Friday, February 10, 2012

Mortgage Settlement:Sky Clearing or Storm Coming?

Whether CA and NY join is anticlimactic. The quibbling over the amount of the settlement was foolish. $17B or $25B has never been the issue. Of bigger concern is the ultimate trickle-down (how Reaganesque) to the affected homeowners.

The Banks have wanted a "free" pass as to future suits and an indemnification from suits by borrowers who are now out of house and home. I know that there will be the hue and cry of "they only got what they deserved; after all they didn't make their payments - so the paperwork was faulty - they didn't pay!" (I worked at a bank where a fellow SVP called it the "Human Cry" - never knew if it was a clever pun or...). Here, there is a human cry and it's from the families who fell behind for legitimate reasons (loss of job due to federal program cutbacks), tried to get a modification but before they could react their house was gone.

I have worked with nearly 100 variations of that scenario in the past 3 years! And I have handled 50+/- of the situation where the house got to be too expensive and the homeowner stopped paying because the mtge co refused payments after 90 or 120 days delinquent.

For that first group, where there were no assignments, where MERS (Mortgage Electronic Registration System) initially foreclosed, where HAMP was ignored or where a major Lender/Servicer stated to me "We don't have to do modifications because we did not take any Federal ("TARP") money", is the group that should be compensated. With the per household figure being $1,500, that's not even 1st, last and security for an apartment, and in many places barely 1st month's rent.

The Securitization of mortgages into RMBS (Residential Mortgage Backed Securities - where thousands of mortgages were pooled together - See Posting Dated ) made this fiasco possible. In a sense, the banks have had to deal with the losing cards they got in the draw. The suit should have included the rating agencies, the Investment Banks, and all who facilitated a swindle that makes Madoff look like a low level Ponzi scheme.

I cannot point a finger at any one individual, organization, regulator, administration etc and say "You caused this world recession!!" That being the case, the Banks that allowed forged or failed documents to be used, corrupted the Civil side of the legal system by swamping Plaintiffs' lawyers with Wall Street law firms to a point where, even though all procedures were followed the hired guns won.

I ran failed S&Ls in MD and part of the Bank of New England mess in MA - I have chased and caught the thieves and cut the business/person who just got a raw deal some slack. Here we have Corporate Persons, some of which took "assets" at the request or arm twisting of the Fed, Treasury, OCC, or FDIC, being asked to pay a quarter's earnings to make up for a systemic failure. That's the price for being in the game but here everyone has lost. Stockholders, displaced CEOs and other officers, Homeowners, Administration officials etc.

The $25B is just hush money - hush to the whole bloody mess.

Author's Copyright by Richard I Isacoff, Esq, February, 2012


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