Stench Rising in Foreclosure Settlement

By Pam Martens: February 20, 2012

Beginning on the evening of February 8 and throughout the next two days, every newsroom in those expensive media real estate offices was running with the government press release that the  $25 billion agreement between the U.S. Department of Justice and 49 state attorneys general was a “foreclosure” settlement.  Turns out, it was a “mortgage fraud settlement” made before the public could be informed of the depths of the mortgage fraud and how it was collusively perpetrated. 

Here’s a sampling of how the story was spun.  (Italic emphasis added.) 

Feb. 8 (New York Times) “…It is part of a broad national settlement aimed at halting the housing market’s downward slide and holding the banks accountable for foreclosure abuses.” 

Feb. 10 (Bloomberg) – “Bank of America Corp., JPMorgan Chase & Co. and three other U.S. banks reached a $25 billion settlement with 49 states and the federal government to end a probe of abusive foreclosure practices stemming from the collapse of the housing bubble.”

Feb. 10 (Time Magazine) — Headline: “Three Cheers and Three Jeers for $25 Billion Foreclosure Settlement

Feb. 9 (Wall Street Journal Blog) Headline: “Finally We Have a Foreclosure Settlement.”  Lead paragraph: “Government officials have finalized an agreement worth as much as $26 billion with five major banks, capping a yearlong push to settle federal and state probes of alleged foreclosure abuses by lenders, our colleagues at the WSJ are reporting.”

Corporate media failed to question why the actual settlement and the executive summary were listed as “coming soon” on the official web site of the settlement monitor.  They also failed to notice that the official web site did not say “National Foreclosure Settlement” but rather “National Mortgage Settlement.” 

It is now 11 days after the so-called historic settlement and the actual terms are still missing from that web site ( but we do at last have the executive summary.  That executive summary, in just a few brief words, tells us just how badly the country has been taken – once again – by the big Wall Street banks. 

The executive summary reads: (Italic emphasis added.) 

“The proposed Release contains a broad release of the banks’ conduct related to mortgage loan servicing, foreclosure preparation, and mortgage loan origination services. Claims based on these areas of past conduct by the banks cannot be brought by state attorneys general or banking regulators.” 

Mortgage loan origination is the area where the bulk of the fraud occurred and caused the homeowner to not be able to afford to make the mortgage payments, resulting in the foreclosure.  One of the fraudulent tactics was to promise the borrower a conventional fixed rate mortgage and then do a bait and switch into an adjustable rate mortgage (ARM) on the day of closing.  If borrowers were paying attention and balked at the switch, they were told they could always refinance to a lower rate when the mortgage was about to reset.  When the mortgage reset, the payment frequently increased by hundreds of dollars, sometimes more than doubling the original monthly payment. 

Now we are learning that behind the scenes, unknown to most of the general public, there has been documentation emerging among federal and foreign regulators that the key benchmark interest rate (Libor) used to reset many of those adjustable rate mortgages was collusively rigged by big Wall Street banks. 

Stay tuned for more on this.


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