[Vision2020] Whores Keeping Their Knees Together

Art Deco art.deco.studios at gmail.com
Mon May 20 09:26:25 PDT 2013

   Behind the mortgage settlements from the housing crisis By Danielle
Published: May 19

Banks have paid less than half the $5.7 billion in cash owed to troubled
homeowners under nearly 30 settlements brokered by the government since
2008, delaying help to the millions of victims of discrimination and shoddy
lending that epitomized the housing crisis, according to a Washington Post
analysis of government data.

When the settlements were announced, with great fanfare, government
officials hailed them as the long-promised reckoning with the financial
industry. Regulators found that some banks had saddled borrowers with
unaffordable mortgages or assigned higher rates to minorities even when
they qualified for a better deal. Some banks were accused of having
employees “robo-sign” foreclosure documents without reading them or having
proper documentation.

But consumer advocates and lawmakers have grown increasingly frustrated by
the delays in releasing the settlement funds, which they say are making it
difficult for some borrowers to recover financially.

In 2011, Wells Fargo agreed to compensate up to 10,000 borrowers after the
Federal Reserve found the bank was steering them into subprime loans even
though they qualified for better mortgages. But no borrowers have received
money yet.

Last year, Bank of America agreed to pay some borrowers between $1,000 and
$5,000 for what the Justice Department called lending discrimination. The
agency said the bank illegally asked some would-be home buyers who relied
on disability income to provide a doctor’s letter verifying the severity of
their ailment. But it’s still unclear how many people will ultimately be
paid. There isn’t a full list of the victims.

The agreements are coming under increased scrutiny from state authorities
who are concerned the banks are not living up to their obligations to help
homeowners. The New York attorney general recently threatened to take Bank
of America and Wells Fargo to court to force the banks to comply with a
large national agreement to offer struggling borrowers help.

“These settlements are a reflection of the dismal response from the federal
government and the banks to consumers who got bad mortgages,” said John
Taylor, chief executive of the National Community Reinvestment Coalition, a
consumer advocacy group. “Their needs got pushed behind taking care of the

Banking industry officials and regulators say the scale and complexity of
the settlements have grown over the years, making them difficult to execute
quickly. They can involve multiple agencies, banks, lawyers and
consultants. In some cases, banks are still identifying people affected or
waiting for borrowers to respond to notifications of eligibility. There are
also a number of cases in which banks have yet to zero in on how much they
will pay out.

“There’s a common misunderstanding that all this information is readily
available and banks can just push a button and get the checks printed, and
that’s not the case,” said Gilbert Schwartz, a banking lawyer at Schwartz &
Ballen. “It requires thorough review, confirmation and validation that the
amounts and the people receiving it are accurate.”

In the meantime, borrowers such as Elizabeth Rizo, 40, have been waiting
for years. In 2009, GMAC Mortgage, which is now known as Ally Financial,
foreclosed on her two-story Tennessee home. The foreclosure occurred while
she was negotiating with the lender to lower her monthly mortgage payments,
a “dual tracking” process that is common among some mortgage servicers but
that regulators have attempted to stop.

“We woke up one morning and there was a man on our lawn taking pictures of
the house. He told us he had just bought the house at auction,” said Rizo,
who now lives in Redwood City, Calif. “We couldn’t understand, because we
were in contact with the bank the entire time.”

It wasn’t until last month that she received a letter from Ally, which had
agreed to compensate borrowers for improper foreclosures in a large
mortgage settlement, indicating that her case was under review. “I have no
doubt that we’ll receive something because what they did was so wrong,”
Rizo said.

It is still unclear how much she will receive or when. Ally officials say
the bank is making progress on reviewing such cases but isn’t ready to pay
anyone. They declined to comment on her case in particular.

In some cases, the money being provided will not be enough to address the
problems homeowners are facing.

Marta Cruz and her husband were among the 29,000 borrowers notified in
April by SunTrust that they were eligible for a portion of a $21 million
settlement the bank reached with the Justice Department. Prosecutors say
that from 2005 to 2009, the bank charged minority borrowers higher broker
fees and interest rates than white borrowers.

Cruz, 50, a nanny who lives in Germantown, is expecting between $500 and
$1,000 in restitution. But that won’t be enough to address her larger
problem: Cruz’s $325,000 home is now worth $180,000, and she is struggling
to make the payments of $2,100 a month. SunTrust has not been willing to
modify her mortgage to make the payments more affordable, Cruz said.

SunTrust declined to comment on Cruz’s case, citing customer
confidentiality, but said it was in compliance with the Justice Department
agreement. “Additionally, we work with clients experiencing financial
hardship regarding potential options to assist in maintaining home
ownership,” the company said in a statement.

Critics point to the 2011 agreement the Office of the Comptroller of the
Currency (OCC) and the Fed struck with more than a dozen mortgage servicers
as a prime example of the dysfunction. After regulators identified flawed
foreclosure processes, including shoddy paperwork, the servicers, including
Bank of America and JPMorgan Chase, agreed to assist homeowners.

But in order to determine how much each borrower was owed, the banks
planned to review each foreclosure one by one. After 12 months, no
homeowners had received a dime. But the eight consultants managing the
process on behalf of the banks were paid nearly $2 billion.

Regulators struck a new agreement with most of the banks involved,
including $3.6 billion in direct payments to homeowners.

“I think that the OCC, the Fed, greatly underestimated the complexity of
the task,” Daniel P. Stepano, deputy chief counsel for the OCC, told the Senate
banking committee at a
April. “The large number of institutions, independent consultants and
counsel involved in the process . . . required substantial regulatory

More than 3 million borrowers have received checks, some for more than

But when the first few checks were distributed in April, some bounced.
Another batch of checks sent to nearly 100,000 borrowers were for less than
they were owed. And despite the agreement’s big sticker price, more than
half of the borrowers affected
receive no more than $300.

There are also thousands of home­owners still in the dark about whether
they are entitled to any sort of relief. Ally Financial, One West and
Everbank did not agree to the revised settlement and are reviewing
foreclosures one by one.

One West declined to comment, and Ally said it is still reviewing the
contested foreclosures. An Ever­bank spokesman said in a statement, “We are
continuing with our independent review and expect that we will complete
that review by midyear.”

Problems are also emerging in the largest mortgage settlement — a $25
billion deal between state and federal authorities and five banks accused
of using forged paperwork to quickly foreclose on struggling homeowners.

The banks agreed to pay $1.5 billion directly to borrowers. No checks have
been sent, though the first are likely to go out later this month. It has
taken more than a year to find the correct addresses, verify information
and receive responses from all of the borrowers who lost their homes,
government officials said.

The loudest complaints about the settlement are coming from some of the
people who brokered it. This month, New York Attorney General Eric
Schnei­derman, one of 49 attorneys general involved in the deal, threatened
to sue Bank of America and Wells Fargo for failing to help struggling

The state prosecutor says he has received 339 complaints from homeowners
about the behemoth banks dragging their feet in processing loan
modifications that would lower their mortgage payments — a direct violation
of the settlement.

Officials at Bank of America and Wells Fargo have said they are looking
into the issues raised.

In spite of the complaints, some authorities say having a court-
appointed monitor has kept the settlement largely on track. The monitor,
Joseph Smith, is expected to release a report on lenders’ compliance with
the settlement agreement next month.

“There’s no middleman,” said Maryland Attorney General Douglas Gansler.
“Funds aren’t going into some bank’s escrow account and then drawn out from
there. It’s going basically from the court to the homeowner.”

Not all of the mortgage settlements have been problematic. It took
Ohio-based Community National Bank less than a year to deliver $299,288 to
151 customers who were allegedly forced to pay illegal referral fees on
mortgages they took out between 2005 and 2009, according to the OCC.

As for the Justice Department’s cases, Debby Goldberg, special project
director at the National Fair Housing Alliance, said, “Every­body, aside
from the banks involved, would like to see more money going to people, but
the settlements are pretty straightforward in the way they work.”

* *

Marlon Correa contributed to this report.

Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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