Will Wall Street Mortgage Settlement Talks Halt Homeowner Abuse?
Posted by Larry Doyle on April 7, 2011 5:57 AM |
Call me old fashioned but the idea that those engaged in abusive, and very likely fraudulent, business practices are allowed to negotiate a settlement strikes me as un-American.
That said, the world of unintended consequences in our Uncle Sam and Wall Street dominated economic system brings us just such an un-American approach in terms of addressing our current mortgage mess.
Negotiate? Settlement? Growing up in Boston in a family full of lawyers, I was under the impression that fraud and abuse likely got you 5 to 7 years in a medium security facility and maybe you got out in 3 to 4 with good behavior. Perhaps that form of justice still applies to you and me but for the large monied interests who run this country, we’re talking negotiations and settlement. Wow!! Little wonder why the rage in our nation directed at the Wall Street-Washington incest continues to burn so strongly. Let’s navigate.
My commentary of earlier this week, Did Wall Street Violate the Racketeering Act? struck a chord like none other during the life of this blog. I thank all those who wrote to me and shared their stories. A number of people expressed a similar situation as that detailed by Rachel last evening,
Thank you for this story! We were first time homeowners in 2006 credit score 800. We said no to all the bad loans, 40 years ARM, interest only …we made improvements every year and in 2010 had to move for employment. Our realtor said we were underwater and the only way to sell was shortsale. Our bank said we were eligible for this program only if we were not current. We moved and the house didn’t sell and we couldn’t pay for rent and mortgage so in not paying became eligible.
Little did we know the bank didn’t accept 4 offers never enough money for them. Now we are going to foreclosure and bank refuses a deed in lieu. We can’t get a correct appraisal so we can’t sell. I guess we made too many improvements. Now our credit will be destroyed.
All the realtors I spoke with said anyone who bought or took out seconds during 2005 to 2007 are screwed. I am ashamed that our government helps the bank and has abandoned the homeowners who have been screwed. As first time homeowners putting thousands of dollars into a home because we thought being a homeowner was a good thing never to make money. But now our good name is ruined and the last two years has been hell with the bank and we didn’t do anything wrong. We did what they told us to do…..
I obviously do not know all of the particulars of Rachel’s situation or that of others who wrote to me over the last few days. Additionally, I will not deny the fact that there are plenty of individuals who knowingly lied on mortgage applications in an attempt to defraud. That said, there is rampant evidence that many homeowners have truly suffered abuse at the hands of a number of banks.
The American Banker addresses this fact in writing, Seize the Moment: Use Settlement Talks to Halt Abuse of Homeowners,
State attorneys general and federal financial regulators are locked in settlement negotiations with U.S. banks that engaged in abusive, often fraudulent, mortgage and foreclosure practices. These negotiations may be the last, best chance to help struggling homeowners, stabilize neighborhoods and strengthen the economy.
It shouldn’t come as a surprise that before it’s even finalized the settlement is under attack by some in Congress who don’t want banks held to account for their actions. But banks should be held accountable, and if anything the proposed terms should be strengthened.
While the deal is still being negotiated, some elements have been leaked. If these proposed terms get more detail, time frames and teeth, they could go far to prevent future abuses.
All of this, of course, argues for a larger monetary settlement than the $20 billion that has been floated.
What is my immediate reaction to this article acknowledging the fact that negotiations and a likely settlement to this mortgage mess and abuse will occur? $20 billion will not go very far. Moreover, I want to witness the public apology from JP Morgan’s Jamie Dimon, Bank of America’s Brian Moynihan, and Wells Fargo’s John Stumpf to acknowledge and apologize for the abusive and fraudulent practices within their organizations. Ben Bernanke and Tim Geithner should do the same. The only individual who strikes me as having a degree of remorse is the FDIC’s Sheila Bair.
While the $20 billion, or whatever final figure is negotiated, will help somewhat, the very real costs of cleaning up this mess go far beyond the monetary. The loss of confidence in Wall Street, our overall economic system, and our government will likely be felt for generations.
I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.