The Banks' "Penalty" To Put Robosigning Behind Them: $300 Per Person

Back in late 2010, there was much hope that as a result of the unfolding robosigning "Linda Green" scandal, not only would banks would be forced to fix their ways by incurring crippling civil penalties (because not even the most optimistic hoped any bankers would ever face criminal charges for anything), but that the US housing market may even reprice to a fair price as for a brief moment there nobody had any idea who owned what mortgage. Ironically, what did end up happening was to provide banks with a legal impetus to slow down the foreclosure process to such a crawl that an artificial backlog of millions and millions of houses at the start of the foreclosure process  formed, bottlenecking the foreclosure exits even more (as described in Foreclosure Stuffing) and in the process providing an artificial, legal subsidy to housing prices manifesting itself best in what is erroneously titled a "housing recovery" for many months now.

What this did was to allow banks to aggressively reprice the mortgage-linked "assets" on their balance sheets much higher, and in the process unleash much capital, primarily for bonus and shareholder dividend purposes. Yet this epic self-benefiting act did not come without a cost. Yes, it turns out the banks will have to fork over some out-of-pocket change to put not only the robosigning scandal behind them but the indirect housing subsidy from which they have benefited to the tune of hundreds of billions. That quite literally change, which is what the final cost of the release and bank indemnity amounts to, is roughly $300 for each of the affected borrowers!

American Banker explains:

Mortgage servicers tied to the independent foreclosure review settlement will begin sending the first wave of $1.2 billion in checks to troubled borrowers on Friday, federal regulators said.

More than 4 million borrowers will be compensated as part of the amended settlements between the 13 mortgage servicers and the Office of the Comptroller of the Currency and the Federal Reserve Board. The regulators said Tuesday that payments will be sent out in waves with the first 1.4 million checks totaling $1.2 billion sent out this week. By the end of the month, about 90% of the cash payments will be sent with the final wave ending in mid-July.

Regulators also released further details in how it broke down payments for each borrower and how many people fit into each category — a question that has come up repeatedly since the agencies announced the settlement earlier this year. It has identified more than 3.9 million borrowers that will receive payments from $300 up to $125,000 depending on their status of foreclosure or modification. Based on the chart released by regulators Tuesday, more than 60% of the affected borrowers, or 2.4 million, will receive the lowest amount of $300. Only 1,135 borrowers are receiving the maximum amount.

Where specifically does the $300 number come from?

Regulators reached the mortgage settlement in January after calling off a prolonged and costly independent foreclosure review. The settlements call for a total of $3.6 billion in cash payments to borrowers who faced foreclosure in 2009 or 2010 and were serviced by one of the 13 companies. Those companies are: Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo. Only Goldman Sachs and Morgan Stanley did not provide payment information but it's expected to be announced "in the near future," the regulators said.

Obviously one can't have "independent reviews" in the US - especially prolonged and costly ones:  why, there is so much less opportunity to game the outcome for the benefits of those who control the same regulators who as the SEC revolving door has shown, are entirely controlled and in the pocket of Wall Street. Which is why a quick and dirty settlement was best, if only for the banks. And there is your "Linda Green" release.

So congratulations America: you allowed yourself to be pushed over for the measly sum of $300 per person. Even 2000 years ago a comparable act of betrayal cost some 30 pieces of silver. But at least this time a few Obamaphones were the defining variable that tipped the scales of "justice" into their final resting place.

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