"It does more for narrow political interests than for aggrieved homeowners."
Posted on 02/12/2012 6:15:03 AM PST by KeyLargo
Foreclosure pact promises more trouble
DAVID ROEDER
droeder@suntimes.com Last Modified: Feb 12, 2012 02:25AM
The foreclosure settlement involving Illinois and 48 other states is much ado about $25 billion, but for homeowners still in a heap of financial trouble, it signifies little besides more pain.
The banks involved will like it, and their investors should draw comfort as well. By settling, the five large banks have indemnified themselves against civil lawsuits over robo-signing and faked paperwork. Criminal charges are possible, but hardly likely. The banks get financial certainty as opposed to the prospect of endless litigation. That should help the shares of four banks involved — JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC). The fifth one in the deal, Ally Financial, is not publicly traded. The deal does not cover loans backed by Fannie Mae or Freddie Mac, a major limitation.
Some homeowners will get reductions in mortgage principals. A few who lost homes will get direct payments, perhaps $2,000 each, which might not even pay the moving expenses. But the larger impact will be on the housing market itself.
Expect banks to turn up the flow of foreclosures. They’ve held them back because of the robo-signing scandal, causing national foreclosures to fall about 46 percent from October 2010 to last December, according to RealtyTrac.
A sharp increase in foreclosures will snuff out any recovery in most U.S. cities. Before the foreclosure settlement was announced, the realty data provider Zillow estimated housing prices in the Chicago area will fall an average 7.6 percent this year, on top of a 36 percent decline since the 2006 peak.
In 2011, Chicago area prices fell 10.9 percent, the second largest decline of 25 major cities in the U.S., by Zillow’s reckoning.
Stan Humphries, chief economist at Zillow, said its forecast took into account the likelihood for a foreclosure settlement. He said that while the pace of liquidations will rise, he doesn’t expect lenders to flood the market.
Some will say the attorneys general who settled this case sold out too cheaply. More to the point, the settlement took too long. It does more for narrow political interests than for aggrieved homeowners. And the dispute put off housing’s great reckoning. The market needs a purgative. Without more foreclosures or targeted mortgage relief, prices cannot stabilize.
"It does more for narrow political interests than for aggrieved homeowners."
Criminal charges are possible, but hardly likely.
Of course, laws are for little people not for our overlords.
You bet it causes more trouble, mainly in the Department of Unintended Consequences, for it means that contracts are no longer sacred.
When a contract no no longer sacred, then its enforcement becomes arbitrary. People will hesitate to put their money at risk because of the ways the counter-party can get out of fulfilling their obligations. Borrowers will start to look at lenders as candidates to defraud. Indeed a co-worker just voiced their thoughts to me on Friday when he indicated his preference to refi his house with Bank of America, because of how likely they were to lose his paperwork or otherwise fail to be able to collect where no court would enforce the mortgage.
The investor Dick Bove is quoted on ZeroHedge as saying: “There is no sanctity of contracts in the United States. Only fools meet their financial commitments. The non-payers are the truly enlightened.”
and: “...-the US taxpayers bailed out the banks, which are now using the balance of said proceeds to pay a settlement which amounts to the tune of $2,000 per every person foreclosed on in the past 3 years, in order to assure their vote for Obama, while in the process trampling contract law, as no longer will anyone in America honor anything printed and signed. “
This cannot end well.
So, what is the one state not having a foreclosure problem? I would venture that would be either Alaska or Hawaii, and of the two, I would think it is Alaska.
Neat, eh? TBTF (Too Big To Fail) Crony "It does more for narrow political interests than for aggrieved homeowners." Fascism. BIG GOVERNMENT/BIG FINANCE/BIG SOCIALISM. The leviathan rolls on. Neat, eh?
As FReeper MV=PY's tagline reads, (The Magic Question: Who's paying for it?)
It’s a great deal if you have stocks in those big banks.
“The banks involved will like it, and their investors should draw comfort as well.”
Ally/GMAC
Bank of America
Citi
JPMorgan Chase
Wells Fargo
Mortgage Settlement Is Just Another Stealth Bank Bailout
By Washingtons Blog - February 10th, 2012, 10:30AM
Yet Another Bailout for the Giant Banks … Homeowners Get Hosed Again
The 50-state settlement with the banks (Oklahoma didn’t sign, but supports letting the banks go scot-free) over mortgage fraud is a stealth bank bailout, according to many top observers. See this, this, this, this, this, this, this and this.
This is par for the course … All of Obama’s previous “mortgage relief” programs have really been stealth bank bailouts which screwed the homeowner. And see this.
http://www.ritholtz.com/blog/2012/02/mortgage-settlement-is-just-another-stealth-bank-bailout/
The 25 billion will mainly end up in state mandated programs that in the end help no one.
Can you spell 'Obama'... 
Borrowers will start to look at lenders as candidates to defraud.
In this case the lenders as well as many borrowers are guilty of fraud. They should all be punished in criminal court.
I believe they are only indemnified against lawsuits by the Federal government and the states. Individuals can still sue.
Of course, with tens of thousands of lawyers on each bank’s staff, they’re not exactly shaking in their boots.
Most of the robo-signing was done by law firms hired by the banks to do the foreclosures. It says right in the contracts that these law firms are required to obey all laws, rules, regulations.
Some of the law firms might be hit by criminal charges, but the banks have protected themselves. See, it’s right in the contract!
Thanks for the ping, PGalt - I had missed this.
The housing market still has quite a ways to unwind and this should move the process along. The banks, of course, remain a protected species.
Banks are sitting on tens of thousands of homes ready to be foreclosed, already.
Thanks very much for the link (post #6). Lots of interesting comments/analysis at those sources.
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