Just How Relevant is the Multi-State Settlement?
Editor’s Comment: There are jokes going around about how you can’t fix stupid. We should add that you can’t fix title either unless you throw out hundreds of years of law and market expectations. No settlement will clear title, nor will it absolve the Banks of criminal responsibility — but the latter can be settled by AG’s too willing to grab for the public relations coup and not willing to stand up for the citizens of their state.
Yves Smith has captured the flavor of the moment in the article below. The Banks seeking a settlement had better be careful what they wish for. As events unfold outside the boundaries of the settlement, they may have put themselves in the position of already admitting to the fraud, without any meaningful protection against liability —- civil or criminal — for screwing up the title registries around the country.
In the end they will either be required to pay far more than this settlement to get signatures that clear up chains of title or they will be forced to fold their tents. The ultimate responsibility for fixing the title problem will come back to the banks who created them because nobody else will do it. Their assumption that they could finesse their way out of this was and remains, well, stupid.
After all this time, it is hard to imagine that we are only half way through this game. It is the second half that will determine the fate of the banks and our nation.
by Yves Smith SEE FULL ARTICLE ON NAKEDCAPITALISM.COM
The Administration, through the nominal head of the bank settlement negotiations, Iowa attorney general Tom Miller, has moved its final deadline for a deal yet again, this time to Thursday.
One event of the day was a non-event. New York AG Eric Schneiderman has scheduled a conference call to the media on the settlement for 6 PM, then postponed it indefinitely 10 minutes before the scheduled time. One can presume that whatever he had intended to say was rendered moot by events…but what events? The only thing one can infer is that he is presumably still negotiating. Per Reuters (hat tip Lambert):
Last Friday New York filed a lawsuit that conflicted with part of the settlement. His office has been in discussions with bank lawyers to move forward with both the lawsuit and the settlement, according to two other sources familiar with the matter.
According to another person familiar with Schneiderman’s thinking, the tenuous nature of the talks caused the postponement. Schneiderman still is a holdout, that person said.
So, reading between the lines, it looks as if Schneiderman saw his MERS lawsuit as not inconsistent with the settlement (remember, Delaware and Massachusetts both have filed MERS suits, and the Massachusetts suit targets the five biggest servicers along with MERS) and the banks begged to differ. This is consistent with the report by Loren Berlin in Huffington Post:
Bank executives argue that New York attorney general Eric Schneiderman is using the lawsuit to go after claims already covered under the settlement, said the source.
But perhaps the biggest news was that Florida is now among the states not yet signed up. This is pretty surprising, given that Republican AG Pam Bondi had the nerve to hector California’s Kamala Harris last week for not joining the settlement. Although some reports indicated that Florida had gotten a sweetened deal, the HuffPo story says she wants a side deal, which is what California would get.
So far, the states that are listed as not yet agreeing to the settlement are California, Florida, New York, Nevada, Delaware, Arizona, and Massachusetts. The bad thing about this list, from the officialdom’s perspective, is that it includes the states that were the epicenters of the housing bust.
But while the claim is that these states will eventually fall into line, it is the banks that now appear to be the serious holdouts, as news reports we highlighted yesterday indicated. From Huffington Post:
Bank concerns reached fever pitch on Friday when the New York State attorney general’s office sued Bank of America, JP Morgan Chase and Wells Fargo, accusing the banks of deceptive and fraudulent use of a private database used to register mortgages.
“I think it’s fair to say that the banks are becoming an obstacle to completing this settlement now,” said the source, who spoke on condition of anonymity.
The banks clearly don’t want to be exposed to MERS litigation. While Schneiderman and Massachusetts’ Coakley face some hurdles in pinning liability on the banks (they have MERS, foreclosure mills, and vendors like LPS as scapegoats liability shields), the bad press and the exposure of document defects would embolden and aid stressed homeowners and thus be damaging to them.
The other interesting tidbit of the day was the report by Shahien Nasiripour of the Financial Times that the Administration is pushing hard to get this deal closed. That could be inferred by the way HUD chief Shaun Donovan has taken a high profile role, including talking to “progressive” media (yours truly is apparently in a special category, “incorrigible”).
But the FT piece reveals that some core constituencies aren’t buying what the Administration is selling:
Aides to President Barack Obama have in recent weeks courted civil rights groups and borrower advocacy organisations, scheduling meetings and calls in an attempt to gain support for the expected settlement and muffle criticism from key political allies…
The meetings have occasionally served as a “gripe session”, as one participant called them, because many of Mr Obama’s most ardent supporters have criticised the pending deal’s terms for the degree of relief provided and the extent of the release from legal claims it provides for banks desperate to minimise mortgage-related liability…
Janis Bowdler, a housing expert at the National Council of La Raza, the largest US Hispanic civil rights group, said the settlement would be a good start for the White House as it seeks to prove it is doing all it can for homeowners.
“Wrapping up the settlement now is the right thing to do, but it’s only going to be a win for them politically if they follow up with the financial crimes task force,” Ms Bowdler said…“Otherwise, if this is it, and they’re satisfied with just $25bn, I don’t think that will be enough to convince voters that they were doing all they could to fix the housing market.”
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