The Department of Justice, HUD and State Attorneys General are sure proud to have reached a settlement with five banks (Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally) over the abuses in real estate foreclosure practices that plagued homeowners and the banks themselves. Is the settlement a triumph or simply window dressing? I’d say somewhere in between – and thus the very definition of a “settlement”.
First, forget the number: $26 billion. It sounds like a tremendous amount of money and it is – but spread throughout the country, it is a tiny percentage of what is surely the nation’s multi-trillion dollar residential real estate market. No, the crux of the settlement is whether it will change practices in the future. Will banks respect homeowners and the court system? Will they not blithely in the future offload their responsibilities to “processors” and claim they had no control over their conduct?
Hard to know. From where I sit, no amount of money is enough to get people’s attention. What works far better is the real threat of criminal prosecution. Mortgage processing companies working for these large banks blatantly committed fraud on our court system by submitting time and again, without fear of retribution, forged – yes forged – foreclosure papers. Time and again, they signed off in court on documentation that they had lost or that may never have existed. Such reckless conduct is never appropriate, but certainly not when you are doing it: a) to seize someone’s home; and b) before a judge or judicial officer.
I understand as well that homeowners who purchased a home they could not afford share some of the blame for this widespread debacle, but this settlement is about the foreclosure practices of our nation’s largest and most powerful banks. The value of all homes will be enhanced far more than $26 billion if trust and confidence is restored to this critical market place.
I would have much rather seen a $6 billion or $600 million settlement that included a criminal indictment or two or three. Even if the targets are exonerated of charges, the risk must exist for all individuals working in the foreclosure food chain – from top to bottom. Sadly it takes the reasonable risk of a criminal sanction for to keep the system working fairly. And not just processors; the guys at JPMorgan Chase or Citibank that looked the other way too. They need to be indicted if it can be shown they knew of and approved some of the mortgage shenanigans that went on for too long. By targeting a few bad actors, the whole sector will step in line. Along those lines, some enhanced whistleblower protections would help too.
For once it really is not about the money.