Coming and Going

          Bank of America, Wells Fargo, Citi Group, JP Morgan Chase, and Ally Financial offered to "help" distressed homeowners by refinancing $25 billion in underwater mortgages. This noble gesture was prompted by a deal cut with State Attorney Generals across the country. The banks would be not be liable in civil, Federal or class action lawsuits and would pay a fine of $2,000 to 750,000 households who experienced "improper" foreclosure. Over 1 million households will benefit from the refinancing.

          Who wins from this deal? One million people get to stay in their homes. The lenders get mucho lawsuits off their backs. The economy benefits. The President looks better.

          However, lenders are "caught" but not chastened. Main Street remains the loser in all this. The two grand might be of little comfort to someone who has lost their home. Refinancing $25 billion might not seem like much in a housing market which has lost $700 billion in asset value. There is still $300 billion of principle in the pipeline which needs to be refinanced.

          Since 2007, 4 million households experienced foreclosure. These households may have experienced both predatory and fraudulent lending AND foreclosure practices. The deal and compromise by the banks are in essence an admission of guilt. The deal clarifies how banks drove homeowners into foreclosure, creating short term profits while pushing real estate asset values through the floor. Deflated real estate values are one major source of the down pressure keeping us in recession.

          Such practices continued until the deal was cut, but these have now been "reformed". Please forgive me if I don't trust the bankers charity or integrity. Banks paid into a pool to provide legal resources and defense for people undergoing foreclosure. That's what we need, more lawyers. In addition, banks are required to contact and offer to refinance remaining underwater household....I remain skeptical. 

          While the deal keeps the banks from liability against most civil litigation, individuals can sue the banks for specific maltreatment experienced. Task forces continue to work at both the State and Federal levels to make life unpleasant for the guys who caused and then leveraged the Crash. They soaked us both coming and going.