National Mortgage Settlement Documents Lack Detail On Banks' Alleged Misdeeds

* Previously announced pact filed in federal court

* Banks commit to $25 bln, much as mortgage relief

* Ally Financial negotiated reduced penalty - sources

* Federal officials tout strong enforcement mechanism

By Aruna Viswanatha

WASHINGTON, March 12 (Reuters) - A previously announced $25 billion mortgage settlement will be closely policed to make sure banks follow through on promises to offer wide housing relief to Americans, federal officials said as they filed the long-awaited pact in court on Monday.

The deal, announced last month and filed in federal court in Washington, D.C., requires five major U.S. banks to help struggling borrowers to settle accusations they pursued faulty foreclosures and misled borrowers who sought loan modifications.

The banks did not admit to the allegations laid out in the complaint, but the government said its intention was to "remediate harms allegedly resulting from the alleged unlawful conduct."

While the Obama administration's previous efforts to jumpstart a housing recovery have not lived up to their initial promises, officials believe this time may be different.

The settlement includes an independent monitor who will ensure banks comply with the new mortgage payment processing standards through a "very specific" sampling process, test questions, and error thresholds, an Obama administration official said in a briefing with reporters on Monday.

The results will be publicly reported, said the official, who declined to be named.

The settlement documents - filed as one lawsuit and five separate consent judgments with Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Ally Financial - provide little detail about the misdeeds government investigations uncovered.

But the documents devote hundreds of pages to detailing how different types of relief will count toward the banks meeting their obligations under the settlement.

Banks are required to provide 30 percent of the relief in the form of cutting mortgage debt for borrowers who owe more than their homes are worth, but the banks receive different amounts of credit for different scenarios.

Banks only get credit for reducing debt for homes where the borrower owes up to 175 percent of the current value, for example.

They get full credit if they own the loan, but 45 cents of credit for every dollar of reduction on a loan they service for a separate investor.

Banks are expected to bring a borrower's monthly payments to within 31 percent of a borrower's income, and establish a new loan value that is no greater than 120 percent of the value of the home.

Some banks negotiated separate requirements.

Ally Financial, for example, negotiated a steep discount on the fine part of its settlement, based on an inability to pay it, according to people familiar with the matter.

It was expected to pay some $250 million, but the Justice Department cut it to around $110 million, these people said.

In exchange, it committed to solicit all borrowers in its own loan portfolios and to offer to cut principal for delinquent borrowers down to 105 percent of the home's value. It also offered to refinance underwater borrowers who are current on their payments.

A spokeswoman for Ally did not immediately respond to a request for a comment.

Bank of America, which had the largest exposure to the settlement due to its 2008 purchase of the troubled subprime lender Countrywide Financial, also agreed to offer deeper cuts for its underwater borrowers.

The bank has agreed to contact more than 200,000 borrowers and will potentially cut their debt to the current value of the home.

In exchange, Bank of America can avoid up to $850 million in payments.

Comments

[OldTulsan]

11:02 AM on 03/13/2012

Time for a stealth $ 7 trillion bailout?...

http://www.huffingtonpost.com/l-randall-wray/why-mortgagebacked-securi_b_802600.html
L. Randall Wray: Why Mortgage-Backed Securities Aren't (Backed by Securities): How MERS Toasted the Banks

"In a series of pieces I have argued that MERS, a creation of the mortgage banking industry, has effectively destroyed the institution of private property in America. Ironically, MERS was created to facilitate quick and easy and cheap securitization of mortgages -- what are called mortgage-backed securities. In fact, what it did was to eliminate any backing of the securities by mortgages. Of the total securitized asset universe, something like $7 trillion are (supposedly) backed by residential mortgages. However, MERS helped to delink the securities from the mortgages. At best, they are unsecured debt -- there is no property backing the securities. What this means is that foreclosure is not permitted. As I have said before, it is likely that most or even all foreclosures occurring in the US are illegal seizures of property -- home thefts. We are talking about 100,000 completed home thefts per month, with another 250,000 new foreclosures started to steal homes every month. Projections are that 13 million homes will have been "foreclosed" (read: stolen) by 2012.

Worse, from the perspective of the banks, they've got to take back all the fraudulent MBSs, most of which are toxic..."

That will NEVER happen.

[sfsoma]

03:18 PM on 03/12/2012

Shame on you, Attorney General Holder and President Obama.

[cats530]

02:20 PM on 03/12/2012

"Once in a while, you can discern a linchpin lie on which other important lies hinge. We can point to quite a few in America: the notion of a permanent war on terror, which somehow justifies vitiating not just the Constitution, but even the Magna Carta, or the idea of an imperial executive branch. Now the apparently-to-be-filed-in-court-today Federal/state attorneys general mortgage settlement is less consequential than matters of life and limb. But it still show the lengths to which the officialdom is willing to go to vitiate the law in order to get its way."

http://www.nakedcapitalism.com/2012/03/the-legal-lie-at-the-heart-of-the-8-5-billion-bank-of-america-and-federalstate-mortgage-settlements.html

[cats530]

02:09 PM on 03/12/2012

"Ally Financial, for example, negotiated a steep discount on the fine part of its settlement, based on an inability to pay it, according to people familiar with the matter."

What? So if I go out and commit a crime and then can't afford the restitution, I get off scot-free? No, I didn't think so. Only the banksters get off scot-free. Since Ally is a "person too" according to SCOTUS, it should be appropriately punished and JAILED.

[fabuloush2s]

05:12 PM on 03/12/2012

Very alarming information of lack of. Not sure what to make of this obvious deceiftful reporting of the full and complete details in the settlement official and formal filing. As complicated as it can be, is as complicated it is. So much for any majors being held accountable any longer, it appears even the SCOTUS, has stamped on the banksters accounts "We've got your backs" I never thought this country would come this far allowing states Attorneys General to determine what their residents should have and not have according to the settlement terms. The normal amount appears to be 2,000 per victim. This is not even enough to hire legal advice in this country!