The Bryan Ellis Investing Letter – When lenders started to “talk turkey” to state attorneys general about their egregious foreclosure practices and lousy loan modification procedures, many homeowners thought that their troubles were over. After all, when the dust settled, the five biggest banks in the country had agreed to $25 billion in damages and restorative actions like principal reductions, loan modifications, and foreclosure-avoidance strategies in order to compensate for robo-signing and other “abusive” lending and collections practices. Unfortunately, while the state attorneys general celebrated and set up lots of “foreclosure counseling” outreach centers that they placed at the center of reelection campaigns and their own official webpages, the actual homeowners (and yes, we did warn you about this back when the settlement went through) got left by the wayside.
Take, for example, homeowner Craig Tate and his wife. Tate modified his loan in the wake of the foreclosure fraud settlement and reduced his monthly payments by $250. The savings made it possible for him to keep his home. Unfortunately, a few months later Bank of America notified the Tates that they owed $3,100 and would be facing imminent foreclosure because they failed to “sign on the right dotted lines and, because of [the resultant delays] the normal time frame allocated for a permanent modification had elapsed and the modification was declined.” Those are a Bank of America spokesman’s words[1]. The bank also refused to accept new paperwork with the proper signatures because, in the lender’s words via the eviction letter, the Tates “declined their services, which…made the modification process un-appealable.” After Tate contacted the media and the Consumer Financial Protection Bureau (CFPB), the lender did offer to allow the Tates to reapply from scratch.
While the Tates’ loan modification story is not unique, the bigger issue is that lenders simply are not keeping up their side of the bargain, and, quite frankly, neither are the elected officials that negotiated the settlement in the first place. Of the five lenders involved in the settlement, only one (Ally Bank) has completed the financial relief requirements laid out in the settlement, and homeowners and former homeowners across the country have been shocked to learn that in many cases their grievances have been valued at $350 or less – even when they unjustly lost their homes. Furthermore, in many cases lenders have been allowed to identify and rectify their own transgressions according to their own standards of review, meaning that there is little or no supervision of the process. Small wonder that many homeowners and politicians are investigating their options for taking the big banks back to court for further restitution.
WHAT WE THINK: As long as the attorneys general or other politicians are involved in this process, homeowners are never, never, never going to truly be the central focus no matter what anyone says. Politicians are lining government coffers by trotting out homeowners and their horror stories, but they are not actually working hard to protect those homeowners or garner restitution for former homeowners who have already lost their properties. Class action suits might change the situation, but this entire fiasco has made cynics of even the most optimistic BEIL analysts. We hate to say it, but we have to say it: No one cares about the homeowners and $25 billion basically wasted just proves it.
Do you think that the foreclosure fraud settlement has done any real good? Especially if it helped you, please leave a note in the space below.
Source: The Bryan Ellis Investing Letter
