Mortgage Crisis: No Political Solution to a Math Problem

Rachel Keyser and her daughter, Sydney, stand
in front of their house in Deerfield, New Hampshire.
(photo: Chris Arnold/NPR)

Dylan Ratigan and Eliot Spitzer, Reader Supported News

12 February 12

his week officials from the Obama administration, the banking regulators, and state Attorney Generals announced a settlement of claims stemming from the financial crisis. The nominal amount put forward as the cost of the settlement is $26 billion, and in return the banks will be released from civil claims on origination of mortgages and the falsification of documents in the foreclosure process, or "robosigning". This caps off a month of political noise on the housing situation which started at the State of the Union, when the president announced a task force on financial fraud headed by officials from his administration as well as New York Attorney General Eric Schneiderman.

An investigation, and a multi-billion dollar settlement. That sounds like a lot, until you put it into perspective. Here are the numbers. Roughly half of homeowners with mortgages are underwater, which means they owe more than they own, to the tune of $1 trillion or so. And housing values are still declining so far in this "recovery", throwing more homes underwater. In terms of an investigation, the Savings and Loan crisis used roughly 1000 FBI investigators to uncover fraud - this task force taking on a crisis forty times more severe will employ 10 FBI agents.

There's a reason this is so inadequate to the problem at hand.   READ MORE

Why Do Dangerous Financial Criminals Roam Free?

 Prosecutors like Eric Schneiderman need cops on the beat to put financial crooks behind bars. But thanks to Bush, these cops are missing in action.

February 4, 2012

American Public Media's "Marketplace" had a recent segment focused on why it has taken so long to bring criminal prosecutions related to the financial crisis. Reporters observed that at the beginning of the crisis, the Obama administration wanted to calm the financial industry rather than impose accountability. They speculated, along with Tea Party and Occupy Wall Street participants, many of whom have been calling for prosecutions, that Obama’s creation of a new group to prosecute mortgage fraud led by New York Attorney General Eric T. Schneiderman was likely to be politically motivated. And they indicated that financial crimes are complex and prosecutors need time to develop their cases.

But here's what they didn't say: A major reason the prosecutions don’t exist is that President George W. Bush took the cops off the beat.

Think about street crime. Imagine, for example, a protection racket in which gangs extort payment from fearful shopkeepers. Prosecutors rarely initiate criminal prosecutions; indeed, they may not even know that the crime is occurring. The police pound the beats that keep them aware of the increase in crime, respond to complaints, investigate, determine that a crime may have occurred that warrants attention, create a file and send it to the prosecutor’s office. In routine cases, the prosecution proceeds on the basis of the police report alone. In more complex cases, the prosecutor may supplement the police investigation. But prosecutors rarely initiate cases. Even when a task force is appointed to target crime in a particular sector, it typically involves prosecutors working with the police. The prosecutors simply don’t have the skills or the manpower to detect crime, conduct investigations and make the record necessary to prosecute.   READ MORE

A Victory for the Public on Foreclosures?

A foreclosed home in Miami, Florida.

POSTED: January 28, 12:07 PM ET 

So there was big news yesterday on the foreclosure settlement front. We still have to wait and see what the final deal looks like, but there are reports out that the long-awaited settlement is a far, far better deal for the public than expected. If these reports are true, it looks like New York Attorney General Eric Schneiderman and California AG Kamala Harris have scored an enormous victory in narrowing the scope of the settlement to the point where it really only covers robosigning abuses.

According to reports (like this one in the Huffington Post), the deal will not include:

1. Criminal liability.
2. Tax liability
3. Fair lending, fair housing, or any other civil rights claim.
4. Federal Housing Finance Agency or the GSEs [Fannie Mae and Freddie Mac]
5. CFPB claims for the period after they came into existence in July 2011
6. SEC claims
7. National Credit Union Association Claims
8. FDIC claims
9. Federal Reserve Board claims
10. MERS claims

If that is true, and all of those things are out of the deal, and the banks are still exposed to liability not only for all of those things, but also for the broad range of offenses related to securitization, then $25 billion, dare I say it, might not even be a completely sucky number. It's far less than the real liability, but it's a much bigger sum than I ever thought would be negotiated just for robosigning.

READ MORE

New York AG Sues 3 Major Banks and MERS, Calls Mass Foreclosure Filings a Fraud on Court

Posted Feb 3, 2012 6:01 PM CST
By Martha Neil

The attorney general of New York today filed suit in state court against three major banks and an electronic mortgage recording operation, contending that they circumvented legal requirements and cost the the state some $2 billion in property recording fees by keeping their own private list of property transfers and mortgage assignments.

The Brooklyn Supreme Court suit seeks to ban foreclosure filings that rely on information from the Mortgage Electronic Registration System and obtain reimbursement from the defendants for lost recording fees and other damages, according to the Los Angeles Times and Reuters.
Bloomberg also has a story.

"The banks created the MERS system as an end-run around the property recording system to facilitate the rapid securitization and sale of mortgages,” AG Eric Schneiderman said in a written statement today. “Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.”  READ MORE