Safe as Houses: Banks offer $5 billion to make foreclosure cases go away

Posted Wednesday, June 22, 2011 in Analysis

Safe as Houses: Banks offer $5 billion to make foreclosure cases go away

by Gina Hamilton

AUGUSTA -- The nation's largest banks floated a $5 billion deal to end the continuing probe by all 50 states' attorneys general into lending and loan servicing practices, including the now-infamous 'robosigning' of foreclosure documents.

To their credit, the attorneys general were not impressed by the offer, including Maine's AG Bill Schneider.  In an email exchange, Rep. Roberta Beaver (D-South Berwick) informs him of the offer:

Hi Bill,

Many Mainers across the state have let me know already this morning how infuriated they are when read this article in today's Wall Street Journal article. Banks Float $5 Billion Deal to End Foreclosure Probe - WSJ.com.

Since you are among the state Attorney Generals looking into this situation, I am asking you not accept this minimal amount to relieve the people and states who were terrorized by this egregious technique of making money and that you will convince the other state AG's not to accept this unconscionable offer. Some of the involved banks pay more than three times that amount in bonuses each year. Why are the banks even allowed to negotiate on this deal when they are guilty of extreme wrongdoing against the people of our nation? The banks should not be relieved of any of their responsibility. If anything, they should be charged an excess of the damage they caused, an excess of the $20 billion originally suggested.

We are all here in Augusta to protect the people of our great state. Please help us honor our oaths.

Thank you,

Bobbi Beavers

AG Schneider replied:

Hi, Bobbi!

Thank you very much for your email.  Linda Conti, my Consumer Protection Division Chief, has been helping me to follow this lawsuit closely.  We have not yet seen a proposal from the mortgage servicer defendants that would convince us that it is in the best interests of the people of Maine.  We will continue to be involved in the litigation as it proceeds.

Thanks for reaching out!

Bill

The amount is laughably small; some states and federal officials are demanding at least $20 billion to settle the outstanding claims.

Five of the largest banks were informed last month that they face liabilities of at least $17 billion in civil suits if they do not reach a settlement with aggrieved homeowners and state attorneys general.

The figure doesn’t cover additional billions of dollars in potential claims from federal agencies such as the Department of Housing and Urban Development and the Justice Department. State and federal officials haven’t proposed a specific comprehensive settlement figure, but last month's discussions represented the first effort to formally quantify potential liability.

Banks have argued that their problems are largely technical and that few if any borrowers have faced wrongful foreclosures. State and federal officials have faulted mortgage companies for not hiring enough staff to provide assistance to millions of borrowers that have fallen behind on their mortgages.

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