In a well-researched email for CREDO Action, Becky Bond sets up her piece with the following statement: “Wall Street bankers fraudulently ad illegally foreclosed on your house. You get $2,000.” With an average mortgage of $180,000, the homeowner gets a little over one percent of the mortgage amount.
Bond belittles the impressive-looking amount of $26 billion announced by President Obama in concert with many state attorney generals. She contends that based on her research, an estimated $10-20 billion in the deal for reduction of the mortgage principal would reduce by about only two percent the $700 billion destroyed during the financial crisis. Banks would pay about $5 billion out of their own pockets. Investors and taxpayers will be hit the hardest and they didn’t cause the robo-signing nor instigate other illegal activity.
Bond writes that one in five underwater Americans owe their banks an average of $50,000 each, creating a very large negative equity.
The size of the home mortgage deal is less than one tenth the size of the settlement reached with tobacco companies, which in today’s dollars is $350 billion. It also is dwarfed in comparison to the $1.2 trillion provided to Wall Street banks by the Federal Reserve. Bond is also concerned by the national government’s bad record in enforcing settlement terms with Wall Street banks.
Banks have profited from taking illegal shortcuts. According to the Consumer Financial Protection Bureau, the largest mortgage banks saved $20 billion by use of illegal shortcuts. There has been no full investigation of the robo-signing scandal nor what Reuters has called “copious evidence” of “widespread forgery, perjury, obstruction of justice and illegal foreclosures….”
It was either ABC or CBS evening news that interviewed a robo-signer. He admitted to signing up to 4,000 documents a day and there were days when he may have signed for five or six bank vice presidents. Under questioning, he acknowledged having no prior bank experience and no special skills, other than being able to sign his name a lot.
The bottom line is that widespread lawlessness of banks is whitewashed and no banker is under risk of an indictment. Failure to impose a real penalty for unlawful behavior will encourage other bankers to try to get away with illegal shortcuts in the future.
A Final Note: In his State of the Union speech, President Obama said that “responsible” underwater homeowners would get $3,000. Apparently, that amount has been scaled back to $2,000, which, as a New York Times financial writer has said would be great if you had a $2,000 mortgage.