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Mortgage Foreclosure Fraud Settlement Is Payoff TO Bank of America, Wells Fargo & Chase

While the Obama’a administration touted the news of the largest class-action payoff since the $350 billion tobacco settlement, I say the payoffs by banks for their mortgage foreclosure fraud are the largest travesty of justice in history. The corks are popping and so are banker’s buttons over the feast they will celebrate tonight. See why further down:

First, a summary of what the fraud by banks was, for any who haven’t followed it: The fraud centers largely around “robo-signing” where foreclosures were coming in so fast that bank employees essentially just rubber-stamped every one without reading it:

[Former BofA employee Tam Doan] didn’t have time to actually read the paperwork he was signing, he said, and in some cases, he didn’t even know what documents he was putting his pen to. “I had no idea what I was signing,” said Doan. “We had no knowledge of whether the foreclosure could proceed or couldn’t, but regardless, we signed the documents to get these foreclosures out of the way,” he said, noting that he assumed another department had checked that the review was done. (Think Progress)

Of course these pitiful employees would not have been so overburdened and would never have needed to engage in wanton practices in the first place if the banks involved had not been so sloppy in their original credit terms under the relaxed regulations that they pushed for and got on Capital Hill. Because they slobbered on the run to catch as many bad loans as they could, they, then, had to sweat on the run to process all the defaults.

The extent of mortgage foreclosure fraud

David Knutson, a credit analyst, says the collapse of the housing bubble that created the Great Recession is “a colossal failure of basic banking. It’s surprised everyone in terms of persistence and longevity and I think it will continue to surprise. (Think Progress)

I think more people will be surprised by the extent of criminal activity that led up to all these foreclosures, as well as the criminal actions involved in the actual foreclosure process. Last year, Associated Press reported,

Counties across the United States are discovering that illegal or questionable mortgage paperwork is far more widespread than thought, tainting the deeds of tens of thousands of homes dating to the late 1990s.

 The cover-up alone was monumental, much less the actual number of crimes involved:

According to a New York Times report over the weekend, government backed mortgage giant Fannie Mae also knew about the shoddy foreclosure practices as far back as 2003, but did nothing. The more facts that come out regarding the extent of foreclosure fraud, the more it seems that further investigations and potential court action is warranted. (Think Progress)

It is for reasons like this that some state attorneys general hesitated in settling this mortgage foreclosure fraud case. The terms of the settlement limit future investigations into the extent of criminal behavior in the banks over how mortgage foreclosures were handled. It is in that sense, that I think this is a huge payoff TO the banks. By agreeing to use their company moneys to settle these fraud cases, executives in the banks have managed to somewhat insulate themselves against criminal charges by closing the door on deeper internal investigations of the banks.

In general, the kinds of fraud involved included finding signatures of one person’s name signed by many different hands, improper notarization (by notaries who never actually saw the person sign the documents), and thousands upon thousands of titles improperly filed by banks so that homeowners could not even prove they owned their homes in order to defend themselves.

One county reported that 75% of the titles filed by banks with the county since 2006 had questionable signatures. Elsewhere a single city — Salem, Massachusetts — reported that it had found over 25,000 titles with questionable signatures, going back as far as 1998. In Illinois, one county pulled a random sample of 60 titles filed since 2007 and found that 100% of them were signed by known robo-signers.

So, it was not just the rush of foreclosures that led to this problem but the gold-rush of home loans during the expansion of the housing bubble and the sloppiness of rapacious banks under lax regulation.

Damages paid in the mortgage foreclosure fraud settlement

In the settlement, the banks agree to pay 26 billion dollars in exchange for dropping the suit and agreeing not to pursue certain other matters, but only a 17 billion of that payment goes to writing down mortgages that are in default. Five billion of it goes to paying state’s attorneys general. Heck, the bankers will spend that much in parties celebrating this settlement.

Mortgage foreclosure settlement payoff WAY too small

The payoff amount only covers 10% of the nation’s homes that are underwater and then only to a small degree. The negative equity in all the homes that are underwater in the U.S. is about $700 billion. So, this settlement is not going to do much for the housing market, but the real question of justice I’m concerned about is whether or not it even rights the banks’ wrongs:

The settlement even gives the banks more than twelve months to pay out the money while giving incentives for faster payment. Incentives? Why should evildoers get incentives to correct their wrongful actions? Everything throughout this Great Recession has been so structured around bailing out banks that even their settlements for known illegal activity are built around making sure the payoffs don’t hurt the banks, rather than giving homeowners who were harmed immediate relief. Pitty the poor fat bankers who have brought such catastrophe upon the entire world!

The Obama administration says this deal is about “righting the wrongs that led to the housing market collapse.”

Really? How much wrong does it right? The average amount that will be given by the banks to those who actually lost their homes through these wrongful foreclosures is $2,000! Wow! What’s that? One month’s mortgage payment in exchange for the loss of your home by a foreclosure that was not even legally carried out? (Some people were not even in arrears in their payments; see below.) That won’t even pay for the person’s moving expenses when they packed the family out the door and moved back to grandma’s! And that particular money, which is all for damages done, is only required to be distributed over the course of three years! Fat lot of good that does while you’re camping in the park illegally because you no longer have a home! $2,000!!! How many dead-beat dads these days get to wait three years to start paying what they owe?

“It is good for the banks to get this behind them, said Jason Goldberg, an analyst with Barclays.

I should say so! They’re probably throwing a party over this golden parachute! For each damaged party that they have to pay $2,000 to in the next three years, they’ll spend that much on caviar at tonight’s celebration over their victory!

As for those who are not already out of their homes due to illegal foreclosure processes, the few who receive anything at all will receive an average of $20,000 in write-downs on their mortgage. Whoopee! While the caviar is sliding down the bankers’ throats, the homeowners who are still in their homes can have a block party and roast Little Smokies over the fire made from their foreclosure notices. (Many of which will be reposted in a few months anyway.)

“I just don’t think it’s going to be a life-changing event for borrowers,” said Gus Altuzarra, whose company, the Vertical Capital Markets Group, buys loans from banks at a discount. (New York Times)

It’s not even going to be a mortgage-changing event! This foreclosure fraud settlement is so puny compared to the scope of the problem, or even the scope of the actual crimes, that it should be considered Edsel of justice, a one-legged horse in the race to fairness, a gnat landing on an aircraft carrier.

The bad signatures on titles alone made it impossible for hundreds of thousands of  homeowners to sell their homes in short sales in order to save themselves from default back when market prices were higher. It made it impossible for some buyers to get financing or title insurance because the title was in doubt. How much has that cost people compared to the $2,000 many will receive? Never have so many been slapped so hard by the gauntlet of injustice.

Why are those who are still in their homes receiving more than those who were illegally foreclosed upon who suffered great loss and great emotional duress? I think the answer is simple: From the Obama administrations side, it is more concerned about creating future bailouts than with justice over the losses many have wrongfully endured; from the banks’ side, they were willing to cough up more money in the agreement for those still in their homes because the goal of that money is to avoid foreclosure. In other words, they know their write-offs or legal losses in the event they did move forward with foreclosures on those same homes would have amounted to far more than the settlement. Moreover, if the aid doesn’t work, they can still foreclose when those owners default again.

But here is the worst part of the settlement: It promises the bankers that the attorneys general in 49 states will take no more action against them for matters of foreclosure fraud and will do no more investigation into the matter. It gives them immunity over one huge part of their wrongdoings where there was a clear and obvious paper trail of proof. While investigators can still investigate other wrongdoings, such as the packaging of fraudulent securities, this is the end of all robo-signing criminal investigations.

Of course, individuals can pursue the banks for their own losses in non-criminal suits, but they will not have any help from their states or from the United States. The U.S. Attorney General and all state A.G’s, except Oklahoma’s, have signed off on it.

Now lets take a glance at the wrongdoing of a few of the banks named in the suit.

Bank of America foreclosure fraud

Banks in the U.S. have already lost a total of $72 billion in write-offs due to foreclosures. Bank of America (BofA) had the largest number of mortgages taken into foreclosure of any bank in the U.S.  Its losses prior to the settlement, at $41.8 billion, already amounted to more than half of the all money lost by U.S. banks due to foreclosures resulting from the housing bubble collapse.

BofA actually did its own internal investigation into the “robo-signing” of foreclosure documents by its employees when charges were made back in 2010 and re-initiated the foreclosure process after a few days of shutting it down for investigation. BofA claimed at the time that they had found no problems with how employees were signing off on foreclosures. Apparently, they didn’t have their glasses on. Or maybe they just meant they found now problem with it in the sense that they wholeheartedly support forged signatures.

Bank of America would not have been into the housing bubble collapse so deeply had its CEO, Ken Lewis, not rushed through a decision to acquire Countrywide Home Loans in a fire sale — an absurdly rash decision made over the course of a weekend, which, naturally, I brashly criticized back when it happened. I suspect he contemplated the stupidest decision he would make in his career while sipping martinis on his floating pool chair stitched together from waxed Benjamin Franklins. Of course, it is for making such decisions with such panache that one is paid the big bucks.

It is a fact of this case that BofA foreclosed via robo-signing on numerous homeowners who had NEVER missed a payment because no one along the line at BofA had read the foreclosure documents before signing. How do you manage to do that by accident? BofA claimed it was buried in the paperwork from its acquisition of Countrywide. Well, of course it was. When the CEO decides over the course of a single weekend to buy a massive bank that is in bankruptcy, it is a foregone conclusion that the CEO has done NONE of his due diligence. Bank of America bought Countrywide, then spent months trying to sort out its filing system. Naturally, it had no idea what problems it was acquiring because it had been so stupid as to not look before buying.

Claiming it was not at fault because it didn’t understand the loan documents it acquired from Countrywide is like using one’s own greed to excuse his wrongdoing or negligence: “I’m not at fault, Your Honor. This only happened because my insatiable greed caused me to buy something I didn’t understand.” But, again, it is being able to make those kinds of arguments with a straight face that explains why people like Lewis get the big bucks.

J.P. Morgan Chase foreclosure fraud

J.P. Morgan certainly isn’t chaste, but they will chase you out of your home like a greyhound on a rabbit. Your home life is nothing but a number in their computer’s memory bank that can be removed with one tap of “delete.” J.P. Morgan Chase found that it had flawed foreclosure paperwork throughout about half of the United States. It was one of the first banks to freeze all foreclosures. Again, one of the problems was “robo-signing,” apparently an industry-wide practice for some unknown reason.

Spotlighted as one of the more egregious cases of mortgage and foreclosure fraud in recent memory, JPMorgan Chase was recently found to have presented false assignments of mortgages in court in order to foreclose on properties. (PRWeb)

According to this story, Chase actually had its attorney forge documents specifically for presentation in court in order to try to prove the mortgages of a number of properties had been assigned to it when they had not. Now, that’s brash!

 Court found “clear and convincing evidence” that Chase had engaged in a “knowing deception.” (PRWeb)

Wells Fargo foreclosure fraud

Wells Fargo, too, engaged in nearly endless cases of robo-signing. You have to wonder how so many major banks all engaged in the same sloppy practice at the same time. Was it because the regulations they all operate under relaxed at that time, or do CEOs of major banks meet in on the golf course to discuss the new techniques they’ve discovered for raping their mortgagees, then slap each other on the back and dare the other to follow? Some of it, of course, is because they use the same mortgage or foreclosure processing agencies, but not all of it by any means. Some of the banks involved knowing created their own signature mills to accelerate foreclosures.

Maybe this is what Wells Fargo means when it says on its own website,

We’ll do our best to help you understand the foreclosure process and MOVE forward.

Yes, they will move you out of your home as expediently as possible via robo-signatures, assuring their swift dispatch of you from your home if you don’t understand the foreclosure process in order to know they are cheating. You better hang on to your wagon when these coachmen are driving. They’re the four horsemen of the mortgage apocalypse.

Wells Fargo saw its sloppiness on title transfers come back and hit it in the butt when the New York State Supreme court ruled that Wells Fargo could not foreclose on homes if the title was in dispute because it could not prove a clear chain of title giving it the right to foreclose. In other words, if you cannot prove who is the legal owner of the house because the title is in question, how can you foreclose on the owner? They get the award for ability to twist like a pretzel and bite themselves from behind.

The above are mere glints of the numerous fraudulent actions these banks and others were involved in.

Conclusions regarding this mortgage foreclosure fraud settlement

There’s lots to be mad about in this deal! If I were a homeowner who didn’t have time to do a short sale and save my credit because my bank rushed into an illegal foreclosure procedure, I’d think my government had just handed me a squirt gun to save myself from Atilla and the Huns. I’d feel like I was dying of thirst and someone just gave me a cracker.

The advent of robo-signing in the late 90’s also aligns with time period in which mortgages were being bundled into the derivative securities that were sold on Wall Street, which got us into the Great Recession. This is all core fraudulent activity that brought the Great Recession upon the entire world. And that is why these payouts are WAY too small. We can blame the downfall of the entire global economy largely upon the fraudulent activity at the center of this class-action suit.

No agreement should ever have offered immunity to further investigation into the foreclosure fraud, given that the scale of all of the crimes involved brought worldwide catastrophe. The shear scale and audacity of the wrongdoing is more than worth the cost of relentlessly pursuing these banks for every penny of damages they caused to every individual. Never has there been a class-action case so worthy of more aggressive pursuit.

President Obama excused the paltry payoff by saying,

No compensation, no amount of money, no measure of justice is enough to make it right for a family who’s had their piece of the American Dream wrongly taken from them. (BET)

No kidding! Certainly the amount his administration got for these victims isn’t!

The banks were so haughty about their foreclosure activities that they knowingly continued the practice of robo-signing even while all of this was being tried in court. They might have, in the very least, SUSPENDED the activity until the court reached a decision on what had happened so far. Their continuance of the practice while the matter was in court does not indicate the slightest remorse or sensibility to right and wrong. So great is their hubris and greed, they seem to feel they stand above it all:

The lenders promised last fall to stop the [robo-signing] practice. But The Associated Press reported in July that robo-signing has continued. Officials in at least four states say mortgage documents with suspect signatures have been filed with counties in recent months. (Yahoo / Associated Press)

Most of us care enough about integrity to know without a second thought that having one person sign several different signatures or having many people sign one signature is fraudulent unless authorized to sign on behalf of others. In which case, we sign in our own names, and sign that we have the right to sign for the other. In this sloppy rush of documents no one was looking over the thousands upon thousands of mortgages, titles, and foreclosures that they were signing off on … all in the rush to make more money by institutions that were already bloated with wealth.

To all those who will in three years time get $2,000 for having their home illegally confiscated last year, raise a can of caviar in one hand and a glass of champaign in the other to celebrate their newfound riches. That or bring them a Little Smokie to eat and say, “I’m sorry our government cares about the needs of bankers more than your loss,” for the bankers will be firing up cigars while ex-homeowners fire up Little Smokies over a trash barrel.



Other resource articles on robo-signing and mortgage foreclosure fraud

Robo-signed mortgage docs date back to late 1990s

Allegations of Fraud Continue to Surround JP Morgan Chase’s Foreclosure Processes

Settlement Worth $26 Billion Reached for Homeowners