The UK Financial Times disclosed and several blogs picked up the real story behind the Obama Administration’s nd States’ Attorney Generals bank settlement of last week. Yesterday, The Daily Economist posted the following about the Financial Times findings related to the bank settlement stemming from the financial crisis and major banks servicing problems,
“Well, for the taxpayers, it looks like it wasn’t so great a deal after all as new findings show an Obama Administration program will allow the banks to pay the states out of funds provided by taxpayers.
US taxpayers are expected to subsidize the $40bn settlement owed by five leading banks over allegations that they systematically abused borrowers in pursuit of improper home seizures, the Financial Times has learnt.…However, a clause in the provisional agreement – which has not been made public – allows the banks to count future loan modifications made under a 2009 foreclosure-prevention initiative towards their restructuring obligations for the new settlement, according to people familiar with the matter. The existing $30bn initiative, the Home Affordable Modification Programme (Hamp), provides taxpayer funds as an incentive to banks, third party investors and troubled borrowers to arrange loan modifications. – Financial Times via ZerohedgeHAMP is a program under the Obama administrations Making Homes Affordable program, and is taxpayer funded.”
“state officials involved in the talks had had misgivings about allowing the banks to use taxpayer-financed loan restructurings as part of the settlement. State negotiators wanted the banks to modify mortgages using Hamp standards, which are seen as borrower-friendly, but did not want the banks to receive settlement credit when modifying Hamp loans. Federal officials pushed for it anyway…”
“It turns the notion that this is about justice and accountability on its head”.
“Mortgage servicers will not be able to use principal reduction tax dollars under the Home Affordable Modification Program as “credits” toward the foreclosure settlement with the attorneys general”
“Not every dollar the servicers reduce from the principal will be “credited” from the $17 billion the banks agreed to. For every dollar forgiven, roughly 50 cents or less will be credited under the $17 billion number. Officials said the settlement would ultimately result in an estimated $45 billion in total principal reductions.”
