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Anonymous ID: dbcf81 Jan. 27, 2019, 7:41 p.m. No.4934996   🗄️.is đź”—kun

for those that do not know

 

Kamala Harris Tells Big Lie: That 2012 Mortgage Settlement Was a Good Deal for Homeowners

 

The Big Whopper season is already upon us, in the form of presidential aspirants telling egregious lies about their track records. The Wall Street Journal tonight covers a section from Kamala Harris’ new book, in which she touts what a great deal she got for California homeowners in the so-called Federal-49 state National Mortgage Settlement in 2012.

 

The officials who played meaningful roles in the mortgage settlement negotiation should be run out of public life, rather than failing upwards, as Harris has. Hopefully, the millions who lost their homes to foreclosure will vigorously oppose her Presidential bid. But being a successful politician apparently means having no sense of shame.

 

Background: Why the National Mortgage Settlement Was a Bank Enrichment Scheme at the Expense of Homeowners and the General Public

 

In fact, as we and many others, like Dean Baker, Matt Stoller, David Dayen, Marcy Wheeler, Tom Adams, and Abigail Field recounted at the time, the settlement was a sellout to banks, a “get out of liability almost free” card. Due to widespread and probably pervasive corners-cutting during the mortgage securitization process, it appeared that the overwhelming majority of mortgages that had been securitized since the refi boom of 2003 had not had the mortgages conveyed to the securitization trusts as stipulated in the pooling and servicing agreements that governed these deals. Because these deals were designed to be rigid, for the ~80% that elected New York law to govern the trust, there was no way to straighten out these securitizations after the fact. Georgetown law professor Adam Levitin called these agreements “Frankenstein contracts” and argued that what had happened was “securitization fail,” that the securitizations had never been properly formed and thus the investors had bought what amounted to legal empty bags. Mind you, someone did have the right to collect the interest and principal from the mortgages, but that “someone” didn’t appear to be the servicers acting on behalf of the securitizations.

 

Nevertheless, in an early manifestation of what Lambert later called “Code is law,” everyone acted as if things had been done correctly. And weirdly, this might never have become a problem were it not for a tsunami of foreclosures. The dirty secret of mortgage servicing was it had been set up to be a high-volume, highly routinized business, which it could have been if servicers were dealing with on-time payments. But every time a servicer had a portfolio with a lot of delinquencies and defaults, it wound up engaging in a lot of fraud because it wasn’t paid enough to foreclose well, and certainly not enough to modify mortgages, as banks had done as a matter of course back in the stone ages when they kept mortgages on their books.

 

The securitizers and servicers all acted as if they could do the paperwork needed to convey the mortgage to the trust properly if and when they needed to foreclose. The wee problem with that was that for a whole bunch of good legal reasons we won’t bore you with (but we covered in gory detail back in the day) the mortgages had to have gotten to the trust by a date certain….which was inevitably well before the foreclosure. Only a time machine could fix this problem.

 

Servicers and foreclosure lawyers engaged in all sorts of creative frauds to try to make everything look OK. But with servicing so automated, botched, and too often deliberately abusive, quite a few of the people being foreclosed upon should have been salvaged. It would have been better for everyone, the investors, the homeowners, and the communities, except for those servicers (well, there was another bad incentive that we’ll get to in a minute). And many of the people who were foreclosed upon had missed only a payment or two, or would have been able to remain current with only a modest payment reduction. But some servicers like Wells Fargo would “pyramid” fees, impermissibly deducting a late fee first from borrower’s payment, guaranteeing that one late payment would result in all future payments being “short” and therefore late too, leading to more late fees.

 

rest at

 

https://www.nakedcapitalism.com/2019/01/kamala-harris-tells-big-lie-2012-mortgage-settlement-good-deal-homeowners.html