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Dennis M. Kelleher Headshot

Robo-Signing Bank Settlement Is a Criminal Sell Out

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"Let me help a few victims I created by ripping them off and illegally throwing them out of their homes by false court filings that I swore were true." That's what the so-called mortgage settlement talks are really all about: fraud, perjury and crimes. That's what these banks did and that's what they are trying to buy their way out of.

The settlement discussions are the same: eliminate all or almost all liability for the bank and, most importantly, all bank officers and employees in exchange for a loan forgiveness or modification program. Think about this: the banks engaged in a years' long pattern and practice of what can only be described as fraudulent if not criminal conduct that would put anyone else in prison for years if not decades, yet banks get to buy off the cops with some money to help just a few of the victims they created.

Worst of all, there is no requirement in any of these talks that I'm aware of that require the banks to come clean, publicly release all the relevant documents and provide sufficient information on their conduct so that anyone can evaluate whether the sell-out, I mean, pay-off, oops, I mean, "settlement" is anywhere near adequate.

And they get to buy their way out of prosecution for chump-change. It's reported that the settlement is going be $25 billion, with only $5 billion in cash and $20 billion in "loan forgiveness." That's nothing. There are more than 10 million homes under water where the amount they owe on their mortgages is more than the house is valued, i.e., could be sold for. $20 billion doesn't make a dent in that: 1 million homes at $20,000 loan forgiveness is it. And, remember, $20 billion in loan forgiveness to the banks is not equal to $20 billion in cash. It is probably more like $10 billion, if that, due to accounting, prior write-downs and similar shenanigans.

There is also the risk of a tacit conspiracy here. The banks want to "put this behind them" (gee, who wouldn't) and escape from real liability (criminal and civil) and the prosecutors (many of them politicians) and the administration want to claim victory. You will hear that the settlement was the largest, one of the largest or the greatest settlement in history that will help millions or billions or trillions of people who need help -- you get the point: no hyperbole will be spared.

As if all that wasn't bad enough, the most egregious aspect of all this may be the reporting: stories repeatedly use innocuous, but grossly misleading words that obscure what really happened here. For example, so-called "robo signing" is massive, systematic, fraudulent, criminal conduct. This is where banks themselves or their contractors sign legal documents to file in court swearing under oath that the facts are true and therefore support the legal application to take someone's home away from them, i.e., foreclose.

Can you think of anything more despicable? Lying under oath to get someone thrown out of their home and onto the street. That's what robo-signing means and what it obscures every time that word is used. Then, there's always someone saying, basically, no harm, no foul because it's just a "paper work" problem and these people are all delinquent and "deserve" to be thrown out on the street. Really? Since when does saying "trust us" while we lie to you under oath make illegal conduct acceptable?

And, the fraudulent if not criminal conduct occurred throughout the boom as well as the bust (when the robo-signing and other criminal conduct occurred). For example, there are unending examples of mortgage brokers changing income, job history and other material terms in mortgage applications without the person having any knowledge of it. Another example is putting large amounts of unqualified mortgages into packages that were securitized in violation of the required representations and warranties.

Anywhere else this would be called lying, cheating and stealing and it's past time it gets called by the right name. And, everyone should insist on no settlements by anyone that includes the elimination of liability for a corporation or any of its officers or employees unless it also includes a requirement that all documents related to the conduct are all publicly disclosed on a central, searchable website. That won't happen because they the conduct of the prosecutors and politicians in the sellout, er, settlement could be evaluated along with the conduct of the banks -- see the problem here?

If they are getting any legal immunity, which is what they are demanding, then the American people deserve to at least know what laws they violated and how they did it so everyone knows what they are getting immunity for. That simply must be a price for forgiving what has been years of unconscionable fraudulent and almost certainly criminal conduct that has victimized tens of millions of American families, hollowed out neighborhood after neighborhood, and stuck millions more homeowners with underwater mortgages through no fault of their own.