“The Fed messed with the wrong senator…” posted David Dayen on Salon. Sen. Elizabeth Warren (D-MA) grilled federal officials about illegal bank foreclosures at a Senate Banking Committee hearing on Thursday. She wanted to know if they would give information to victims of illegal foreclosures–or if they just want to protect the banks. Warren asked, “You now know individual cases where the banks violated the law, and you’re not going to tell the homeowners, or at least it’s not clear yet whether you’re going to do that?”
ELIZABETH WARREN: “So do you plan to give the families this information? That is, those families that have been victims of illegal foreclosures, will you be giving them the information that’s in your possession about how the banks illegally foreclosed against them?”
RICHARD ASHTON, DEPUTY GENERAL COUNSEL, FEDERAL RESERVE: “I think that’s a decision that we’re still considering making. We haven’t made a final decision yet.”
ELIZABETH WARREN: “So you have made a decision to protect the banks, but not a decision to tell the families who were illegally foreclosed against?”
“Elizabeth Warren vs. Captured Banking Regulators. Guess who wins.
Brand new clip from Senate hearing Thursday on illegal foreclosures. Warren blasts the Federal Reserve lawyer for shielding big banks and hiding fraud.
WATCH: Elizabeth Warren Kicks Bank Regulator’s Ass” writes the DailyBail.
“You work for the people not the banks!”
ELIZABETH WARREN:”You have made a decision to protect the banks but not to help the families who were illegally foreclosed on. Families get pennies on the dollar for being the victims of illegal activities. And you know of cases where the banks broke the laws, but you are not going to tell the homeowners. People want to know that their regulators are watching out for the American public, not the banks.”
Now we’re getting to the real nitty gritty! The Senate realizes these bank settlements are not equitable. Senator Warren states it very clear – “pennies on the dollar for being victims of illegal activities” – you can’t get much clearer than that! Then let’s change how these settlements are calculated.
It’s a fact that many, if not nearly all of these loans from 2003-2008 (over 84 million mortgages) had inflated appraisals. It’s a fact that the banks patented nearly every aspect of these defective mortgage loans from birth to death as if to legitimize the process. The loans were based primarily on the borrowers credit score and willingness to pay – rather than on the a legitimate appraisal (which was really only a sales tool to fool the borrowers into over-mortgaging their home). And this is why so many homes are underwater.
Most homeowners would prefer a reduction in principal as opposed to a meaningless financial settlement. Why not reduce the principal by 20% for each modification violation, another 30% for dual tracking and fraud, another 20% for filing false documents?
And for wrongful foreclosures – why not a 50% reduction in principal in addition to attorneys fees and costs? Percentage Principal Reductions. This would seem like a more equitable approach.
Reducing the principal would help the economy and get the courts over the “free house” crutch they keep leaning on. It would also keep the cash in the banks and given the recent draft of the Brown-Vitter bill – the banks are going to need to keep the cash.
“Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) have been working on a bill to block the largest banks and financial firms from receiving federal subsidies for being deemed Too Big to Fail. On Friday, a draft version of that bill was leaked to Tim Fernholz of Quartz, much to Vitter’s chagrin,” wrote the Washington Post.
Seeking Alpha says: “The Brown/Vitter bill being rolled out in Congress is essentially Armageddon to the TBTF banks, says Goldman, seeing it as mandating another $1.1T in equity for the banking system. Banks would need 12 years of earnings to build this amount organically, though the bill would give just 5 – say goodbye to lending. Break up the banks? BAC, C, JPM, and WFC all have multiple divisions with more than $400M in assets – the level at which the bill gets tough on lenders.”
REDUCING THE PRINCIPAL AND INTEREST MAKES MORE SENSE
It is clear that there have been illegal activities in the mortgage securitization scheme and lame attempts at modification by the banks. Certainly, there were investors whose pension and retirement funds were lost as a result of the banks’ bad acts. It all boils down to the fact that banks screwed everybody – only the investors had more warnings. The investors probably bought the bonds because they were told they would be AAA+ and liquid and that foreclosures would be covered by insurance. Of course, nobody has ever grilled a pension fund financial director for public record, but you really have to wonder why anyone would have been buying these securities after January 2007 when credit had stopped rolling for the banks, especially, if they were doing their due diligence.
Actually, after the RTC v. Key Financial [appeal] decision in 2002 – don’t you think you’d do some research into what and where you were investing Billion$ of other people’s pension fund dollars? Yeah, this has been going on for quite a while.
We’re only addressing the modification abuses here, although we all know there are many more claims and fraudulent paperwork. Not to mention the rigged LIBOR interest rates which should be stripped out of each and every defective ARM loan and the homeowners allowed to apply all of their payments (past, present and future) toward the principal.
Want to get tough on banks?
If you’re not going to send the banksters to jail consider an equitable alternative: Settlement penalties for the banks due to their modification abuses and violations, fraud and other bad acts that are intended to benefit the homeowner should be factored in percentages that reduce the principal and interest. Reduce the principal accordingly on the mortgage notes and cut the interest rates to 2%; and 0% on LIBOR ARMS. Only then will we start to see some stability on the home front.
We can push for “percentage principal reductions” (PPR) in lieu of cash penalties if we don’t like the $300 pittance checks. Even the U.S. Senate realizes how lame these bank settlements are for homeowners.
There are still those, however, it appears – that fail to understand homeowner frustration such as one assistant AG who remarked to his constituent when the small size of the settlement check was brought to his attention,
“[O]f course, you are always free to return the check to them or throw it away and not cash it.”