Rep. Mason proposed a bill yesterday that would forbid Gov. Scott “Darkseid” Walker from raiding Wisconsin’s mortgage settlement funds, meant to help out struggling families affected by the foreclosure crisis, to pay for a projected budget lapse.
Yeah, the mortgage settlement failed miserably in its job to force banks to pay for the devastation they unleashed – but at least somebody’s making sure that whatever measly funds were allotted to homeowners aren’t being used to cover up the fact Walker’s running a deficit.
But just to be clear, this is how badly the settlement sucks (thanks to Yves Smith):
1. We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan… The cost is also trivial in comparison to the average loan, which is roughly $180k, so the settlement represents about 1% of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.
2. That $26 billion is actually $5 billion of bank money and the rest is your money. The mortgage principal writedowns are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s. Refis of performing loans also reduce income to those very same investors…
5. The enforcement is a joke. The first layer of supervision is the banks reporting on themselves. The framework is similar to that of the OCC consent decrees implemented last year, which Adam Levitin and yours truly, among others, decried as regulatory theater.