They got off easy, again.
They are the big banks, which recently agreed to pay $25 billion to the victims of foreclosure abuse and to help current homeowners who are "underwater" on their mortgages.
Yes, $25 billion might sound quite impressive, and it certainly impressed U.S. Attorney General Eric Holder and his Florida equivalent, Pam Bondi, as soon as they announced the settlement. In addition to principal relief and refinancing opportunities, Holder claimed the agreement "requires substantial changes in how servicers do business, which will ensure that the abuses of the past are not repeated."
But here in Miami, the virtual "ground zero" of the housing, mortgage, and foreclosure crisis, we're wary. Maybe we witnessed the "boom" too closely.
We saw way too many homes being sold for more than what they were worth and saw way too many banks throwing out questionable loans to families that were just trying to achieve the American Dream. As the market went bust, our friends and neighbors stayed on the hook for those questionable loans. The financial institutions, despite their grey-suited façade, came up with some creative, exotic mortgage products to satisfy desperate -- and even the most dubious -- potential borrowers who longed for a loan. It could have been precisely at this point that the banks discovered the joy and convenience of "robo-signing," as each of the new loans was approved, bundled, and then quickly sold to investors at great profit. The banks were like bartenders at a South Beach nightclub, dispensing $20 cocktails with titillating names. "Sex On The Beach? No thanks, but can I get a 30-year Interest-Only ARM?"
Perhaps it was only then that we experienced the "bust" too hard here. The hangover of those balloon-rates and other bizarre mortgage concoctions kicked in, and we couldn't make the payments. If we lost our jobs or needed to move to find a new opportunity, we couldn't. Nobody would buy our homes for nearly the price we paid, and we didn't have the means to pay off the difference. We became trapped.
At night, the Miami skyline didn't light up. In fact, it looked dim from all the vacant homes with no lights on. During the day, the tall condo cranes, symbols of a "growing Miami," stopped mid-construction. Even in the richest zip codes, someone knew a family in foreclosure. Still today, almost half of all Florida homeowners owe more than their home is worth.
In Miami, we are acclimated to the heat, but the housing bubble burned us badly. So, when some people say "settlement," it's only natural for us to think: "suspicious." And looking at the recent settlement between the U.S. Attorney General and 49 states against five of the nation's largest mortgage lenders (Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial), you can see why we aren't jumping with excitement. The settlement, praised by President Obama for speeding "relief to the hardest-hit homeowners" and ending "some of the most abusive practices of the mortgage industry," does not go far enough. The president was correct to depict the banks' behavior in both the boom and bust as an expression of "an era of recklessness that has left so much damage in its wake.''
However, the settlement will only help a small percentage of the millions of Americans who still are deeply underwater on their mortgages. Victims of fraudulent foreclosure robo-signings look to receive only about $2,000 in compensation. That amount is paltry compared to the amount of pain, desperation, and despair of millions of Americans, and so many Floridians, dangling precariously at the unlikely mercy of banks and their improper, illegal foreclosure processes. $2,000 wouldn't even come close to covering moving expenses or the "first, last and security deposits" for folks forced to downsize from their own homes to rentals.
Another highly troubling aspect of the settlement is the potential spike in new foreclosures predicted by various real estate and financial industry analysts. The banks were delaying foreclosing on great numbers of homes until details of the settlement were finalized. They may not power up the illegal "robo-signing" machines again, but they are now clear to fire out the foreclose notices. This is the buzz I hear from real estate professionals in South Florida these days. While it certainly has a big impact on their day-to-day business, a bigger question is: How will these trends affect the momentum of the overall economy? The tentative recovery has yet to reach a large portion of the individuals hit first and hardest by the recession; these residents, in particular, are still struggling mightily -- and yet another downturn could be exponentially catastrophic for many of these families.
The settlement frees the banks from any potential civil charges from the 49 states, though individuals can try to sue (in the chance you had the time and resources), and federal and state officials may wish to pursue criminal charges against the banks. But don't bet on the latter, unless you're interested in "wrist slaps." Snug relationships between so many politicians and big businesses, especially the banks, are telling.
They always get off easy.
At 1Miami, we are trying to change that. Through rallies and marches on the downtown financial district and protests against elected officials, most recently Sen. Marco Rubio and Rep. Allen West, we are calling out the politicians most cozy with powerful corporate giants. These companies successfully lobby for tax loopholes and get all the breaks -- financial, legal, and otherwise. Without significant changes to the system and serious efforts to hold accountable those politicians who place profit before people, it always will be easy for them and hard for us. Now is the time to truly foreclose on this fixed scheme and find a fair, ongoing settlement for all Americans.
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