Bank Settlement Highlights the Feds’ Foreclosure Flop
The $26 billion settlement that 49 attorneys general wrested from the big banks today is a pittance compared to the damage done—but they were forced to act by inaction in Washington.
Go ahead and hate the deal the federal government and 49 of the country’s 50 attorneys general just finalized with five of the country’s largest banks over foreclosure fraud. There’s plenty to dislike about the settlement, starting with the price tag: $26 billion. That’s a slap on the wrist given the reckless, sometimes criminal behavior of the banks and a pittance compared to the trillions of dollars homeowners collectively lost during the subprime debacle. Wade into the fine print and the deal seems even more disappointing. One settlement site says that it can take up to three years for homeowners to know if they’re even eligible for a cash payment. Victims losing their home in a foreclosure can expect a cash payment of between $1,500 and $2,000—enough to maybe cover the costs of a rented truck and storage costs once they got the boot.
Be mad, but make sure to be angry at the right people. Bank regulators in Washington, and not the country’s attorneys general, should have been cracking down on banks that were routinely evicting people despite incomplete documentation. It’s the U.S. Justice Department and other federal agencies that should have gone after the banks when they were caught fabricating legal papers and routinely “robo-signing” thousands of affidavits at a sitting. The Obama administration also might have added teeth to HAMP (Home Affordable Modification Program) rather than relying solely on incentives, which explains why HAMP has helped only a small fraction of the 3 million to 4 million homeowners it was created to help.