Settlement Is Actually A Pot Filled With Promises

Steve Dibert, MFI-Miami

The day of reckoning is finally here involving the mortgage settlement with the mortgage servicers and the state attorneys general.  The final settlement which is not yet available or finalized is best described using this quote from Frank Drebin from The Naked Gun,  

“I’m sorry I can’t be more optimistic, Doctor, but we’ve got a long road ahead of us. It’s like having sex. It’s a painstaking and arduous task that seems to go on and on forever, and just when you think things are going your way, nothing happens.” 

Some states are already spending the money on non-foreclosure relief budgetary issues but don’t expect Jamie Dimon or Brian Moynihan to travel the country handing out oversized novelty checks to the governors like they were the financial world’s version of Ed McMahon.  The $25 Billion is not a fine  for damages but money pledged to help fund programs to help future homeowners who are facing foreclosures and supposedly earmarked for principal reductions.

So what does it all mean?  It means that the banks just promised the states $25 Billion in table scraps to keep the the states happy and out of their hair.  It’s like my old friend Egon used to say, “Dealing with your parents is like dealing with your Japanese boss.  You tell them what they want to hear and then you go and do your own thing.” 

This is exactly what the banks did and they hedged their bets like they do with credit default swaps.  They don’t have to shell out $25 Billion to the states all at once or if ever because they only promised to use that money to help future homeowners.  It also gives homeowners a choice of suing their servicer and the parties involved or take a $2000 settlement which would come from the promised $25 Billion.  If the client takes the money, they forfeit the right to sue their servicer.

By giving a homeowner $20o0 saves the mortgage servicer money because that  money is already set aside to pay the law firm to foreclose on the homeowner.   Mortgage servicers are also assuming that the vast majority of homeowners who will attempt to fight their foreclosures will lose and in most cases, they are correct.  Most homeowners don’t have the money to hire an attorney or refuse to hire an attorney and they decide to represent themselves as a pro-se litigant.

What the settlement does do is expose companies like MERS, LPS, NTC and the foreclosure mills to more criminal and civil liability for wrong doing because they weren’t listed as a party in the settlement.

What most people don’t realize is the banks have and had a certain level of plausible deniability when it came to robo-signing and foreclosure fraud.   The banks hired the law firms to handle the mundane task of filing mortgage assignments and foreclosing on people.  The law firms in an attempt to get the business from the servicers low balled their fees and in order to maximize their profits turning the adjudication process into an assembly line process.

In some cases they even hired companies like LPS or NTC when they thought they could increase their profit margin.  The responsibilities the foreclosure mills and their contract processors didn’t end there.  The foreclosure mills, LPS and NTC account for nearly 75% of the MERS assignments filed with clerks and register of deeds office through out the country.   This now implicates MERS which wasn’t a party to the settlement because MERS made many of these attorneys and employees from the foreclosure mills and processing companies representatives of MERS and to act in MERS’s interests.

The reason most foreclosure defense cases fail is because in most cases the homeowner’s attorney is in way over his or her head and tend to only bring a claim against the servicer or the Trustee for the MBS that holds the note.  They typically do not name all the people involved including the foreclosure mill or the processing company.  Most attorneys are afraid what I call Judicial Karma.  In most cases, attorneys won’t sue another attorney regardless of how big of a scumbag they may be because they don’t want another attorney suing them.

Any good litigator representing a homeowner won’t have an issue with this and will name the foreclosure mill and the attorney who allegedly signed the assignment or foreclosure documents in any suit against the foreclosing party because as the case begins to unravel,  a game of point the finger soon begins and ends with the bank throwing the foreclosure mill under the bus in the purest form of social darwinism.

Why would they do this?   Banks don’t like to lose and they don’t want to set a precedent.  They know there are hundreds of attorneys watching their case and they know that if the homeowner wins, one of these attorneys will file a similar suit.  If they do lose, they have to punish someone for the failure.  Foreclosure Mills have both malpractice insurance and since most are title agencies, they also have errors and omissions policies.

this means it’s business as usual for those of us in foreclosure defense.



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