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Bank deal reality check: more sizzle than substance

Sunday, February 12, 2012

imageFor those not big on nitty-gritty details and like breakdown over hype, try Michael Hiltzik’s analysis of the Obama administration’s much-ballyhooed settlement with the big banks over mortgage loan abuses. While the President, and, locally, state Attorney General Kamala Harris, grabbed headlines for their roles, Hiltzik points out that there’s a lot more sizzle than substance, and the culprits—the banks themselves, including BofA and Wells Fargo—get off relatively easy. An excerpt:

Many of the loans destined to be modified under the settlement aren't even owned by the banks, but rather by investors — the banks just collect the checks.

Consequently, as mortgage expert Adam Levitin of Georgetown Law School observes, most of the settlement "is being financed on the dime of MBS [mortgage-backed securities] investors such as pension funds, 401(k) plans, insurance companies and the like — parties that did not themselves engage in any of the wrongdoing covered by the settlement."

What about homeowners? They don't get much, especially in relation to the scale of the housing crisis. More than 2 million owners have lost their homes to foreclosure during the last four years; this deal will provide 750,000 with a payment of $2,000 each.

Image: Los Angeles Times

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