Florida homeowners might have a new definition for bank robbers… With details now coming to light on a possible deal between banks and the state governments, it’s seems the chances of these financial institutions being held accountable is less and less likely.
South Florida law blogger and foreclosure attorney Roy Oppenheim strongly opposed the deal, which is being sought by state Attorneys General including Florida’s Pam Bondi, in a recent FOX newspiece. Now New York Times columnist Gretchen Morgensen has backed up Oppenheim’s assertion that the deal, in its current proposed form, is not worth the potential relief that it might provide to homeowners.
Oppenheim called the reported $20-25 billion dollars in principal that homeowners would be forgiven for “a drop in the bucket” and now Morgensen reports that deal would only cost the banks between 3.5 and 5 billion dollars in actual cash, to be paid by about a dozen or so institutions. The rest of the banks’ penalties would come in the form of credits.
While HUD secretary Shaun Donovan insisted in the Times article that the settlement will hold banks accountable, both Morgensen and Oppenheim remain unconvinced. Oppenheim told FOX the deal isn’t worth a “deal with the devil”, and that it robs homeowners of the chance to bring legal action against the banks.
And will it really provide the relief homeowners are seeking?? The Times piece points to a 2008 settlement involving Countrywide Financial that promised $8.7 billion in relief to borrowers in Illinois and California that failed to deliver anything close to that. And California is one of several states that has backed out of this current negotiation.
It’s also worth noting that not all troubled mortgages would be covered under this proposed settlement, according to Morgensen. People with loans from Freddie Mac and Fannie Mae would not be able to get their principals reduced, leaving many homeowners out of luck. Only privately funded mortgages would be eligible.
Yet another strange twist to this deal is that any homeowner who lost their home since 2008 would get $1,500 from the banks, the New York Times reports, costing the banks a total of $1.5 billion. As Morgensen rightfully points out, this is far less than any wrongfully foreclosed on homeowner deserves, and more than anyone who was legally foreclosed on should receive. This incentive makes no distinction between people who were victims of mortgage fraud and those who were not.
Bottom line, a deal still seems likely, and all the parties involved emphasize they are seeking a deal which is fair to both sides, but Oppenheim cautions that can’t happen unless there are greater repercussions to the banks or should we say bank robbers?
Florida Attorney General Bill McCollum has issued subpoenas to three South Florida foreclosure law firms seeking detailed financial, client and employee records.
