US foreclosure settlement angers Wall Street critics
WASHINGTON, January 7 - RAPSI. A multibillion-dollar settlement announced Monday between US financial regulators and major banks over alleged abuses related to home foreclosures is the latest example of the financial industry running roughshod over the rule-of-law without repercussions, Wall Street critics said.
“The bottom line is: Fraud pays, and it pays big time,” William Black, a former federal bank regulator and a professor of economics and law at the University of Missouri-Kansas City, told RIA Novosti.
The US Office of the Comptroller of the Currency (OCC) and the US Federal Reserve said they had reached an $8.5 billion settlement with 10 banks and mortgage firms that would halt independent reviews of their mortgage servicing and foreclosure processing practices.
Last year, the country’s top five mortgage servicing firms—Citibank, Wells Fargo, JPMorgan Chase, Bank of America, and Ally Financial—agreed to a $25 billion settlement with the federal government over what US Attorney General Eric Holder called “abusive practices” related to foreclosures, including the so-called “robo-signing” of unverified documents.
Bank of America, Citibank, JPMorgan Chase, and Wells Fargo were also part of the agreement announced Monday, which promises $3.3 billion in direct payments to eligible mortgage-holders and $5.2 billion in other assistance, such as loan modifications.
But critics of both deals say these settlements send a message to the American people that Wall Street gets a slap on the wrist for behavior that lands people on Main Street behind bars.
Robo-signing and other types of foreclosure fraud are tantamount to perjury, said Dennis Kelleher, the head of Better Markets, a Washington-based nonprofit that lobbies for tighter regulation of the US financial industry.
“You or I would be in jail for a very long time if we filed a bunch of affidavits we knew were false,” said Kelleher, a former senior aide in the US Senate.
In 2011, the OCC ordered the creation of the Independent Foreclosure Review, a program tasked with examining foreclosure cases in 2009 and 2010 for instances of abuses.
Regulators reached out to 4.4 million borrowers and received nearly 500,000 responses from potential claimants by the Dec. 31, 2012, deadline.
Monday’s settlement would halt those case-by-case reviews, a decision US Comptroller of the Currency Thomas Curry said would provide quicker relief for struggling homeowners.
“Our new course of action will get more money to more people more quickly, and it will speed recovery in the nation’s housing markets,” Curry said in a statement.
That provision of the deal essentially means the public will likely never learn the full extent of the most egregious foreclosure practices, Kelleher said.
“That conduct is never going to see the light of day now,” he said. “So once again the banks are going to be able to hide their illegal conduct, and apparently there is going to be almost no public disclosure of it.”
The settlement spawned similar concerns Monday on Capitol Hill, where the committee on oversight and government reform in the US House of Representatives had asked the OCC and the Federal Reserve to provide details of the proposed deal before signing off on it.
Rep. Elijah Cummings, the ranking Democrat on the committee, said the request went ignored.
“I am deeply disappointed that the OCC and the Federal Reserve finalized this settlement and effectively terminated the Independent Foreclosure Review process before providing Congress answers to serious questions about how this settlement amount was determined, who these funds will go to, and what will happen to other families who were abused by these mortgage servicing companies but have not yet had their cases reviewed,” Cummings said in a statement.
“I do not know what the rush was to make this settlement without answering these key questions,” Cummings added.
The OCC did not respond to a request for comment Monday, and the Federal Reserve said it would not be able to comment in time for publication.
The halting of the reviews will make it exceedingly difficult to determine whether the $8.5 billion agreed to Monday constitutes adequate compensation, Kelleher told RIA Novosti.
“It strikes us as extremely unlikely to be adequate compared to the damage that banks inflicted,” he said.
Black, the former federal bank regulator, said the $5.2 billion to be earmarked for assistance such as loan modifications is likely money the banks would have coughed up anyway.
“They would have restructured the loans anyway in rational world, because it’s better not to have a default,” he said.