I’m lying to you now.

Tom Miller, HUD Officials Laugh at Schneiderman Publicly

By: David Dayen, Firedog Lake

Wednesday February 22, 2012 8:55 am

Whether you believe in Eric Schneiderman’s ability to deliver a legitimate investigation on mortgage securitization fraud or not, you have to admit that the united front on opposition to a settlement on foreclosure fraud collapsed the moment that he agreed to helm that federal investigatory task force. He immediately separated “pre-bubble” and “post-bubble” conduct, allowing for a settlement on the latter while he joined the investigation on the former. And eventually, every other AG on the Democratic side fell in line, as they didn’t have New York as an anchor to stay out of a settlement.

That’s just what happened. And now we have HUD Secretary Shaun Donovan and Iowa AG Tom Miller, head of the executive committee that settled on foreclosure fraud, clowning Schneiderman on the record, saying that he got next to nothing in exchange for his holdout.

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There is no guarantee that the settlement will lead to the maximum amount of $32 billion in principal reduction that Donovan hypes. In fact, the government’s own press release only guarantees “at least $10 billion” in principal reduction. Needless to say, even the high-end amount is next to nothing relative to the scale of the problem for underwater borrowers. And according to this article, Geithner was won over when he learned that the program would not be “overly punitive.” We’ve chronicled the numerous ways in which the banks make out very easy on the deal, and can even profit off it.

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Wow. This is on the record, with Miller saying that the release only looks like it was tailored to Schneiderman’s specifications. Miller, by the way, was announced today as one of President Obama’s re-election campaign co-chairs.

Schneiderman has promised that he would walk away from the task force if he found it insufficient, with his co-chairs slow-walking the investigation. With the task force barely begun, here’s the head of the state settlement and insiders close to Donovan just out-and-out clowning him, alleging that Donovan bait-and-switched him. We’re waiting for that walk-away any time now.

HUD Continues Defense of Allowing HAMP Modifications as Part of the Foreclosure Fraud Settlement

By: David Dayen, Firedog Lake

Wednesday February 22, 2012 11:06 am

The pushback from the Administration on one particular story arising from the foreclosure fraud settlement has been pretty intense. You cannot say that Shahien Nasiripour doesn’t have the attention of HUD.

Today, they devoted an entire blog post (unsigned, from “HUD Public Affairs”) to refuting Nasiripour’s story in the Financial Times (which they don’t link, so I will) about how bank servicers can count HAMP modifications toward the “credits” in the foreclosure fraud settlement. But really they only refute the title of Nasiripour’s story.

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HUD also leaves key questions unanswered in their post. They say that “if a servicer receives a HAMP incentive of 40 cents for every dollar of principal reduction, it can receive credit at the applicable rate on the remaining 60 cents… in no event can the servicer receive more under the settlement than it would have in the absence of HAMP incentives.” But does this include the additional HAMP incentive for the borrower staying current? Also, isn’t it the investor, not the servicer, who receives incentive payments in the principal reduction plan inside HAMP?

In addition, if this is coming on line with the settlement over the next 6-9 months, as eligible underwater borrowers are identified, why would any servicer in the short term do a principal reduction through HAMP? As HUD says in their post, “most HAMP modifications do not include principal reduction.” That, of course, is why it has such a high re-delinquency rate (up to 30% of borrowers go delinquent within 18 months), because the modifications that servicers perform in HAMP are unsustainable. The entire point of the new HAMP tweaks was to encourage more principal reduction. So why add an incentive to delay principal reduction for 6-9 months?

HUD claims that they could not have exempted HAMP from the settlement, because “it would have freed (servicers) from HAMP’s extensive compliance regime, reporting requirements, and borrower-protection features.” This is a non sequitur. You could very easily have put those compliance guidelines into the settlement. It would have been a simple copy-paste. HUD answers this by saying that “it would make it less likely that HAMP-eligible borrowers would receive principal reduction.” I’m not following the logic there at all. You could just include the evaluation and reporting requirements across all loans as part of the settlement.

And it goes without saying that, until there are terms on a sheet of paper that everyone can read, these claims by HUD just aren’t entirely credible. We don’t know what’s in the settlement yet. That’s a factual statement.

I’ll say this, the criticism appears to be getting to HUD. Some Connecticut lawmakers savaged the miniscule $2,000 check to foreclosure victims (which the Attorney General of the state, who was on the settlement’s executive committee, characterized as $1,500 – what does he know that we don’t?) that’s part of the settlement. Heck, even Pat Robertson is calling for corrupt bankers to be put in jail, citing the experience of Iceland. It must be lonely defending this settlement.