Sense on Cents

In a nation now all too familiar with a “too big to fail” banking system, a heavily manipulated and high frequency dominated equity market, and an incestuous financial regulatory system, we should not be surprised with a mortgage settlement that does little more than ‘piss into the wind’.

Pardon my cynicism, but one does not need to look too deeply into the recently announced mortgage settlement to understand there is little in the way of meaningful justice embedded in this contrivance. Has America become so numb to the news emanating from both Wall Street and Washington that we expect so little and receive less than that when it comes to real justice? I believe we have.

If the mortgage settlement were derived from shoddy mortgage servicing practices at the five institutions (Ally Financial, Bank of America, JP Morgan Chase, Citigroup, Wells Fargo), then how is it and why is it that the executives running those business units are not singled out in this settlement and handled accordingly?

I believe it defies logic to think that the mortgage servicing units within these institutions were not fully aware of the practices (robo-signing of documents and the like) ongoing at each bank and perhaps jointly shared information. Would that sharing of information be considered a conspiracy and ultimately a form of racketeering?  Did these institutions actually violate the Racketeering Act? I posed that question during 2011, but we see nary a whisper of that sort in this settlement.

What do we see? Very little actually.

As the American Banker highlights, Missing Settlement Documents Raise Doubts About $25B Deal:

More than a day after the announcement of a mammoth national mortgage servicing settlement, the actual terms of the deal still aren’t public. The website created for the national settlement lists the document as “coming soon.”

That’s because a fully authorized, legally binding deal has not been inked yet. The implication of this is hard to say. Spokespersons for both the Iowa attorney general’s office and the Department of Justice both told American Banker that the actual settlement will not be made public until it is submitted to a court. A representative for the North Carolina attorney general downplayed the significance of the document’s non-final status, saying that the terms were already fixed.

“Once the documents are finalized, they’ll be posted to nationalmortgagesettlement.com,” the representative said in an email toAmerican Banker. Other sources who spoke with American Banker raised doubts that everything is yet in place.

A person familiar with the mortgage servicing pact says that a settlement term sheet does not yet exist.

Does this sound like “declare victory, take a ceremonious lap, and rely upon an uninformed American public to buy a bill of goods”? You bet. Do not think for a second that the funds involved in this settlement will provide meaningful relief for the housing market. The settlement funds represent mere pennies on the dollar in terms of the overall negative equity within American homes.

Additionally, do not discount that homeowners who receive some of these funds will spur other current homeowners to forestall making their own mortgage payments. More unintended consequences and subsequent foreclosures in the process. Why is it that mortgage investors who will suffer from principal reduction programs also bear some of the costs of this settlement? The cost of this component will be borne immediately by investors and ultimately by higher mortgage rates for all.

When you add all of these shortcomings, misfirings, and injustices together, the simple fact is this mortgage settlement is at best justice deflected, more accurately justice neglected, and in summation justice denied.

As American Banker concludes:

“Even once we get to the final terms, the servicers we’re told are going to be allowed to develop their own plans,” says NCLC’s Thompson. “They’re going to have three months to develop those from when the settlement is approved by the court. We are a long way in lots of ways from being able to kick the tires.”

Why does this happen? Two reasons:

One, our Washington political establishment is currently more driven in its pursuit of any and all funds that might be injected into the economy than anything else.

Two, can’t you just picture the heads of the banking institutions involved in this settlement chuckling about this settlement knowing that “these regulators and pols really work for us.”

Pissing into the wind in America 2012. How pathetic!

Navigate accordingly!!

Larry Doyle

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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, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

This entry was posted on Sunday, February 12th, 2012 at 5:34 PM and is filed under General, Mortgage Cram-Down, Mortgage Crisis, Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.