Newspaper columnists are pointing out the failures of the Obama Administration since 2007-2008 to provide relief to Homeowners in Foreclosure. Rightfully so. E.g., Beth Kassab, "Like Many Homeowners, Hope Adrift" p. A3, col. 1 (Orlando Sentinel Tuesday, July 24, 2012); Gretchen Morgenson, "Fair Game / Into the Bailout Buzz Saw" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, July 22, 2012).
However, it is easy to point a finger at Government miscues and inaction. Perhaps too easy. Let's take a look at a contract, a settlement agreement, made by the Banks in exchange for immunity from Government criminal and civil prosecution over their Mortgage lending practices.
The Banks made a deal to pay $2.5 Billion to the States which would include loan modifications. (Their deal included other money and other provisions as well. They announced the deal weeks before they posted their agreement online. See the posts here and links in them on January 31, 2012 and on February 2, 2012.) The deal was supposed to include debt forgiveness to be included in that amount. There is no deal, it appears, and there is no $2.5 Billion for loan modifications.
By way of background, in January of 2012 a global settlement agreement was announced. The agreement involved 5 major Mortgage Servicers but, since all 5 happened to also be Banks which lent money to Homeowners, the deal was expanded to include their practices as Banks and not just as Mortgage Servicers. Of course, once the deal was expanded to address the questionable practices of Banks lending Mortgage money to Homeowners, the Bank practices were arguably expanded to the Mortgage practices of all Banks.
On the other side of the deal were the State and District of Columbia Attorneys General. They were reportedly holding out for far more money and concessions if they were going to expand their deal to confer immunity on Banks for anything more than the so-called "robo-signing" practices which triggered their joint investigation in the first place. Under pressure from the Obama Administration through Sean Donovan, Secretary of Housing and Urban Development, they caved and took a deal that included the fictional 'loan modifications' and '$2.5 Billion' in question. Furthermore, they gave credit to the Banks for all the money spent by the Banks toward that $2.5 Billion figure that not even the Banks' lawyers probably thought they would get in 2.5 billion years. Pretty soon, there was little or nothing left of the $2.5 Billion and the loan modifications that were supposedly part of the deal.
If there ever were any enforceable provisions with respect to loan modifications included in that deal -- and that is a big "if" -- then they were not only negotiated in Bad Faith but they are seemingly being performed in Bad Faith. It does not help that many observers have been aware since the deal was announced in January, 2012 that this was coming. Homeowners asking for loan modifications under the deal are finding that out now, in July, 2012.
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