State AGs And Banks Prepare Fraudclosure Settlement, Bailout Number Two For BofA Imminent

Tyler Durden's picture

CNBC's Diana Olick reports that the investigation into the biggest financial fraud in recent history is about to be shelved: the reason, state AGs are nearing a settlement with banks, which will slap a few wrists, will see banks put some lunch money in a settlement fund, will result in some principal reductions, and everything will be well again, as banker bonuses surpass 2009 levels (as noted previously). Retroactively in perpetuity. In other news, state sponsored fraud in America is alive and well.

Update: don't spend that bonus money on the January edition Perfect 10s just yet. In what seems to be a day of relentless newsflow, we have just learned via Charlie Gasparino and Fox Biz, that Phil Angelides is launching his own probe into the mortgage market. Then again, all this means is that BofA will need to spend a few million extra dollars to bribe the key people in this latest development, and then everything shall be well again.

Add Phil Angelides to the growing list of regulators investigating whether banks committed fraud in the $6.4 trillion mortgage-bond market, the FOX Business Network has learned.

The Financial Crisis Inquiry Commission, which Angelides chairs, has begun investigating whether mortgages packaged into bonds and now held by investors including government agencies like Fannie Mae and Freddie Mac were done so improperly, thus calling into question the legality of trillions of dollars of debt, according to people with direct knowledge of the matter.

The inner workings of the mortgage-backed securities market have come under intense scrutiny in recent months following revelations that big banks may have committed fraud by hiring so-called robo-signers to approve foreclosure applications on tens of thousands of mortgages. At issue: Whether the robo-signers properly approved foreclosures and whether people forced from their homes received due process.

The latest twist in the robo-signer controversy involves whether improper foreclosures and banks failing to follow proper legal procedures will call into question the mortgage bonds themselves. Many of the foreclosed mortgages aren’t held by banks, but have been placed in bonds held by investors. The money thus is returned to an investor holding the bond.

But if the foreclosure has been done by a robo-signer, or if the banks creating the bond did so improperly, as a recent congressional study suggested, then the bonds themselves could be declared illegal. That could pose big problems for the banks that created the mortgages and sold the bonds, like Bank of America (BAC: 11.94 ,-0.16 ,-1.32%) and JPMorgan (JPM: 39.58 ,-0.47 ,-1.17%) because it would allow investors to “put”, or force the banks to buy back, the underlying mortgages.

And here is Diana Olick's disclosure:

While sources say there is no universal solution to shoddy foreclosure practices at some of the nation's largest mortgage banks/servicers, the three largest, BofA, JPM and Wells Fargo, may be agreeing to the same solution.

First, banks would pay into a fund used to compensate borrowers who have claims after their home has been sold in foreclosure. The borrowers would have to prove they were wronged in the process, and the attorney's general would allocate the funds. In other words, the AGs would be the administrators. The amount of said fund is still undetermined, and likely still in negotiation. Each bank could settle on its own amount, or there could be a joint agreement.

Secondly, the banks would do away with the dual track of modifications and foreclosures. That means that only after all options of modification are exhausted can a bank begin foreclosure proceedings. Many borrowers currently complain that they are in the midst of the modification process when they get a notice of foreclosure sale. The drawback to eliminating the dual track is even greater extended timelines to foreclosure for borrowers. As it is, borrowers on average can be in their homes for a year and a half without making mortgage payments before eviction.

Finally, there would be some kind of agreement to third party mediation for review of all the cases in the first part of the agreement where borrowers are seeking compensation from the AG fund.

There has also been talk of principal write down as part of settlements, perhaps with some banks and not others. "It's been on the table," says one source.

Read more here

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bigdumbnugly's picture

sorry, but was there ever any doubt?

No Mas's picture

It is as I have said before:  Banks will make money, lawyers will make more money and no one will be the wiser.

Defaulting homeowners will be kicked to the curb and become renters subsidized via section 8 housing.

Banks will write down the loans over time but no problem for the reserves or income as the Fed will take care of all of that.

Who in their right mind ever thought anything would come of this?  Christ, this is the USA and it is owned outright by the banks.  Nothing will happen to any of them or theirs until their is no currency.

Keep up the bitching and complaining.  The banks will simply laugh all the way to the,well....  BANK!!

Fraud-Esq's picture

never a doubt. Keep track of each AG that settled-up with the banks. You can bank on their bright futures....

They had loads of leverage. Time to send in Internal Affairs! LMAO... 

Dental Floss Tycoon's picture

IA would just be one more pig at the trough.  Lots of bucks to spread around.  How do I get a cut?

RECISION's picture

Keep track of each AG that settled-up with the banks.


More names for the Hit-List

Triggernometry's picture

"This is a god damned traveshamockery"

Duuude's picture






Altan311's picture

Not gonna happen, too many angry people...

Cognitive Dissonance's picture

This so called "settlement" might just be the flash of the magician. I suspect it might just be designed to fail in order to allow Congress to pass a law retroactively making the bank boo-boo's all better.

If "we the people" get too pissed off, Congress will say that the banks are repentent and the AG's are "satisfied" with the settlement. In the interest of keeping the economy on the mend, we "must" save them from themselves.

Or like a ping pong game, the "settlement" can appear to be failing, thus forcing Congress to pass a law "against it's will", thus forcing the AG's to "compromise" after all and settle.

This is a political soap opera folks. I was saying weeks ago there will be a political solution. It will be done before Xmas. The Ponzi will not tolerate anything less.

johngaltfla's picture

Sorry CD. THAT oversight was signed away with Frank-Dodd. The Federal Reserve has the power now. We're just newspapers on the floor waiting on the puppy shit to hit us.

BrosMacManus's picture

more like a full grown mastiff...

fxrxexexdxoxmx's picture

I can take just about anything but puppy shit.

That is all for me boys and girls.

Puppy shit? Puppy shit?

I saw some pictures from a gay parade in San Francisco the other day and almost vomited. Middle aged men were performing oral sex on one another in broad daylight while in public.

Puppy shit and gay men performing oral sex in public.

I quit.

Mentaliusanything's picture

As a man, I am now scared for life. Thanks for coming

MachoMan's picture

This is all about plausible deniability post collapse.  The fact of the matter is that the watchdogs for the citizens of each state, the attorney generals, sat on their hands this whole time, in sheer ignorance of the banks' transgressions or, worse, knowingly turned a blind eye.  Either way, it is a complete embarassment for them.  As a result, the best possible solution for them is not to go into a lengthy trial whereby the negligence of each attorney general is on full display, but rather make a settlement so it stays out of the limelight.  The angry people are completely immaterial to the determination unless they have molotov cocktails and a thirst for blood and are knocking on the door.

snowball777's picture

How much AG apathy was the result of Dubya's specifically castrating state-level enforcement via executive orders to the OCC?


MachoMan's picture

Are you suggesting that AGs are out parading with this argument?  The point where they have to defend themselves will never be brought up...  they don't want to deal with it, which is why they're capitulating and settling...  before the thing even gets started...  I mean, we really aren't even to the cursory discovery phase yet...  It's kind of like an opponent of mike tyson taking a dive before the fight starts...

dizzyfingers's picture

...since you brought it up, the last two sound good.

El Gato's picture

Damn, it feels good to be a bankster

RobotTrader's picture

Nice vacuum pump into the bell to stauch the losses before the GM IPO.


slaughterer's picture

Meanwhile, PIMPCO High Income Fund (PHK) gets pummeled.  Surprised Robo has not pinned up a chart of Bill Gross's crash and burn fund. 

Cleanclog's picture

Super ugly when you look at the long term muni funds!

Cruel Aid's picture

All varieties dumped.

Ugly if you slept thru support levels. There was time to bail.


RobotTrader's picture

Really not that bad....

Not as bad as this....

slaughterer's picture

Don't worry: Munis are next on the Fed's buy list.   Thanks for the comparative chartology.

tallystick's picture

Seriously Robo, what a clown.  Calculate the percentage drops and try again.


Your first chart clearly shows a >10% drop, while the second is clearly less than 10%


Tyler, can you remedy Robo's image clutter issue?

Minion's picture

I love it.  Robo for the play by play, PPT is in effect!

RockyRacoon's picture

How come on the gold charts you choose to post the last 12 hours chart?

Take a look at this one, choose the 2010 YTD button:

Shameful's picture

And now to watch for campaign contributions to certain AGs. After all can't mount a reelection campaign without kickbacks...err contributions.

johngaltfla's picture

Private Property rights fucked again. Why bother keeping "the damned piece of paper" undre glass. Let Bernanke's dog or Obama's use it to shit on.


Lawyers and banksters have been for years.

hedgeless_horseman's picture

Wet clean up (vomit) under my desk.

goldmiddelfinger's picture

I see Chris Dodd's leprechaun is dancing a jig singing "They're magically delicious!"

Cleanclog's picture

It could be worse.  

In Ireland the banks were borrowing at 8%, when they could find a lender, and then making mortgages at 5% - to keep a floor on housing prices that are obviously going to plunge again . . . as I doubt the ECB and EFSF will further support Irish housing prices lest they must do the same in Portugal, Hungary, Greece, Romania, Italy, and eventually every country in Europe.

Chuck Bone's picture

People, it's time to get angry.

HarryWanger's picture

Been saying this would happen while everyone kept trying to make this into a big story here. It's always this way, slap a few wrists and on to the GM IPO and a new episode of "Glee" tonight.

Bastiat's picture

You are a confirmed cynic, Harry and that seems to be a more comforatable adaptation to the world we live in.  It seems many of us here suffer from a sense of outrage fueled by some childish idealism about judicial legitimacy and the necessity of clear legal structure defining property rights.

SheepDog-One's picture

Harry the ultra cynical hyper optimist!

RichardENixon's picture

You'd better get over that fast or you're gonna be in for some real misery ahead.

Bastiat's picture

No shaking it; I've adapted adapted over the years.  May be a self help book in it:  "Living With Outrage." 

DaveyJones's picture

I'm living with outrage and anger. It's a polygamy state

samsara's picture

A cynic.  He knows the price of everything and the value of nothing.

He doesn't care about the constitution, or the law really.  If he can work the angles to make a buck, he's happy.  And considers himself "Smarter" than the average dope who expects fair play, equality and all those things that don't make you a dime and just paints a big bullseye on your back for the P.T. Barnums like himself.

He's never disappointed because he doesn't have expectations.    Just results.


Minion's picture

Good ol' Wanger telling it like it is.  JPM was on fire all day, then experienced a stick save of UFO proportions, right before the bell. 

tahoebumsmith's picture


Guess what? Slap a few wrists? You wait and see how many people have stopped paying their mortgage because of the light shed on this problem. 35% of homes are underwater and people now have no moral obligation to pay these assholes. So like I always say, just sit back and watch, because the shell game is running out of hands and soon the ball will be revealed.

goldmiddelfinger's picture

WTF? they spend 6 man-hours on this then settle? Bull shite!


Don't pass the smell test then again it's Donna Olick reporting

Mad Max's picture

I'll take a 100% principal and interest reduction and call it good.

Bartanist's picture

Fraud is a crime!!

There needs to be criminal trials and jail time for crime. These corrupt pussy AGs need to stop worrying about maintaining the lifestyle of the bankers and need to start putting them in jail.