Didn’t you just know yesterday, when it was announced that U.S. banks had agreed to a $26 billion bank settlement over foreclosures, that somebody was making out like a bandit?
The banks are supposed to be paying for alleged transgressions leading to the housing market crisis. The beneficiaries are home “owners,” who are allegedly facing unjust foreclosures. But they don't really own the houses because–small matter–they haven't been sending in their payments. Charles Gasparino of the New York Post nails what happened yesterday (justifying my worst suspicions):
It’s hard to imagine a less-deserving group of victims: people who gambled during the housing bubble by purchasing homes with borrowed money that they knew or should have known they couldn’t afford, but who are now able to stay in the homes they should have never bought because of what amounts to paperwork errors on the part of the nation’s big banks.
But that’s essentially what went down yesterday, thanks to the Obama administration’s latest re-election gimmick — the nationwide mortgage-foreclosure settlement.
I remember reading a story in the Washington Post when the housing bubble was bursting. It was about a family that had come to the U.S. from Latin America and had done well. They were prospering. But then they saw a big, fancy house they wanted. Their lawyer (or was it their realtor?) advised against buying the house. Beggedthem not to do it. But they didn’t listen.
Because of the purchase of a house bigger than they needed, the family ended up in debt and unable to make mortgate payments. Why even the swimming pool was grown over with vines!
What struck me as odd about this story was that it was presented as a sob story about people who were completely innocent of any responsibility for their predicament. The reporter never seemed to think that somebody should have said, “Whoooa, we can’t afford this house.”
This $26 billion bailout is to help home “owners” who never said, “Whoooa…” The Obama administration regards them as victims. They were pushed into buying these houses by unscrupulous bankers!
The people benefiting from this settlement don’t deserve it:
Or as banking analyst Dick Bove put it: “What this settlement did was to help 1 million people who were deadbeats.”
The deadbeats are getting the bailouts because of a technically that should not absolve them in any way of taking on debt they could not afford:
Why are these deadbeats getting bailouts? Aside from election-year politics, at issue is the foreclosure practice known as “robo signing” — a procedure in which low-level bank employees, without direct authorization, approve perfectly legal foreclosures on a bank’s behalf.
The foreclosures themselves were legal; the only apparent illegality is that the banks streamlined the foreclosure process, with clerks signing the bank officer’s name on legal documents.
These bailouts, which keep people from fully facing the consequences of their actions in a timely manner (they didn’t robot sign, did they?), promote irresponsibility and prolong the sluggishness of the housing market.
I can’t imagine what effect a settlement of this sort has on the banking industry in the U.S., but it can’t be good.