If the 'settlement' involving mortgage foreclosure practices is supposed to be good news for the country, I must have missed something. To me this is economically detrimental, manifestly unfair to those who did not take on unaffordable mortgages, and a thinly disguised attempt to buy votes (with banks' money) for incumbent politicians.
The unfairness seems quite evident. Persons who were never subject to foreclosure because they never had a mortgage or met their obligations, get nothing in return for their prudence. All of the benefits go to those who failed to meet their obligations. On another level, the unfairness arises because the root cause of the settlement -- lenders' practices regarding foreclosure documentation -- had nothing to do with whether borrowers met their obligations.
The original impetus was to hold banks to account for engaging in robo-signing.
Bad as it was, however, it was a mere handmaiden to the easy credit and eager borrowing that led to financial disaster. Robo-signing marred the foreclosure process at the heart of the settlement. But by itself, it didn't cost anyone his or her home and savings.
If someone at a lender lied about their review of documents or otherwise under oath, they should be prosecuted for perjury. However, this should not obscure the age old legal standard imposing consequences on those who fail to meet their obligations. I have yet to see reported a single case where someone was evicted from their home despite having met their obligations. If any such cases exist, compensation should be provided to those impacted, but not to provide a windfall to those who simply did not pay what they owed. An apt summary of the impact from the preceding source in an editorial entitled "Help for a Lucky Few":
"The limited scope of this deal is likely to draw complaints about fairness. A small number of winners, and not necessarily the homeowners who have the greatest claims that they were victims of banks."
The economic detriment is a bit less evident but probably more significant. Credit availability is going to be reduced. Lenders have always been admonished to make credit decisions based upon the capacity of the borrower to repay on schedule, and value of proposed collateral, if any. Now, we have introduced an element of uncertainty as to repayment by making the obligation subject to review of the lender's practice regarding enforcement. Even where a lender makes a good decision in traditional terms and should not suffer a loss, they are subject to punishment if their collection practices are deemed inappropriate. By definition, this makes repayment of a loan portfolio less likely and requires an increase in underwriting standards and pricing. This is bad for our economy at this time in that it reduces aggregate demand at a time when we still have greatly underutilized capacity, especially labor.
As we have seen, it is hard enough for lenders to make sound credit decisions. When we tell them that even when they do so, they may still suffer losses because of how they run their businesses on unrelated fronts, they have every incentive to avoid consumer lending and deploy funds elsewhere.
It is also bad for the economy in a more subtle manner in that creditworthy borrowers and even cash buyers of real estate are likely to refrain from such transactions because of the random or lottery element which has been introduced. When one behaves in a prudent manner but sees special favors being dispensed to those who failed to do so, one may well lose confidence in the entire process and simply 'stand pat' rather than having the confidence to take action. It is basic economics that a viable legal system which enforces contracts is fundamental for economic development. When one makes repayment of loans subject to examination of the lender's conduct, they greatly deviate from this principle.
If this were just typical election year populist posturing by the President, state AG's and the like, it would be easy enough to dismiss it as such. However, this 'settlement' is likely to have lasting, material economic impact at a time when we can least afford it. I suggest that those who value a strong economy, make their feelings known at the polls this November in all races involving officials who brought about this solution, starting with President Obama and including pertinent state AG's. Private actors have done their share to mess up our economy. Let's make sure government doesn't compound the problems.
I may disagree with the author a little on how to fix things, but I'm in complete agreement when he says
"When one behaves in a prudent manner but sees special favors being dispensed to those who failed to do so, one may well lose confidence in the entire process and simply 'stand pat' rather than having the confidence to take action"
I despise such thinly veiled propaganda in our media -- and the corruption and betrayal of public trust that it represents. Clearly you are a "law professor" who believes that property law boil down to "whatever the bank says". And if you're unaware of fraudulent foreclosures and abuse of the public by US banks -- clearly it's because you refuse to look.
The reality of this settlement is that bank executives -- who knowingly and intentionally setup organization and processes to commit hundreds of thousands of FELONIES -- will escape the punishment they well earned.
Keep in mind, our home equity is also in the tank, just like the ones who have been living mortgage free in the same homes for 2 years ( the banks tell them the only way they get help is if they stop paying their mortgage, but they also get to stay in the house until the bank gets time to file, sometimes 1 1/2 to 2 years or more).
My gut feeling is that by living a pie in the sky, dreamland of morals and what is right and wrong we are getting ready to completely get screwed over. Already our Freddie Mac backed mortgage makes us ineligible for any kind of help.
if this part of the process was investigated it would move up the food chain to other more interesting areas which no one wants the AG's messing with
so why should this all be ignored?
because i guess you believe in fraud as a business tool presumably? and dont believe in due process i suppose?
why not just do away with property law that has been in place for 100's of years and make it up as you go along?
the properties - coast to coast - for those with or without a mortgage - have been devalued by bank fraud - end to end - they deserve a RICO penalty by the banks for treble damages since the fraud was both "organized" and affected those outside of the contract - that is what "systemic" wrong doing - does to a market
wake up ACE you have no idea what you are dealing with
There is not a sane banker, commercial local lender, who would make these loans.
BoA / Chase / WF / GS are all commercial banks with access to the fed and servicers or own servicers and mortgage brokers and banking orgs
end to end they committed fraud - they originated mortgage apps that were cut and paste and phony appraisals / they misrepresented content of the trusts (didnt exist ) / they created phony docs for the rating agencies who declared junk AAA at their bidding / they committed fraud on the CDS when put in place on synthetic CDO's / they had robo signers and phony docs certified in court as true and correct - / MERS completely fraudulent - no docs or notes in trust / cheated the counties out of their fees /
other than that - your correct - they did pay cash for the paperclips!
many ahve already paid billions in settlements
We could afford our mortgage just fine when we moved into our house, and did for several years. Then I, like millions of others, fell victim to the great recession. Not knowing how long it would last, we tried to remain optimistic and kept paying our mortgage for as long as we could. We met all the requirements of the Making Home Affordable program, but were told that we couldn't receive a loan modification because the bank couldn't base it on unemployment income, only paying work. We were evicted, and there's no way to describe the suffering we went through throughout the process, including the subsequent bankruptcy and divorce. I, for one, wish the settlement were much larger.
Homeowners should suffer their losses. Unwary commercial bond buyers should suffer their losses. Unfortunately, the ones to suffer the worst losses were pension and retirement funds....and taxpayers.
Reguardless of losses, those that participated in knowingly fleecing the public---the banks, appraisers, and bond ratings corporations......should all be held to account for their criminal actions---and money alone should not be used to cover for criminal actions.
Homeowners/ home-buyers were responsible for their own ignorance of believing they would somehow increase their earnings two-fold to continue making payments once the zero or extremely low initial interest rates were bumped up. Other homeowners were equally as responsible for actuallyl reading mtge contracts that contained clauses for variable rates to exceed their ability for repayment. And bond/mortguage buyers should have been much more prudent in researching the viability of the packages they were buying and thus were also responsible for investing others money into such poor investments.
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