by Brian Mahany
The purpose of this blog is to educate. Sometimes, however, we get pretty agitated and just have to vent some steam. Case in point is the national settlement between 49 states and the larger mortgage lenders. No sooner was the ink dry than politicians began the parade to the podium to declare victory. Everyone from President Obama to the governors of many states. The banks took credit too. Everyone joined the parade except homeowners, millions of whom are underwater and trying to hang on to their homes.
The settlement calls for $25 billion in mortgage relief, although much of that is in what I call Monopoly Money – you know, not real. The banks will plunk down $5 billion in actual cash. The rest is in the form of helping homeowners with mortgage modifications and payment reductions. That sounds like the banks are taking a hit but a refi actually helps the banks.
Lenders don’t like being in the foreclosure business. They make more money when homeowners remain in their homes. A vacant house at a sheriff’s sale is worth much less. Plus once the bank takes over the property, they must worry about freezing pipes, keeping the lawn cut, etc.
Many of the loans that will be refinanced aren’t even owned by the banks. They are owned by investors or the taxpayers through mortgage guarantee programs. The banks just service the loans and collect payments.
The behavior by some of the larger banks – our favorites are Bank of America and Allied Home Mortgage – has been appalling. They created much of the mess.
If $25 billion in relief sounds like a lot of money, let’s keep the figures in context. Roughly 2 million people have already lost their homes to foreclosure since this crisis began in 2008. The national mortgage settlement so eagerly touted by politicians will provide less than a million of those people an average of $2000 in relief. That’s not much considering these folks already lost their homes and now have terrible credit.
The other part of the bill implements new foreclosure standards but even a cursory reading reveals that the banks are simply promising to do what they should have been doing all along – obey the law. Having banks promise to obey the law is no victory.
Although the victory for homeowners is rather hollow, the program is a step in the right direction. We are glad that banks are finally being forced to accept some responsibility for the mess they created. Ponying up real cash is also a step in the right direction, although already politicians are finding ways to spend that money. Here in my home state of Wisconsin before the ink was even dry on the settlement Wisconsin Governor Scott Walker announced the state was going to take some of that money to plug unexpected budget holes. (Lest you fear we are partisan, governors from both parties have already announced plans to raid the settlement funds.)
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The law firm of Mahany & Ertl is not a foreclosure defense firm (although we do represent some individual homeowners who are close to our offices.) Instead, we concentrate on mortgage and financial fraud at the grand scale. We are presently partnered with the United States government and HUD in the largest false claims act case in the nation against a mortgage lender – our $2.4 billion claim against Allied Home Mortgage. We handle false claims cases and class actions against the mortgage and financial industry.
If you have inside information (whistleblower) about mortgage fraud or you believe you have a particularly egregious horror story to share, give us a call. Class action plaintiff representatives and whistleblowers are often entitled to a sizeable amount of any monies recovered. All inquiries are strictly confidential.
For more information, contact attorney Brian Mahany at (direct) or by email at
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in certain other jurisdictions as well.