Among the featured news stories today was the $8.5 billion settlement by ten large banks of federal charges that they had “wrongfully foreclosed” on the homes of borrowers. The settlement puts an end to the loan-by-loan foreclosure review process mandated by the OCC and the Federal Reserve arising out of allegations that the banks had "fudged" foreclosure documentation, a subject that has generated plenty of palaver by pundits and news organizations for some time.
Under the settlement, people who were wrongfully foreclosed on could receive from $1,000 up to $125,000. Failing to offer someone a loan modification would be considered a lighter offense; unfairly seizing and selling a person's home would entitle that person to the biggest payment, according to guidelines released last summer by the OCC.
The agreement covers up to 3.8 million people who were in foreclosure in 2009 and 2010. All will receive some amount of compensation. That's an average of $2,237 per homeowner, although the payouts are expected to vary widely.
About $3.3 billion would be direct payments to borrowers, regulators said. Another $5.2 billion would pay for other assistance including loan modifications.
According the OCC, the review process was not only taking too long, it was diverting money away from borrowers and into the hands of the outside review companies. As a third party service provider, I fail to see what the problem might be with third parties being enriched at the expense of the needy, but I realize that reasonable people might disagree with my narrow view of the matter.
At any rate, I'm not alone in questioning this settlement. My soul mates, consumer advocates, also berate the end of the reviews.
But advocates say the foreclosure deal allows banks to escape responsibility for damages that might have cost them much more. Regulators are settling at too low a price and possibly at the expense of the consumer, they say.
"This was supposed to be about compensating homeowners for the harm they suffered," said Diane Thompson, a lawyer with the National Consumer Law Center. The payout guidelines already allowed wronged homeowners less compensation than the actual damages to them, she said.
Diane has been strangely silent, at least as far as I can glean from a Google search, about the other side of the coin of foreclosure process abuse: borrowers abusing lenders.
Fraud investigators say they are seeing an emerging foreclosure rescue scheme in which desperate homeowners record phony documents — a felony — simply to stall losing property at public auction.
The cost of buying time can be steep: The homeowner typically pays a bundle of money for bogus forms and learning how to use them, often loses the property anyway and then faces criminal charges.In the past couple of weeks, authorities have launched prosecutions against four Stanislaus County property owners. All were warned when investigators got wind that the owners might be up to something, but each returned later or sent someone else to try to file fake papers again.
"It comes to a point where enough is enough," said Jeff Mangar, a prosecutor with the district attorney's real estate fraud unit. "How many breaks can we give these people?"
According to many of the commenters to the linked story, the answer to Jeff's question is "an infinite number." Among the more temperate of the comments is the following:
ONLY banks are allowed to use fraud and forgery. "People" are not at issue here....bank profits must be preserved at the low, low cost of....law. We are running out of lawful redress options, leaving what? The DA's office is cowardly due to being controlled by the banks. How? Take a look at their pension funds and where that money is invested....right, IN "financials". Banks, in other words. We, the people, no longer have any representation. Mr. Gulley, will you investigate foreclosure fraud and forgery by the "servicers", "lenders" and alleged Plaintiffs? No? I THOUGHT NOT. The question is why not? Oh yeah, he doesn't want to "upset the lending".....AND he must protect the banks. People? No matter. When you create enough people who "have nothing to lose"....it does not end well. History does not bode well for the richest 1% when they continue to oppress people...need an example? Our own revolutionary war! Despair + Tyranny+ no future = ?
Yeah, revolution is right around the corner, pal. Just as soon as you get through stuffing your pie hole with a Quarter Pounder, Large Fries, and a 16-oz. Cherry Coke, you and your buddies will be taking on Seal Team Six and the 101st Airborne. I'll get a ahead of the crowd and start investing in body bag manufacturers tomorrow.
Lawbreakers on both sides need to be prosecuted. Contrary to the belief of some segments of the American public, "robo-signers" on the lenders side are doing the "perp walk" and no one is shedding a tear for them. There should be no more sympathy for borrowers who break the law. At least, there shouldn't be among people who believe in the rule of law. These days, I'm beginning to wonder if that might be a minority.