News for Joe Nocera: Things Not to Love About the Mortgage Settlement

In his column on the mortgage settlement last weekend Joe Nocera praised the fact that it would mean that more people would be able to stay in their homes and that some compensation will be paid to foreclosed homeowners in situations where the banks did not follow the rules. He also criticized those on the left who criticized the deal "before the ink was dry."

Of course there was a reason to criticize the deal before the ink was dry. The settlement was announced before it was actually finalized. That meant that if the critics wanted to get their views into the same news cycle they had no choice except to criticize a settlement before the ink was even wet. Nocera's criticism would be better directed at the attorneys general's effort to manipulate the news coverage of the settlement.

There are many issues that can be debated about the settlement, but there are three big ones that stand out:

1) It is not clear what baseline is being used to determine how much is being paid. The banks are already doing some amount of modifications, principal reductions, and short sales. It is not clear how it will be determined that they are going beyond what they would have done anyhow as a result of the settlement. This means that it will be difficult to determine that the $17 billion in write-downs stipulated in the settlement have actually taken place.

2) The banks will be able to count write-downs of loans that they are servicing against this sum. These losses will come out of the pockets of the investors in mortgage backed securities, not the banks' pockets. This means that the defendant in a civil case is effectively being allowed to pay its penalty with someone else's money. This is at the least unusual.

3) It is far from clear that the foreclosure abuses that are the basis for the case have been put to an end. An audit of 400 recent foreclosures conducted in San Francisco County indicates that abuses are still pervasive. It is unclear that the servicers are prepared to change their practices and that the attorneys general will take further steps if they do not.

There are many other reasons for criticizing the settlement, but those are my big three. These points were not acknowledged in Nocera's column praising the settlement.

Semantic Settlement
written by Union Member, February 21, 2012 10:07 AM

Servicers will continue in their practices until, and unless, the Attorneys Generals implement some creative punishment. Otherwise, laws are meaningless, whether the ink is dry or not.

investors occupy
written by Union Member, February 21, 2012 11:08 AM

Investors have a common inerest in the development and progress of Occupy Wall Street. If investors put some sweat equity into Occupy Wall Street, the returns will be there; unless they think the FED, the SEC,the OCC, the Attorneys General and our watchdog press adequately see to it that everyone works hard and plays by the rules.

Where are the Woodwards & Bernsteins?
written by Perplexed, February 21, 2012 2:36 PM

But what about selling "get out of jail free" cards to criminals & criminal enterprises? That doesn't even make the list? If the press had been doing the same function in Mortgagegate that it performed in Watergate the government would have been forced to prosecute these criminals instead of providing cover for them. Remember, not only do these criminals not have to go to jail for their crimes, they are still running these same criminal enterprises that caused this crises. If they had been prosecuted, they would no longer be able to work in the industry and there would at least be a chance that these enterprises were now being run by law abiding citizens; this settlement, as did the one with Mozillo, largely eliminates that chance.

What is being covered up, largely due to our useless press corps, is that the Robo-signing fraud was part of a larger criminal operation to cover up the securities fraud that Eric Schneiderman fought to exclude from the settlement and is still pursuing. It appears that the banks didn't lose the documents they needed to foreclose, they destroyed them to prevent them from being used as evidence of their securities fraud. See Randall Wray's article in the Huffington Post for one of the best descriptions of how this fraud works and why its so important for the banks and their government accomplices to keep this story from becoming widely known by the public: http://www.huffingtonpost.com/...94713.html

Just where in the Constitution is the Justice Department authorized to sell "get of jail free" cards to wealthy criminal oligarchs? So how much more is the government getting by selling "get out of jail free cards" than they could get by imposing fines on the same criminal enterprises and clawing back ill-gotten gains? Its only the incremental costs that the criminals have to pay to stay out of jail and maintain control of their enterprises. Hopefully the Federal Judge that has to approve this won't view justice as a commodity that can be bought and sold in an open market and reign in this attempted cover-up. If we actually had working press corps, that possibility would be much greater than it is now.

Solving problems while doing nothing
written by FoonTheElder, February 21, 2012 3:56 PM

Back in the old days when Barry Goldwater was against something (like Medicare) he came out and said he was against it, even though a majority of Americans thought he was wrong. That doesn't fly in politics in the past 30 years.

What we have had for decades is the 'let's pass a law that does nothing for the average American'. That way they can claim they did something, when they really did nothing except produce another bushel of big corporate welfare.

The reaction to foreclosures is a perfect example. All of these highly publicized programs on forclosures have benefitted very few of the people in trouble. They probably have spent more in advertising than actually helping foreclosed homeowners.

What good is another program on foreclosures when its three years after the housing bust.

a fourth reason
written by tew, February 22, 2012 7:36 PM

Another reason to criticize the settlement is that it uses taxpayer money to remedy damages between private parties.

Nobody in the press even questions why these damages are not settled with the stakeholder's funds. There is plenty of bank and investor shareholder and bondholder capital to pay these damages. To the extent taxpayer funds are used, why is there no enforceable, transparent recapture provision?

If either a home debtor or financial institution later makes 'windfall' profits, shouldn't those be used to make taxpayers whole?

Macroeconomic fraud
written by v98max, February 22, 2012 7:44 PM

The fraud was committed all the way back at loan origination, when the bank charged a couple thousand dollars of fees for the service of filing documents correctly. Foreclosure is the occasion when we happen to discover that the bank didn't do what it what got paid for, but the failure happened at the beginning. It's vanishingly unlikely that the fraudulent mortgages auditors are discovering just happened by chance to be the only fraudulent mortgages out there.

News for Joe Nocera: Things Not to Love About the Mortgage Settlement

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