Under the terms of the 50-state mortgage foreclosure settlement, US taxpayers could end up paying billions in penalties that were supposed to be paid by the banks. That’s the gist of a front-page story which appeared in the Financial Times on Thursday, February 17. The widely-cited article by Shahien Nasiripour notes that the 5 banks that will be effected by the settlement — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial – will be able to use Obama’s mortgage modification program (HAMP) to reduce loan balances and “receive cash payments of up to 63 cents on the dollar for every dollar of loan principal forgiven.”
And that’s not all. If borrowers stay current on their payments after their loans are restructured, the banks could qualify for additional government funds which (according to the FT) “could then turn a profit for the banks according to people familiar with the settlement terms.”
How do you like them apples? Leave it to the bank-friendly Obama administration to turn a penalty into a windfall. In effect, the settlement will help the banks avoid losses on mortgages that are vastly overpriced on their books and which were probably headed into foreclosure anyway.
Taxpayers will stump up the money for the principle writedowns that will allow the banks to extract even more tribute from underwater homeowners. What kind of penalty is that?
9 million homes have been lost to foreclosure since 2007, and there will be another 9 million before we’re done. Homeowners have lost $8 trillion in home equity (in the last 4 years) and 11 million people are currently underwater on their mortgages. All of this is unprecedented. All of this is the result of fraud.
Forget about the mortgage-foreclosure settlement. It means nothing. Someone has to go to jail. That’s what matters.
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