Tuesday, November 1, 2011

Matt Stoller: Why a Foreclosure Fraud Settlement is a RIDICULOUS Idea

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller.
Gretchen Morgenson is ringing alarm bells that a 50 state settlement on the foreclosure fraud issue is on deck, and is spelling out some of the details. There would be some principal write-downs, random cash payouts for those who were foreclosed, and money to buy off nonprofits in the states that work on housing issues (a classic Fannie/Freddie Dem friendly tactic Morgenson and Rosner exposed nicely in their book Reckless Endangerment). The settlement looks vague and stupid, and will probably be executed with the care and competence of HAMP. But let’s put that aside.
What makes these discussions so utterly absurd, so ridiculous, and farcical, is that robo-signing, an abuse the banks have admitted to and clam they’ve ceased, is still going on. The AP reported this in July; mortgage servicers in Nevada have stopped foreclosing because of a law explicitly criminalizing robo-signing. Yes, the banks are asking for a release of claims on acts, or perhaps crimes, that are ongoing. And these abuses are extensive: lying to investors about the quality of the mortgages; violating their own contracts by failing to convey mortgages properly to securitization trusts; charging fees that are impermissible under Federal law and the contracts; making a mess of property records and engaging in deceptive consumer practices through the use of MERS; and engaging in document forgeries and fabrications in foreclosures. All these people trying to give the banks “a settlement” are in fact immunizing banks against acts they are committing and will commit going forward. Only in the future, when a voter complains to his or her state AG, that official will have to explain to that voter that his/her rights have been given away.
The larger problem is that banks mistreat homeowners and abuse property rights, and this is going to continue and worsen until the housing market just dies. During the mortgage servicing process, homeowners complain of poor service, lost records, inconsistent treatment of modifications, and fraud. During the foreclosure process, it’s clear that banks have been falsifying documents and records to foreclose, which allows them to get around fraud in the original securitization process. Without a thorough investigation of the documentation issues at hand, an investigation this settlement precludes, there will be no way to bring back certainty to the mortgage market, ever. The rule of law matters when it comes to property rights. Allowing banks to just take property from homeowners will ultimately cause the death of homeownership. But you don’t believe me. Just look at the housing market.
original story from Naked Capitalism read the rest at the following link. Matt Stoller: Why a Foreclosure Fraud Settlement is a RIDICULOUS Idea

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