Adam Levitin | The Multistate Foreclosure Settlement

The Multistate Foreclosure Settlement

The New York Times came out with a strong editorial urging state AGs and the Administration not to rush into the proposed multi-state settlement deal. I think it’s worthwhile reviewing what we know about the deal and the arguments for and against it.  Let’s start with the facts that we know.  There aren’t many that are publicly confirmed; the Administration, the AGs leading the multi-state settlement, and the banks very much want to avoid public comment on the deal–they want to present it as a fait accompli.  As a result, there hasn’t been definitive reporting on the contents of the term sheet currently circulating among AGs.  It appears, however, the the deal has the following features.

Some 16 banks that do mortgage servicing will:

  1. contribute a total of $5 billion in cash;
  2. contribute total of mortgage assets with a face value of $20 billion, but a market value considerably lower;
  3. agree to uniform servicing standards.

In exchange, the state and federal authorities signing on would give the banks:

  1. a release of all servicing claims;
  2. a release of all origination claims, including discriminatory lending claims;
  3. a release of all MERS claims against the banks, leaving MERS Inc. as a potential defendant for MERS related issues (MERS Inc. has no financial assets of note.)

Perhaps $20B of the money would be used for principal write-downs and for interest rate reductions (via refinancings, which have the added benefit of relieving the banks of rep and warranty problems on the old loan) on the loans owned by these banks, which is less than 10% of the first lien loans in the U.S.

Let’s start with the argument for this deal and then consider why it is wrong.

The defenders of the deal make no bones that it is perfect.  Instead, they make two related arguments for the deal:  Too-Big-to-Fail and Exigency.

  • The Too-Big-to-Fail argument is that the US housing market is too fragile and can’t afford anything upsetting status quo; it is necessary to close some sort of deal for stability’s sake.
  • The Exigency argument is that every day of delay means more foreclosures, so it’s imperative to close the deal fast to get help to homeowners.

So what’s wrong with these arguments?

Find out here…


7 Responses to “Adam Levitin | The Multistate Foreclosure Settlement”
  1. lvent says:

    Unless they stop powder-puffing the real issue which is the fact that there is no legal fix for what the GSE’s and Wall Street did..the economy will never recover. Time to give the 99% a clean slate and return all of our stolen wealth … Honestly I don’t give a damn about the foreign investors at all…Selling interests to the foreigners in the American People was an act of treason by the U..S GOVERNMENT…and I don’t give a F–K about all..Throw the Wall Street and the GSE crooks in prison and throw the traitor Politicians in Guantanamo that is where they all belong…The American people deserve a clean slate and full monetary compensation for what these crooks have done…. The U.S. GOVERNMENT should seize all of these crooks overseas bank accounts and take back all they have stolen from the 99% and return it to us..

  2. Ron Moss says:

    Fortunately the Attorney General in my state wors for the State and not me. He has no authoritu to settle witrh and big bankers on my behalf.

  3. pendinglawsuit says:

    Please visit the following website with a nationwide audience.


    Thank you.

    Barry S. Fagan Esq.

  4. talktotennessee says:

    Anyone who believes that 20B will trickle down to homeowners, I got a bridge in Brooklyn!
    Go ahead and sue MERS, the banks will pull support and leave it as empty as the shell it is. If given amnesty or a free ride look for banks to make a structure change that will leave victims no recourse. I sincerely pray that Biden will expose the MERS shell for what it is, a ‘construct’ to conceal banking crime.

  5. Granicus says:

    I might add, if this goes through every AG that took part in this settlement should be disbarred.

  6. Granicus says:

    Wow, how generous, 20B in bad mortages. What a scam. The banks are off the hook and the public gets toilet paper in return. And the best part is that we the public get to sue MERS, that shell of a company with no assets.
    I’m speechless……………………………………………………………

  7. talktotennessee says:

    No wonder there is no public discussion on the settlement? Even a rank amateur can see it is fatally flawed and only releases banks with a tip of the hat to their fraud. Where do the 20 billion mortgage backed assets that aren’t really worth 20 Billion, go? Who administers the payout and what is the criteria? This is a farce!
    The only answer is to hold banks accountable for their fraud and exact a similar or higher amount in penalties.
    No, the banks aren’t too big to fail.
    The Government is bigger, at least it is before the Republicans get to it, and the government can take over any bank that can’t handle their business and should!
    The housing industry is too big to fail! HOGWASH!!!!
    It has already failed! It continues to fall, and even now home values are dropping in areas by 40-50-60%. and more in others. I am appraising houses now where there is NO market value for the improvement (house) on the lot. When one can buy a 2 BR 2 Bth house for $10,000 to 14,000 cash, friends, the lot cost the builder 15K or more than that and the property is currently assessed higher than market. As these continue to default what do people think this does to the city’s tax base?
    There are no owner occupant buyers for these homes. The market goes to investor sharks looking for cash bargains at pennies on the dollar. We have interest rate lows below 4% but people can’t qualify that would buy this type home. Foreclosures are escalating again as banks feel they have weathered the robo-signing fraud unscathed. There is no drum roll, no special prosecutor or investigator. After all, all they had to worry about was Washington, DOJ and the Courts or the Attorneys general. Court action is unimpressive, Washington is involved in an election and solely in that endeavor. Attorneys general, showing a hint of political bias. Housing concern is over, at present. Short-sighted and foolish.

    It makes one’s blood boil to read the potential settlement and know the banks are laughing all the way to their “bank” because they pulled it off and they now expect to pick up foreclosures while the parties are busy doing something else. Fast forward when the tax base is so gutted cities and states are cutting services plus housing inventory gluts the market and taxpayers are paying to gut or care for derelict housing. Can’t you see everyone wringing their hands saying, if only we had known how bad it would be we could have done something !!! Can you hear the rhetoric now in the inevitable Congressional hearings. “Oh woe as me” bad, bad. Look what you did while we weren’ looking. Wink, Wink!! Slap, slap!!! Now don’t do that again fellas, please. . . .

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