This is an Update of a post which appeared here on October 4, 2011.
Over three weeks after California's Attorney General abandoned the settlement talks between representatives of all the State Attorneys General and the five largest Mortgage Servicers in the United States, new demands and offers are reported from the talks. See Alejandro Lazo, "California is Wooed in Mortgage Settlement Talks" (Los Angeles Times Online, Friday, October 21, 2011).
The Iowa Attorney General, on behalf of all the other AG's including California, has demanded that the Mortgage Servicers agree to "refinance" up to 300,000 Homeowners. These would be Homeowners who owe more than their houses are worth. Looking at the situation on the ground in only one State, California, that is a fraction, 1/7, of the California Homeowners who are in that situation. See id.
Predictably, the Mortgage Servicers presented a counter-offer to the Iowa A.G.'s demand: for exactly 1/2, or no more than 150,000 Homeowners. My math tells me that that figure is not only 1/2 of the demand, but is also 1/4 of the number of underwater Homeowners who live in, again, one State, California. It leaves no margin (you should pardon the expression) for the numbers of underwater Homeowners everywhere else.
Fractions of real value are on their table. The amount of money involved, in the demand and in the offer alike, is a fraction of the profits the Mortgage Servicers made on these Mortgages.
These figures also represent a fraction of the profits they made investing Federal Taxpayer monies from the TARP bailout.
ALL RELEASE AND NO ACCOUNTING
If the Mortgage Servicers agree to refinance a small number of underwater Homeowners, they want a Release of all claims against them, now and in the future, based on their Mortgage misconduct in originating the Mortgage in the first place.
This goes way beyond the stated purpose of the negotiations in the first place. It also goes beyond the actual risk of legal liability faced by Mortgage Servicers to reach their roles as Mortgage Originators. See "Good Faith: Homeowners Betrayed, Banks Unreal: California Investigates, Refuses Pre-Immunity" (posted here on October 4, 2011). This fact has now been picked up by some of the popular press as well. See, e.g., Los Angeles Times, supra.
You have to wonder why the California Attorney General is being disrespected in these belated discussions. In any case, she is not alone. "New York, Delaware, Nevada, Massachusetts, Kentucky and Minnesota also have voiced unhappiness with the deal being discussed by the attorneys general because of the release from liability being offered to the banks." Id.
Time will tell how the Mortgage Servicers use "their" money in the future. Chances are it will not be good for you or for me. Or for the people who are being treated like fractions by the demands and offers reportedly passing across the table in Washington, D.C.
Please Read The Disclaimer.
P.S.
The five largest Mortgage Servicers reportedly involved in the talks ostensibly about mortgage servicing, are also Mortgage Originators:
- Bank of America;
- JPMorgan Chase;
- Wells Fargo;
- Citigroup; and
- Ally Financial.
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