A Bailout by Another Name // New York Times

Edward DeMarco

Fannie Mae and Freddie Mac own more than half of the mortgages in the United States.  This has lead many people to push for these two government controlled entities to offer principal write downs like the banks that were part of the National Mortgage Settlement.

Ed DeMarco, the acting director of the Federal Housing Finance Agency and overseer of Fannie Mae and Freddie Mac, has resisted principal write downs as not in the best interest of taxpayers.  Members of Congress disagree.

Representative Barney Frank, the Massachusetts Democrat who supported Fannie Mae almost to its collapse, has called for Mr. DeMarco’s resignation because he is “too rigid” on the issue. Representative Elijah E. Cummings, a Maryland Democrat and ranking member of the House Committee on Oversight and Government Reform, told a field hearing in Brooklyn last week that Mr. DeMarco “may be the biggest hurdle standing between our nation and the recovery of our housing market.”

The title of the article refers to the following explanation of how the requested principal reductions by Fannie and Freddie would constitute and bailout for private banks.  Many banks hold second liens on the same properties for which Fannie and Freddie either own the first mortgage or have guaranteed. If principal amounts on these first mortgages are reduced while leaving the second liens intact, those seconds become much more likely to be paid off over time. With no principal reduction, the banks would have to write off many of those second liens.


Mortgage settlement leaves most homeowners to fend for themselves // MSNBC

At the time this article was written it was not know that BoA would independently be required to provide principal write-down to 200,000 mortgage holders. This graphic illustrates the numbers of delinquent investor-owned mortgages serviced by BoA.

This article, written before the actual terms of the agreement were made public, presents the opinion of experts that think that the mortgage settlement will do little to improve the housing market.  Even if the most optimistic goals of the architects of the agreement are reached the amount of relief provided will only equal 5% of the total underwater value of mortgages in the United States.  Also, because the agreement only binds the five banks that joined the agreement, and not Fannie Mae or Freddie Mac (owners of over 50% of mortgages nationwide) a few people will receive dramatic help, but the vast majority will not be helped at all.


National Mortgage Settlement Documents Lack Detail On Banks’ Alleged Misdeeds // Huffington Post

The settlement documents filed with the federal court provide little detail about the misdeeds government investigations uncovered.  But the documents devote hundreds of pages to detailing how different types of relief will count toward the banks meeting their obligations under the settlement.

The banks did not admit to the allegations laid out in the complaint as part of the settlement, but the government said its intention was to “remediate harms allegedly resulting from the alleged unlawful conduct.”

This article does provide a little more detail on the requirements for principal reductions.  30% of the relief provided under the settlement documents must be in the form of principal reductions for homeowners who owe 175% of their homes value.  Banks are expected to bring a borrower’s monthly payments to within 31 percent of a borrower’s income, and establish a new loan value that is no greater than 120 percent of the value of the home.


HUD Secretary praises Maryland’s decision not to divert settlement funds // Baltimore Sun

This article from the Baltimore Sun discusses Maryland’s decision to not use funds from the National Mortgage Settlement to plug holes in the state’s budget , but to reserve the funds for there intended purposes.  HUD Secretary Shaun Donovan commented on Baltimore’s decision and criticized other state’s proposed use of the money.

“The settlement makes very clear that the intention of this funding is to be used to help homeowners stay in their homes, to help communities recover, and yet we have attorneys general in some states, governors in some states, legislatures, that are trying to divert this funding away from the intended purpose to fill gaps in state budgets,” Shaun Donovan said.

He pointed to Virginia as an example. The commonwealth’s General Assembly — given the right to decide by Virginia’s attorney general — is discussing a plan to send the lion’s share of its $66 million to local governments for education. Officials there said local budgets took a pummeling as the mortgage crisis reduced property-tax collections.


Cleveland To Use National Mortgage Settlement Money To Demolish Homes // Huffington Post Business

The National Mortgage Settlement awards money to the States that is intended to be used to help struggling families stay in their homes.  Some states are using this money for other purposes.

This Article from the Huffington Post discusses Ohio’s decision to use $72 million of its $335 million to demolish abandoned homes in the  greater Cleveland area.

Cleveland and the surrounding unincorporated area has 23,000 abandoned homes.  Many of these homes are bank owned.  When the bank took over ownership of the homes they made no effort to maintain the properties, which became health and safety risks.

Cleveland and other cities have taken the banks to court to force them to maintain the properties but have so far been unsuccessful in getting a court to require the banks to maintain these properties.

See the full article from the Huffington Post Business below.


Other states’ use of settlement funds not directly related to foreclosure crisis:

Missouri Gov. Jay Nixon laid claim to a chunk of the money to avert a huge budget cut for public colleges and universities.

In Pennsylvania, where a fourth straight budget deficit is projected, Democrats are pressing the Republican-run attorney general’s office to use some of its $69 million payment to offset $2 billion in cuts to programs that benefit education, the elderly, disabled or poor.

Vermont plans to use $2.4 million from the settlement to help balance its budget.

Maryland Attorney General Doug Gansler said about 10 percent of his state’s $62.5 million payment will be made available for the governor and lawmakers to spend as they choose.

See full article here:


A Preliminary Guide to the National Mortgage Settlement – NYTimes.com


Article from the New York Times briefly outlining three circumstances that would make you eligible for relief under the recent Nation Mortgage Settlement.  The five banks that are currently parties to the settlement are Bank of America, JP Morgan Chase, Citibank, Wells Fargo, and Ally Financial.

1) If you lost your home in foreclosure between January 1, 2008 and December 31, 2011 and your loan was owned or serviced by one of the five banks above, you may be eligible to receive a cash payment of $1,800 to $2,000.

2) If you are current on your mortgage, your interest rate is 5.25% or higher, and your mortgage is owned and serviced by one of the five banks listed above, you may be eligible for an interest rate reduction if your payment would be reduced by at least $100 per month.

3) If you are late in making your mortgage payments, or are at imminent risk of missing payments, you may be eligible for a modification to reduce the prinicipal owed on your mortgage, which would reduce your monthly payments.  Your loan must be serviced or owned by one of the five banks listed above to be eligible.


Lawyer turned whistleblower earns $18 million in foreclosure settlement – The Washington Post


This article outlines Lynn Szymoniak’s filing of a whistleblower lawsuit beginning with her being sued by Deutche Bank for residential mortgage foreclosure, and ending with her being awarded $18 million dollars as part of the recent document fraud settlement with several banks.

Ms. Szymoniak is a lawyer with extensive experience investigating white-collar crime.  It was, therefore, an easy transition for her to investigate mortgage document fraud.  She became aware of the problem when it appeared in her own foreclosure case; the assignment of mortgage to the plaintiff was executed 4 months after suit was filed.

Regarding the above graphic of different signatures for Linda Green, this issue was discussed in the previois post on this blog discussing the deposition Cheryl Thomas.  There was an actual Linda Green employed by contractor DocX, but there were also numerous other “surrogate signers” employed solely to sign legal documents on Linda Green’s behalf.  See this previous post here.