Frustration with the failed execution of various weakly-constructed legal settlements stemming from widespread foreclosure fraud bubbled over today into a protest at Justice Department headquarters that culminated in homeowners being arrested.
Using tactics and rhetoric familiar from 2011’s Occupy Wall Street demonstration, a group of activists and foreclosed homeowners marched on the Justice building in downtown Washington, D.C. According to tweets and photographs from activists on the scene, protesters moved past a police barricade and attempted to establish a sit-in, at which point police began arresting homeowners and activists.
Why the renewed fervor? Despite agreeing to various settlements since 2008 requiring a total of $5.7 billion in payments to homeowners, “banks have paid less than half” that amount to date, according to the Washington Post:
Critics point to the 2011 agreement the Office of the Comptroller of the Currency (OCC) and the Fed struck with more than a dozen mortgage servicers as a prime example of the dysfunction. […]
After 12 months, no homeowners had received a dime. But the eight consultants managing the process on behalf of the banks were paid nearly $2 billion. […]
Problems are also emerging in the largest mortgage settlement — a $25 billion deal between state and federal authorities and five banks accused of using forged paperwork to quickly foreclose on struggling homeowners.
The banks agreed to pay $1.5 billion directly to borrowers. No checks have been sent, though the first are likely to go out later this month.
While banks have been slow to fulfill the meager direct payments provisions of the settlements, they’ve spent much more heavily to get properties empty and ready for resale.
These settlements are very small in relation to the problem they’re meant to ameliorate and the allegations they’re meant to justly resolve. Even if the banks had complied with alacrity, the $5.7 billion total direct payments to homeowners tallied by the Post pales in comparison to the total harm caused by “robo-signing” and other forms of mortgage origination and foreclosure fraud.
New York Attorney General Eric Schneiderman, a primary negotiator of the 2012 settlement, has announced he will sue Wells Fargo and Bank of America for failure to comply with the terms of that $25 billion package. But just $1.5 billion of that settlement was ever intended to come as direct compensation to “robo-signing” victims and other wrongfully foreclosed homeowners.
The total value of underwater mortgages in the market when that settlement was finalized — three years after the financial crisis — was estimated at $700 billion. The 2012 settlement was divisive at the time, with critics arguing it was insufficient and designed in such a way that banks could abuse its terms. Subsequent settlements have been similarly afflicted and ineffective.