlement, have not been aggressively pursued over the last three years despite widespread evidence of abusive lending. The emergence of the unit as well as the final language of the settlement suggests that the administration is refiguring its approach to future litigation.

The lingering question is whether the banks will sign off on the final language. Agreement from all 50 state attorneys general has also not been finalized. Schneiderman was not the only attorney general who spent months unhappy with the deal, and after Obama's State of the Union speech, Delaware's Beau Biden and California's Kamala Harris reiterated their opposition to the deal as it stood.

Tom Kelly of Chase's media relations office declined to comment. "No input from us," he said.

Schneiderman's office did not immediately respond to a request for comment from The Huffington Post.

UPDATE: 7:00 p.m. -- According to the Associated Press, "New York Attorney General Eric Schneiderman says one of his major objections has been resolved in a proposed settlement between U.S. states and the nation's biggest mortgage lenders over deceptive foreclosure practices."

Comments

[nifty165]

03:09 PM on 07/18/2012

I have proof that the USDA rural home serviceing loan program BREACHED a written contract to avoid foreclosure. This is recorded on a phone line at the USDA service loan center in which they tell you you are on a recorded line in which not only did i get a written contract to avoid foreclosure, but the service on a recorded line stated if I sent them as little as 800.00 that theyw ould not foreclose. I sent them the payment. Two weeks later they returned the payment on teh grounds they were foreclosing even though I had a written agreement in which my payments would be reduced adn I would get a moritorim. For the following three months they kept rejecting my payments. On teh fourth month I got a federal income tax refund. These people STOLE that money refused to tell me for six months they took it and then have refused to return it to me, they have selected payment option they can deny your payment for three months straight and then elect to keep what they want without telling you or letting you know what they did with it..I am going to be posting the contracts adn all the informaton on YOUTUBE so that every one as a citizen can see just how crooked our UNITED STATES GOVERNMENT

[OneAmericanRants]

09:40 PM on 02/04/2012

Let me get this straight:
On Tuesday, 1-24-12, President Obama announces a FraudUnit to investigate & prosecute mortgage fraud. Wednesday, 1-25-12, news articles predict the unit will speed the 50 State agreement. Thursday, 1-26-12, news articles predict this Unit will derail the 50 StateAG's negotiations. On Friday, 1-27-12, the 50 StateAG's are near agreement.

They'd be ill-advised to sign off on the robo-signing because the full extent of that egregious misconduct has yet tobe fully disclosed.

Think: $25 billion divided by 62 million homeowners means approximately $403 per homeowner (or is my math flawed?). That doesn't begin to put a dent inthe financial destruction created in each of these homeowners' lives.

It's time for Pres. Obama to take a stand. Put Eric Schneiderman completely in charge with power to subpoena and prosecute. When a man takes a stand, people may not like it, but they can respect him. If you don't help homeowners keep their homes now, very soon, there'll be no one to lead. They'll all be homeless.

Call, write, email the White House, your state legislature, Congress over & over & over every week until they get it. We must hammer away at them like Chinese water torture, so they know, in their every waking moment, that we are watching & we are angry & we want results now & the only way for them to get relief is to do what is right for the nation. Not for themselves. For the nation.

[Renee KnafelBullock]

12:30 AM on 02/14/2012

yes, i have done all of that and no replys,except on newsvine, thanks for your support, and comment.
http://ala­skabrat.ne­wsvine.com­/_news/201­2/02/01/10­284306-ala­skan-robos­tamp-victi­m-asks-jud­ge-to-hear­-all-facts­-before-de­ciding-fat­e-of-evict­ion-filed#­comments

[Renee KnafelBullock]

03:44 PM on 02/01/2012

Need some feedback at my column please
http://alaskabrat.newsvine.com/_news/2012/02/01/10284306-alaskan-robostamp-victim-asks-judge-to-hear-all-facts-before-deciding-fate-of-eviction-filed#comments

[oliviaah]

12:43 AM on 01/30/2012

I keep reading posts that make me believe a lot of people have not read the content of this article.
The settlement is for the fraudulent robo-signing of documents for foreclosure proceedings attesting to the fact that the original mortgage documents were available, when they were not. That is what the $25B is for. The banks fraudulently foreclosed on houses that they could not prove themselves as legal leinholders on.
Listed plainly for all to see is a list of 12 aggressions that the banks remain on the hook for. At the very top is CRIMINAL LIABILITY. Under that term, racketeering (RICO ACT) and conspiracy to commit fraud are big ticket items.
Under conspiracy, they paid the rating agencies to rate the bundled mortgages as AAA, when they were anything but. That's collusion and they will be hard pressed to prove they did otherwise.
People need to get their panties out of a bunch and see what happens, this is the best chance that people will go to jail.

[RevMDS]

11:12 AM on 01/30/2012

While were at it lets clean up the HOUSE and SENATE, Most of them are GUILTY of TREASON against the American people!

[Renee KnafelBullock]

12:34 AM on 02/14/2012

yeah, you got it love it truth in advertising

[kpacvt]

05:39 PM on 01/29/2012

Stop the madness....................BANISH OBAMA 2012

[RevMDS]

11:14 AM on 01/30/2012

Do your homework!

[Firecracker80]

04:07 PM on 02/03/2012

And replace him with whom? I wouldn't trust any of the GOP candidates to hold my purse, let alone run my country. They are all owned by the same people Obama is owned by. Ron Paul is the only one of them with half a brain, but if he gets elected he's going to face the same gridlock in Congress that Obama has had to put up with and he'll end up being an ineffective President simply because he'll have too much resistance from both sides to push any reforms through. Unless we banish our current Congress and demand meaningful campaign finance reform, nothing will change.

[derealest]

05:21 PM on 01/29/2012

What a sham....the people won't get diddly squat ( that's legalese for nothing) The banks are getting off with a tap on the wrist....OOPS, They got hundreds of billions from the governmant...hmmmmmm, nice payback percentage. If I was in the mafia I would be hard pressed to come up with a better deal. $100's of billions for four years, and payback 25....nice deal......The money given to the people won't come close to paying for thier lost equities. Thanks for the grand social experiment. I'm sure the rest of the world is doing backflips over the "paper" they bought.....what a joke. Wake up America, you are being sold down the toilet.

[mal998]

03:30 PM on 01/29/2012

State Attorneys General...DO NOT SIGN OFF THIS SETTLEMENT!!!

President Obama and Attorney General Holder, you must hold the banks and their executives responsible for every illegal thing that happened.

If bankers broke the law, you have a moral obligation to pursue legal action.

They need to be indicted, tried, convicted and sentenced, just like any kid who gets arrested for smoking dope!

We've had enough of this corrupt double standard. Let justice prevail!

[how now]

03:26 PM on 01/29/2012

“release will be "almost entirely confined to robosigning cases" -- meaning that banks will likely not see further punishment from the states for foreclosure fraud. Robosigning fraud is perhaps the easiest type of misconduct for prosecutors to target.”

Have the AG’s or anyone asked “WHY” the “robosigning fraud”? These are banks and lawyers we are talking about resorting to fabrication, forgery, impersonation, outright fraud, filing false and fraudulent documents that claim ownership of real property they don’t have and perjuring themselves in court in order to systemically foreclose on American homes.

These are sophisticated parties (banks – attorneys – and judges that look the other way) who’s business is supposed to be impeccable accuracy. This isn’t sloppiness, laziness or paperwork error by these parties. It may only be partially about avoiding recording fees (why isn’t that prosecuted?). What is the reason these parties resorted to these serious fraudulent actions to? How can they be “released” until the reason for this is “discovered”?. Why needs to be investigated.

[Renee KnafelBullock]

12:35 AM on 02/14/2012

http://ala­skabrat.ne­wsvine.com­/_news/201­2/02/01/10­284306-ala­skan-robos­tamp-victi­m-asks-jud­ge-to-hear­-all-facts­-before-de­ciding-fat­e-of-evict­ion-filed#­comments

[medic628]

11:00 AM on 01/29/2012

Barry is anyone going to JAIL????

[tippy123]

10:34 AM on 01/29/2012

Brand new, monstrous billion-dollar bank just went up in my community... Amazing how they just keep making money... They dont spend money, they make money converting loan documents into cash that investors invest their dollars into...what is left is the fat cat banks holding the bags of money...and now they want to steal your property with forged, fraudulent documents...they lost the right to any lien on your prop once the converted your note into cash. The lenders did not act in god faith, they were not lending you money...they did not tell you that you were part of any investment scheme, that they so didn't give you Loan. The banks have been paid many times over on a loan by usurping investors who actually paid for the loan investing in mortgage-backed securities...the banks never gave you a dime...the simply move money around and skin money every time they can..obviously, when they come out with all the money, home owners are losing everything, investors are losing, etc... And banks are erecting million-or billion-dollar buildings...mmmmmmmmmmmm? Borrowers fault?-

[dogbreath6823]

05:16 PM on 02/03/2012

Just say no to money!

[tippy123]

10:10 AM on 01/29/2012

You can't blanket blame borrowers... Just because you were fortunate to make profit off your own property, you see only from your own eyes. Many borrowers bought their homes under good faith while lenders didn't act accordingly; lenders' interests were to get your signed promissory note that they converted to cash and made money hand over fist. they lied when they said they were giving you a loan... You gave THEM money and now you are playing them twice on the face plus interest... See if you can get a copy of your promissory note with a stamped"pay to the order" endorsement. When you get it, you'll maybe understand the ire. Then, they cloud your title with forged, fraud assignments that are recorded in your county. They know what they are doing and know they can get away with it because they have deep pockets... you should
inform the truth to people, not spew your opinion

[Renee KnafelBullock]

08:03 AM on 01/29/2012

http://alaskabrat.newsvine.com/_news/2010/10/12/5281573-pass-that-good-ole-buck-shall-we-i-forgot-my-brain-and-glasses

Robostamping, this is my sstory in a nutshell too, thanks mr. lux for telling it like it is.

[ApprxAm]

07:59 AM on 01/29/2012

Sadly, the President is expected to save irresponsible borrowers from themselves, and the grave mistake they made in purchasing homes at prices they couldn't afford and at terms they couldn't live with or understood. Had people simply hired a lawyer, which was almost always the case before this bubble, then many would've been advised to not fall prey to this trap.

The Obama administration is forced to forgo criminal charges simply because it's part of the negotiations of remedying stupid home buyers' bad actions. He has no real choice in the matter because people simply don't want the market to decline to its' natural level.

[DawnCargile]

09:44 AM on 01/29/2012

Why would a person "need" a lawyer to purchase a home? Do you know of ANYONE needing to hire one to go into a deal from a bank thinking a "reputable bank" would defraud them? The banks went into these shady deals knowing they would be defrauding millions of people. Anyone would jump at the chance to own a home but the banks went into these deals just to hood-wink people. They are liable for their actions. As for "the market declining to it's natural level" what does that mean when millions of families have been turned out into the street? Does one stay in a boat that the manufacturer intentionally placed a hole in and drown waiting for the "water level to decline to it's natural level because they couldn't afford the cruise but was lured by a free one and guaranteed it was safe? Or do they tell the captain " let me get a shipping expert to inspect this vessel before I take this cruise'? I know of no one especially first time buyers hiring a lawyer. Why would anyone think to hire a lawyer? But I'll bet you now since everyone sees you can't trust ANYONE, now everyone will.

[ApprxAm]

12:21 PM on 01/29/2012

You're angry, but you sound like a twelve year old.

This is a major purchase in the amount of hundreds of thousands of dollars, WHY WOULDN'T YOU hire an attorney?

"Anyone would jump at the chance to own a home but the banks went into these deals just to hood-wink people." You answered your own question as to why a lawyer is necessary.

Your use of analogies is childish and besides the point. There's is no predictive, real world value in it. Just a "wish-the-world" was candy filled dreamer that these banks love to take advantage of. Mindless people like you help banks inflate and destroy markets.

[tippy123]

10:19 AM on 01/29/2012

Are you so sure that borrowers are all irresponsible? On the surface it might appear that way, but if you do your homework and study a little, you hopefully will come to understand the nature of the beast. Truly there is 1% that has its hands in all of this and you mean absolutely NOTHING to them... You are not on team nor will you ever be in their club

[ApprxAm]

12:07 PM on 01/29/2012

That's right, tippy, the 1% made them do it.

[hagenjr]

04:23 AM on 01/29/2012

U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.

Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.

Reuters reported in December that under Holder and Breuer, the Justice Department hasn’t brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.

The evidence, including records from federal and state courts and local clerks’ offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.

[des946]

03:52 AM on 01/29/2012

Why doesn't this article give any details in regard to the oppositions to this "deal" (sic. white wash)? After all of the previous "deals" that they called "settlements", it is my understanding that the goverment provided "guarantees of immunity from prosecution" to the bankers whiich certainly is an incentive for the bankers to agree to "token settlements". A critical problem in all of these matters is that it is the stockholders and the customers who windup absorbing the costs of these "settlements". The bank "employees" (the CEOs and uppermanagement) have profitted greatly throughout all of these frauds and the economic bust . . . they, the guys responsible for these frauds, are NOT being "punished" in any way and are evading responsibility for the BLATANT FRAUDS that THEY orchestrated and perpetuated. "THEY" have to be held responsible and punishable for the CRIMES that THEYcommitted or it is all somewhat meaningless. And now THEY are fighting against regualtions that would prevent such FRAUDS in the future. This ELITIST group of bankers must be crushed and replaced with people of integrity. That is the only meaningful solution.