A group of state attorneys general have been working on a settlement with the nation’s biggest banks, under which the banks would devote a certain amount of money to foreclosure relief, in exchange for avoiding litigation over their myriad abuses that arose during the foreclosure fraud scandal (including the use of “robo-signers.”)
However, the settlement is on shaky ground after federal regulators broke with the AG’s and cut their own (weak) deal with the banks, and several Republican AG’s publicly questioned whether the banks should have to engage in any foreclosure prevention efforts at all, despite their mortgage servicing abuses.
Previously, the Republican attorneys general of Virginia, Texas, Florida, South Carolina, Oklahoma, Nebraska, and Alabama sided with the banks, with radical Republican Attorney General Ken Cuccinelli (VA) deriding foreclosure prevention as “welfare.” Now, an eighth Republican AG, Georgia’s Sam Olens, has also taken the banks’ position:
Georgia Attorney General Sam Olens said he has “significant concerns” about a proposal to reduce loan balances for some homeowners as part of a settlement of a nationwide foreclosure probe, joining at least seven other states that have criticized such a plan…“You’re declaring in advance who the winners and losers are,” Olens said. “I’m a little concerned that this process disengages the normal market forces.”
In reality, the proposed settlement lets the banks off too easy, as the loan reduction amount that has been floated (about $20 billion) wouldn’t be enough to seriously alleviate pain in the housing market. And any settlement that doesn’t involve banks reducing loans amounts to letting the banks off the hook for their prior abuses and counting on vague promises that they’ll avoid such abuse in the future.
A recent report from the International Monetary Fund showed that the effect of more aggressive loan reductions on bank balance sheets “is likely to be limited,” and several of the banks involved in the settlement discussions are back to making sky-high profits. But instead of pushing for help for homeowners, Republican AG’s are siding with the banks, advocating that they receive a slap on the wrist for their flagrant violations of the mortgage servicing process.
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