About that AG “Investigation” and “Settlement”

About four hours ago, Iowa’s Attorney General Tom Miller testified to the Senate Banking Committee  it would be months before the combined AG “investigation” came up with a settlement (he also suggested that there were new aspects that were just being added to the “investigation”).

Dodd: How long AG investigation?

Miller: Months, rather than year or longer. Depends on negotiations. If we expand scope, expands time. Maybe something on fees allowed. Forced insurance, huge abuse. Same thing w/dual track. If you all could solve the 2nd lien problem.

That’s almost exactly the moment when the WaPo posted a story reporting the AGs were close to a settlement.

The 50 state attorneys general are in negotiations over an agreement over foreclosures that would include a victims’ compensation fund that would provide money for borrowers whose homes have been taken away improperly, according to state and industry officials.

The discussions are still preliminary and the final deal may change significantly as details are hammered out and the settlement is vetted by 50 separate state offices, the official said.

Now, there’s a lot that’s weird with this story, aside from the way it seemingly contradicted what Miller was saying to Congress at precisely the moment he was saying it. First, only three of the big servicers were mentioned in the story:

While there’s no universal agreement that would apply industry wide and the AGs are negotiating separately with each bank, many of the stipulations are the same for the agreements being discussed with the three largest mortgage servicers: Bank of America, JP Morgan Chase and Wells Fargo.

No mention of GMAC or Citi–or Goldman Sachs, which just announced a freeze on its foreclosures.

And this story reported that dual-track processing–in which people are being processed for modification at the same time they’re being foreclosed on–“should” stop.

They also agree that there should be no more “dual track” loan modification negotiations that end suddenly with foreclosures.

Yet at almost precisely the time when WaPo published this claim, BoA’s President of Home Loans, Barbara Desoer was explaining that they couldn’t end dual-track processing except on those loans BoA held on its own books and/or for loans that qualify for HAMP, and Chase’s CEO of Home Lending David Lowman was testifying that they wouldn’t end dual-track processing (he did suggest there was something Congress could do to give servicers safe harbor to end dual-track processing, but that he wouldn’t describe it in the hearing).

Then there’s the claim that there would be a compensation fund set up for those wrongly foreclosed.

The most radical part of the settlement deal has to do with providing monetary compensation for homeowners who have lost their homes but can prove that they have been foreclosed on wrongly. This is the most contentious item because the amount of the funds that would go into this have not been worked out and it’s also unclear how it would be administered.

At least the WaPo had the grace to suggest, without saying outright, that any such fund would be ripe for abuse by the banksters. The banks, after all, are often unable to give any real accounting of the amounts owned (and if they were able to, they’d be unwilling to show the illegal fees and accounting they were using). So how is a wrongly-foreclosed homeowner supposed to prove they were wrongly-foreclosed?

And then the article mentions nothing about modifications going forward. In other words, this “settlement” would achieve absolutely nothing–except for getting a bunch of banksters excused, again, for breaking the law. Not that I find that hard to believe. Just odd that WaPo wouldn’t mention that this alleged “settlement” wouldn’t accomplish the primary requirement of any “settlement:” fixing any problem but the legal liability of the banksters.

Mind you, I did note during the hearing that Miller didn’t seem to have consumers’ interests in minds when he was talking about any settlement, so I guess the outlined proposal is a possible one.

But most of all, note the big news in this story.

There is no mention of an investigation.

There was not a single soul at today’s hearing who claimed to have a good sense of the scope or reasons for the massive foreclosure fraud perpetrated by the banks. Indeed, almost everyone acknowledged the need for further investigation to make that clear.

That “investigation” was supposed to be conducted by the 50 AGs.

But if this article has even a shred of truth to it then the AG “investigation” is instead a fast-track effort not to “investigate” (god forbid, because you might actually expose how the banksters had ended private property and rule of law in the United States), but to find a way to get the banksters out of any accountability for their crimes.

  1. phred says:

    There is no mention of an investigation.

    I’m shocked! Shocked, I tell you!

    because you might actually expose how the banksters had ended private property and rule of law in the United States

    Aided and abetted by all three branches of government… The banksters shouldn’t get all the credit for a group effort.

  2. David Dayen says:

    Yeah, it strains credulity that Tom Miller would, after 32 years as an Attorney General, lie to Congress.

    And just because some crappy WaPo article doesn’t mention an investigation doesn’t mean there is one.

    The named sources in this article are… there are none. Just “state and industry officials.”

    So, some Republican assistant AG with an axe to grind, and a JPMorgan Chase lobbyist.

    I call bulls%#t.

    • Fractal says:

      Thank you, DDay, for liveblogging the first half of the hearing. House committee is holding hearing on Thursday on related issue(s), didn’t check the witness list yet.

  3. Fractal says:

    Thanks, Marcy. The lack of a true investigation is stunning. Miller admitted to WaPo that among the 50 state AGs, not one single subpoena has been issued to a single bank. Who do they think they’re fooling?

    I also noticed that WaPo very carefully & deliberately omitted this remark from their quotation of Sen. Tester: “Quite frankly, there ain’t gonna be more bailouts.” WaPo included everything else Tester said before that, about the systemic risk posed by servicers’ incompetence or malfeasance, but deliberately flushed his warning down the memory hole: “there ain’t gonna be more bailouts.” Why would they do that? /s

  4. Watt4Bob says:

    One must remember that the upper class MOTU, like sharks have not found it necessary to ‘learn’ anything new in millions of years.

    The MSM, including PBS and NPR are spewing a toxic mythology intended to simultaneously humiliate and confuse.

    What we are witnessing WRT the current media situation is what I like to call the full-court-press.

    The most intense attack on the public’s mental faculties that I think I’ve ever seen.

    It’s got to be clear by now, that if you have enough money, via control of the media, you can teach 51% of the people to believe anything you want them to believe.

    Right now, they’re teaching some of us that there’s really nothing more than sloppy paperwork at the heart of what some are calling the foreclosure crisis, when in reality we’re witnessing a colossal cover-up, of a vast crime.

    Right now they’re attempting to teach the rest of us that resistance is futile.

    That’s what they are doing right now.

    This minute.

  5. Fractal says:

    I just noticed that the WaPo story Marcy linked to was a short blog posting at 5 PM by one of the two reporters assigned to this on Tuesday. Later, WaPo ran this headline story by both reporters at the top of its home page, with a time stamp of 9:30 PM. Details in that longer story were taken from an interview of Miller done by the second reporter and posted around 1:30 Tuesday afternoon.

    When I said WaPo carefully omitted Sen. Tester’s warning that there would be “no more bailouts,” I was referring to the 9:30 PM story that currently tops WaPo’s homepage.

  6. Fractal says:

    Here are some key exchanges from the Q & A with Miller posted at 1:30, copied from about the middle of the interview:

    Q: Why is it that the banks are not finding the incentive to put the resources in, to get this done, and to maximize their yield through the modifications rather than going through foreclosures?

    Miller: That raises sort of a fundamental question, and that is, is the system fundamentally flawed, that it’s not going to work the way I just described? … It was a system set up where [mortgage servicers] essentially would be collectors. People would send their mortgage payment in. They would send it on to the investors. It was never envisioned, this kind of crisis.

    So part of the problem is how they’re compensated. … They’re compensated basically on the volume of loans they service, and that made sense when it was mainly just a collecting business. It makes less sense today. In part, are they compensated enough to fully resource up? Are they compensated too much on fees, so that the fees are added and emphasized, which are counterproductive to the modification process?

    The other fundamental problem is the same banks own a lot of the second mortgages, the second liens. When they’re acting as a servicer, there’s an interest in modifying the loan for the investor, so that the person can pay and the investor can get more than in foreclosure. But there’s a strong incentive then to wipe out the second lien. Well, they own the second lien, so how does that all work out?

    Q: Is the purpose of the [foreclosure] task force to play the role of de facto regulator and come up with a solution to fix the problem? Or is it to create an investigative record and do civil and/or criminal prosecutions?

    Miller: It’s both. Clearly, it’s investigative, and we want to find out and see what laws were broken and what we should do. But then we switch to what the remedy is. We want to be more creative and figure out a way to make the system better. For instance, rather than having them pay a huge amount of fines, much of that money [instead could] go to adequate resources to make this work.

    Q: Are you issuing any subpoenas to banks?

    Miller: We haven’t at this point. We’ve gotten some compliance. And we’re still sort of early. They are cooperating with us.

    Q: In the end, is your goal some sort of global settlement, like with tobacco, where you have all the banks agreeing to engage in a series of steps to remedy this?

    Miller: What we’re trying to do is have individual agreements with the major servicers that are roughly equivalent, which is just a little different than [with] tobacco. It was one agreement.

    Q: Are you looking for them to agree to principal reductions in the end, to solve this, instead of paying a big penalty. Is that the goal?

    Miller: Well, I don’t think there’s a direct trade-off there. We want the modification process to work. And we think whenever there is a loan that means the criteria … the person can make the payment, has ability to make the payment over the long term and the payment is more than the foreclosure [proceeds], we think that should happen. And in some instances, that involves principal reductions.

    Q: Have banks been willing enough to reduce principal?

    Miller: I think they’ve been too reluctant to do that. But they’re edging their way into it. They are doing it more than they did before, but not enough. … There is a cultural issue that I think the banks/servicing companies have dealt with over time. And that is that for a financial institution, and particularly one that’s main job is collecting the mortgage payment, to give a reduction in the loan – that’s sort of against the culture. There’s a cultural step there. But again, they’re doing better on that.

  7. orionATL says:

    the “fifty”, all fifty!!, state attorneys general

    agreeing so amicably to act with one voice?

    this sceamed “set up” from the beginning.

    the serious reporting will be about who organized this 50 AG hayride?

    the white house?

    and that the AG’s acted so extremely expeditiously?

  8. bobschacht says:

    Thanks for this coverage, EW.

    Where’s the FCIC on this? They’ve had hearings on some aspects of this, and have the authority to subpoena. And their final report is due next month.

    I’m surprised that the 50 State AGs seem to be primarily in a fix-it mode. One would think that they would be out to recover fees on every title transfer, which could result in a lot of revenue for their cash-starved states.

    Is someone tracking all the lawsuits that are accumulating about this crisis?

    Bob in AZ

  9. parsnip says:

    Yves: Rumors of Negotiations on Settlement of 50 State Attorney General Foreclosure Probe at 1:18ET 11/17/10:

    The story seems to have started with a rumor on CNBC, which is being treated with more dignity than it deserves, particularly since the supposed source denied it.

    CNBC reported that Iowa attorney general Tom Miller was nearing a settlement of the 50 state probe (we noted yesterday that CNBC ran a credulity-straining report on MERS, so it seems to be the preferred outlet for bank PR these days). But when Reuters contacted Miller’s office, they disputed this account.

    Nevertheless, this idea was carried further by the Reuters piece, which quoted Bank of America CEO Brian Moynihan stating that a “quick resolution” of the 50 state investigation would be be the best outcome for all parties involved.

    That view strains credulity, unless you are of the “what is best for banks is best for America” school of thinking…….[continues]

    Thanks for following up on this. I can’t bear to read WaPo. Last night as I was trying to wind down and fall asleep I found myself wondering how it was for people in 1930’s Germany, listening to radio and reading the propaganda press. I decided it was like this.

  10. parsnip says:

    Perhaps a good way to keep the pressure on the AGs is by pointing out the recording fees issue, which is causing great harm to local budgets.

    In my county we just went through a $2M (privatized) reassessment as settlement of a lawsuit by a new housing development that claimed they were assessed too high. I wonder if the mortgages on those houses were recorded properly? Now the vast majority of homeowners are complaining that their taxes went up (the assessment was supposed to be neutral). The method for appraisal was based on how much money one could make off of one’s property if one developed it with more single family homes. Idiotic.

    Friends of ours’ taxes went up $1,000 even though they live in a flood plain (and flood regularly), merely because a new housing development had gone in a year ago across the road from them, but those homes are up a hill, out of harm’s way.

    Now a second law suit is being threatened by another community whose taxes went way up. I know for a fact that there was cronyism involved, that determined whose taxes went down, and this was totally unfair.

  11. justbetty says:

    This comment is both EPU and slightly OT, but I wanted to note that while waiting for my internet connection to kick in, I was looking at EW’s time lines. So speaking of investigations and lack thereof, how incredibly sad to see that all the details EW documented about all those suspect activities have led to naught.

  12. joanneleon says:

    Remember that pocket veto?

    Yesterday’s Wall Street Journal says the House is considering overriding the veto — today.

    House lawmakers are scheduled to consider Wednesday a motion to override President Barack Obama’s veto last month of a bill that critics claimed could make it harder for homeowners to stop flawed foreclosures.

    The vetoed bill, sponsored by Rep. Robert Aderholt (R., Ala.), would require notarizations of mortgages and other documents, including those done electronically, that are done in one U.S. state to be accepted by courts in another state.

    The House approved the bill in April by a voice vote, and the Senate passed it unanimously in late September. But Mr. Obama returned the bill to Congress without his signature last month as concerns mounted over the unintended impact the measure could have on consumer protections amid growing problems with foreclosure documentation.


  13. Knut says:

    It’s a clusterfuck anyway you cut it. Throwing the losses on homeowners just moves the clock back a few months, but doesn’t stave off the ultimate collapse. We are moving fairly smartly towards Great Depression territory.

  14. PeasantParty says:

    HAMP is a fog screen and the fact that the banks won’t modify or even stop foreclosure long enough to modify tells all.

    They want your property, all of it, for their own profit and there will be NO accountability! It is what America is these days. If you are rich and powerful you may do what you like, regardless of laws or morality!

  15. b2020 says:

    Does anybody seriously expect the US AG to ride to the rescue on this or an y other matter? Or the courts?

    Watching the ink dry on the most recent whitewashes on crimes past and meticulously observing the various sideshows of accountability kabuki is only going to go so far.

    It strains credulity to think any of this will matter one way or the other.

  16. klynn says:

    I suspect the House is considering the veto because a great number of mortgage loan officers work on commission and are paid only on commission.

    Not a great deal moving right now…

    I just cannot imagine closing our eyes and just moving the mess forward. It would be the end of democracy.

  17. juliania says:

    And this story reported that dual-track processing–in which people are being processed for modification at the same time they’re being foreclosed on–”should” stop.

    “They also agree that there should be no more “dual track” loan modification negotiations that end suddenly with foreclosures.”
    This should be an easy one for folk to wrap their minds around. There’s no “should” in the equation, and in fact those who have already had this sweep perpetrated on them ought to be in a group protesting and demanding court action.

    Also a question OT a bit – is Ireland behind us or in front of us? After PBS Newshour ignored the European dilemma pretty much last night, BBC covered it to the effect that Ireland had ‘solved’ a housing bubble crash by compensating the banks and now is protesting (but not believed) that it doesn’t need an EU bailout. In my mind that equates to Bailout II, also being denied in the above quotes from the hearing.

  18. Mauimom says:

    Are any of the folks at MSNBC on this, Dylan Ratigan in particular?

    I know this is difficult because it’s so complicated [or appears at first glance to be], but I think kicking up a little dust to jam the cogs of this machine is called for.

    We know PBS isn’t going to provide it. I’m trying to think of places where this could get publicity.

    And hey, Tea Partiers, that Constitution thing you’re always so fond of referring to, might that be applicable here? Where’s that idiot Rand Paul on this?

  19. godistwaddle says:

    The fix is in. The bankers and the corporatists own EVERY U.S. government, AND THERE’S NOTHING WE CAN DO ABOUT IT.

    Elections DO NOT matter. Grab your ankles, ‘cause the banks gonna gamble and we’re gonna bail ‘em.

  20. rapier51 says:

    This whole 50 state AG thing is ridiculous. It’s astounding it ever got off the ground. I assume a lot of very serious very important people were burning up the phone lines telling the AG’s that for the good of the nation it would be best if they punted on this and agreed to some quasi legal quasi settlement which the big boys handed them. There is a huge story in here somewhere. For the life of me I don’t know how some of the more agressive Democrat’s got suckered into this thing. I can’t believe that super hard ball politics were not involved.

    I don’t think there is any way all 50 stay on board for the ride now that the election is over. All the GOP ones, sure. They will do what daddy tells them too. Of course daddy in this case includes the White House which presents a problem for the Democrats.