US To Settle Fraudclosure For $25 Billion Even As It Channels Fake Tough Guy In Meaningless Lawsuit Against Very Same Banks

Tyler Durden's picture


Remember robosigning and the whole fraudclosure scandal? In a few days you can forget it. Because in America, the cost of contractual rights was just announced, and it is $25 billion: this is the amount of money that banks will pay to settle the fact that for years mortgages were issued and re-issued without proper title and liens on the underlying paper, courtesy of Linda Green et al. Why is this happening? Because staunch hold outs for equitable justice (at least until this point), the AGs of NY and California folded like cheap lawn chairs (we can't wait to find what corner office of Bank of America they end up in), but not before the one and only intervened. From the WSJ: "The Obama administration made a full-court press over the past four days to secure the support of key state attorneys general, including those from Florida, California and New York." Nothing like a little presidential persuasion to help one with overcoming one's conscience. Because in America the push to abrogate the very foundation of contractual agreements comes from the very top. But wait, there's more - just to wash its hands of the guilt associated with this settlement which shows once and for all that the Democratic administration panders as much if not more to the banking syndicate as any republican administration, as it announces one settlement with one hand, with the other the US will sue banks over the mortgage reps and warranties issue covered extensively here, in the most glaringly obtuse way to distract that it is gifting trillions worth of contingent liabilities right back to the banks, not to mention discarding the whole concept of justice. From the WSJ: "Federal securities regulators plan to warn several major banks that they intend to sue them over mortgage-related actions linked to the financial crisis, according to people familiar with the matter. The move would mark a stepped-up regulatory effort to hold Wall Street accountable for its sale of bonds linked to subprime mortgages in 2007 and 2008. At issue is whether the banks misrepresented the poor quality of loan pools they bundled and sold to investors, the people said." Wait, let us guess -that particular lawsuit will end up in a... settlement? Ding ding ding. We have a winner. All today's news succeed in doing is finally wrapping up any and all legal loose ends, so that banks can finally wrap all outstanding litigation overhangs at pennies on the dollar. And if at the end of the day, they find themselves cash strapped, why the US will simply loan them more cash of course.

First, here is the WSJ, on the banks that will benefit from the fraudclosure settlement:

Government officials are on the verge of an agreement worth as much as $25 billion with five major banks, capping a yearlong push to settle federal and state probes of alleged foreclosure abuses by lenders.


The deal would represent the largest government-industry settlement since a multistate deal with the tobacco industry in 1998.


The agreement covers five banks: Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co. Together, the five handle payments on 55% of all outstanding home loans, or around 27 million mortgages, according to Inside Mortgage Finance.

These are the banks benefitting from Uncle Sam's decision to finally unclog the foreclosure pathway, as banks will no longer have to prove in court they are in fact the title owners.

But just in case popular outrage at this act is a little much, at the same time banks sued over fabricating Reps and Warranties will be: "Ally Financial Inc., Bank of America Corp., Citigroup Inc., Deutsche Bank AG and Goldman Sachs Group Inc." What an odd coincidence: gift with one hand, and take away with the other from virtually all the same banks.

Only it is not really taking away: it is merely putting the wheels in motion that will ultimately result in the same type of settlement that will make a mockery of the legal process in the US, and expose all the state Attorneys General as banker puppets, doing the bidding of the highest bidder... and of Obama of course.

Some more, on the "gifting"

The planned pact would involve around $5 billion in cash penalties, payable to borrowers, states and the federal government. That includes $1.5 billion in cash payments to borrowers who went through foreclosure between September 2008 and December 2011. Borrowers could receive $1,500 to $2,000 each, with the actual amount paid depending on the number of borrowers filing a claim.


The agreement is expected to call on the banks to provide $20 billion in other aid—by cutting loan balances for tens of thousands of homeowners and by refinancing thousands of borrowers who are current on their loans but owe more than their homes are worth.


Officials say the deal will help provide immediate benefits to around one million homeowners, while raising accountability for banks that work with borrowers facing foreclosure. The foreclosure process has been snarled since late 2010, after allegations that banks had serially submitted bogus mortgage documents when attempting to repossess homes from delinquent borrowers.

Why the push now?

The bank payments would unlock a large new source of housing funding at a time when Congress doesn't appear likely to approve new spending measures to tackle lingering problems facing housing markets, such as a refinance program that President Obama unveiled last week.

30 pieces of silver? Or a corner office.

The three key states overcame misgivings about the plan in recent days, people familiar with the situation said. The inclusion of California is especially important: People familiar with the discussions say the banks would have been willing to pay just $19 billion without the participation of the nation's most-populous state.


The office of California Attorney General Kamala Harris declined to comment. A spokeswoman for Florida Attorney General Pam Bondi said that "while Attorney General Bondi has not yet joined the settlement, she is hopeful that a resolution will be reached soon."

The beneficiaries:

"It is frankly a headline victory for both banks and attorneys general with a modest impact on the housing market," said Joshua Rosner, managing director of investment firm Graham Fisher & Co.


"It's not new money. It's all soft dollars to the banks," said Paul Miller, a bank analyst at FBR Capital Markets.

And of course, the president, who ends up buying a few cheap votes for $2000 a pop:

could receive $1,500 to $2,000 each, with the actual amount paid
depending on the number of borrowers filing a claim

This is also the cost per individual to rescind in perpetuity any actual claims about one's mortgage paperwork. Will Americans go for it? You betcha.

As for the so-called punishment:

In a meeting with reporters last month, Robert Khuzami, the SEC's enforcement chief, said the agency's mortgage-bond investigation was looking for evidence that firms "failed to disclose important information when selling these securities."


Mr. Khuzami declined further comment on the investigation.


The planned regulatory actions come at a critical juncture. The SEC, Justice Department and state prosecutors are pushing to complete a number of financial-crisis cases by the end of this year, partly to avoid having enforcement action curbed by statutes of limitations, the people said.

In reality all this action will do is provide a benefit for private plaintiffs against banks like Bank of America, such as MBIA, whose case that banks have misrepresented terms of sold securities, will be strengthened. The ultimate cost, however to banks, will be miniscule compared to the fact that the foreclosure pathway will again be unclogged, and the banks are allowed to deficiency mark houses sold from REO, and use fungible excess reserves to plug the difference.

All in all, just a day's work for the administration as it does everything in its power to push the housing market higher at all costs, and further and further away from equilibrium pricing, which is what should be for a true and normal price appreciation to occur... something which will never happen of course as it would take far longer than the 4 years allotted to the president. If the process entails bending the law beyond recognition, so be it.

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Wed, 02/08/2012 - 23:18 | 2140424 Theta_Burn
Theta_Burn's picture

With liberty and justice for all...

Now on to more pressing matters

Wed, 02/08/2012 - 23:16 | 2140426 blargerz
blargerz's picture

Well, how were the banks supposed to reinflate the world with cheap dollars with all those liabilities on their books? 

Wed, 02/08/2012 - 23:19 | 2140427 goldfish1
goldfish1's picture

as much as $25 billion

That much, huh?

Thu, 02/09/2012 - 00:02 | 2140551 erg
erg's picture

Brother, can you spare $25 billion? It's the new dime.

Wed, 02/08/2012 - 23:17 | 2140430 disabledvet
disabledvet's picture

it's the off balance sheet crap that "passes for a bank" that i've had enough of. so what if the 5 biggest banks fail? who cares? just today BofA told me if i didn't take my money out of their bank they would simply take it "for lack of activity." really? "money sitting in your bank is shit to you?" well ALLLRIGHTY THEN! Governments and businesses are fools for putting money in these things. People obviously should only use credit unions...although State controlled banks and just plain old private banks look pretty darn good to me as well. These "mega crapola machines" are simply government run boondoggles by another name. wake my up when income tax receipts start surging!

Wed, 02/08/2012 - 23:19 | 2140432 Troy Ounce
Troy Ounce's picture



And the banks are paying the US$ 25B to themselves?

Wed, 02/08/2012 - 23:24 | 2140448 JLee2027
JLee2027's picture

Something like that.

Just sleight of hand really.

Wed, 02/08/2012 - 23:29 | 2140468 mayhem_korner
mayhem_korner's picture



It's all just transfers at this point, no? 

Kinda like a poker tourney where the players play with the proceeds from the audience who paid to watch.

Wed, 02/08/2012 - 23:37 | 2140489 LongSoupLine
LongSoupLine's picture



yep, and all the players win because Bill Dudley is the dealer, and the casino is owned by the Bernank.

Thu, 02/09/2012 - 00:09 | 2140575 palmereldritch
palmereldritch's picture

Less their service fees it works out to around $37.50

Wed, 02/08/2012 - 23:19 | 2140434 Bud Denton
Bud Denton's picture

I am lovin' me some bank crooks!  These guys should all be male strippers, they way they grin from ear to ear when they let it all hang out . . .

Comes back to:  mainstream media willing to sweep anything--ANYTHING!--under the rug to get that li'l ol' Golman sachs lawn jockey Odumba elected.  Aw shucks--did somebody say step 'n' fetchit? 

How much money you guys want?  ben!  B-E-N!!!! Fire up them printers!


Wed, 02/08/2012 - 23:20 | 2140435 adr
adr's picture

But this will unclog the foreclosure pipeline leading to millions of homeowners thrown out on the street. Good luck propping up the market with a new weekly foreclosure record being set week after week.

Let me guess, BAC being forced to pay billions is uber-bullish becuase at least traders know how much they will need to pay. BAC TO THE MOON, $125 stock and P/E of 2k+. Who the fuck cares anymore. STOCKS CAN BE ANY PRICE, fundamentals be damned ITS A NEW ROARING BULL!!!!!!!!!!

Thu, 02/09/2012 - 01:28 | 2140751 ChrisFromMorningside
ChrisFromMorningside's picture

Before we see Dow 0 we will see DOW 90,000!!!!

Wed, 02/08/2012 - 23:21 | 2140437 mayhem_korner
mayhem_korner's picture



Coincidence that all of this this "headline" fraud cracking-down is coming out while E. Holder, esq. is in hot water? 

It's reminiscent of the Afghanistan children's hospital that Billyboy wiped out in order to take attention off his blew (sic) dress problem.  :D

Wed, 02/08/2012 - 23:21 | 2140439 Blagio
Blagio's picture

Producing fake documents in court... c'mon that's petty. Everyone does it. 


Revaluing assets to market prices on banks balance sheets, that's the fireworks show I'm waiting for.

Wed, 02/08/2012 - 23:26 | 2140458 mayhem_korner
mayhem_korner's picture



Internally-generated mark-to-markets are all the rage...right up there with Angry Birds, dood.

Wed, 02/08/2012 - 23:21 | 2140440 oogs66
oogs66's picture

Really, it is beyond being a joke.

Wed, 02/08/2012 - 23:22 | 2140442 ThisIsBob
ThisIsBob's picture

So this money goes to the people these banks screwed over, right?




Wed, 02/08/2012 - 23:31 | 2140475 HD
HD's picture

Of course. Comes with an apology too.

Dear Homeless Family:

   Sorry we committed a few felonies and kicked you out of your house. Here's $2000 of freshly printed fiat courtesy of the Fed. Use it to redecorate your dumpster behind the Arby's.

                 Just doing Gods work

                                Signed -Your TBTF friends

Thu, 02/09/2012 - 07:37 | 2140960 Miss Expectations
Miss Expectations's picture

At about $110/night, this $2,000 will get a homeless family about 18 nights at a Holiday Inn Express.  Instead of cash, they'll get a Priority Club Rewards card, good only on week days and at facilities without pools.  Did I mention that breakfast is included?

This is a sad day indeed.

Wed, 02/08/2012 - 23:22 | 2140444 HD
HD's picture

Of course this only applies to the TBTF banks. Several prosecutions are happening at smaller institutions because they can't bribe their way out of it.

Wed, 02/08/2012 - 23:52 | 2140523 pods
pods's picture

Same as it ever was.  Become big enough to partner with the corrupt government and use it to extinguish your competition.


Wed, 02/08/2012 - 23:25 | 2140450 lsbumblebee
lsbumblebee's picture

Still looking for evidence after all these years.

Oh still looking. Still looking. Still looking for evidence after all these years.

- Simple Simon 

Wed, 02/08/2012 - 23:26 | 2140456 Reese Bobby
Reese Bobby's picture

I have never understood why this wasn't papered over long ago.  I guess everybody was just waiting for the Presidential election year.

Wed, 02/08/2012 - 23:26 | 2140457 spastic_colon
spastic_colon's picture

Geez you'd think it was an election year

Wed, 02/08/2012 - 23:27 | 2140459 boogerbently
boogerbently's picture

The whole "robo-signing" witch hunt was a ruse." Look, we're punishing those mean bankers." LOL

How much RESEARCH was really necessary? If you didn't make your payment for "the acceptable number of times", then you're out. There were SO many foreclosures happening.....were they all supposed to get personal visits from Jamie Dimon? Part of the reason this "housing/banking" problem still holds the recovery back, is that those properties need to be resold/reevaluated so a banks assets can be properly determined. As long as they are occupied, but unpaid for, they are unknown quantities of unknown value. Redo the loans for existing "tenants", or get the freeloaders OUT so the homes can be sold. The "housing recovery" hasn't even started yet. That HUGE inventory of abandoned/foreclosed homes needs to be sold before any "recovery" starts. Prices will ONLY go down until THAT process is completed.


Wed, 02/08/2012 - 23:52 | 2140525 WonderDawg
WonderDawg's picture

The point that you seem to have completely missed is that the motherfuckers got away with fraud, and have now clouded the titles of probably 80% of the homes in the US. This was a massive, criminal effort on the parts of thousands of people up and down the mortgage food chain. That's what this is about. Criminals, not only walking free, but getting huge bonuses financed by our taxpayer dollars, all for running a business model based on fraud.

Goddamn. It's a fucked up world.

Thu, 02/09/2012 - 12:11 | 2141938 BidnessMan
BidnessMan's picture

But the ultimate result of the fraud will be a complete collapse of the real estate market and the economy overall.  Will be like Russia in Perestroika.  Even though no one in Russia owned property, when the collapse came everyone basically just stayed where they were.  Jubilee in the Big Reset.

Your credit rating will go to zero, but you can stop paying your mortgage and live rent free for years in Florida.  For most folks their credit rating is already trashed anyway, so no loss.  The last thing Banks want is for the house to be left vacant.  Costs a Bank $100+ per month to a property manager to maintain an empty house, plus unpaid property taxes, etc.  Hope the house won't get trashed and stripped and the copper sold for scrap.  Plus the Bank as "Deep Pockets" is liable for any bad behavior on the property. The bank wants you to stay in the house, keep the grass cut, etc. etc even if you are not making a payment. If the bank forecloses on a condo in Florida, the bank become immediately liable for the past 6 months of Condo Fees, plus all Condo fees going forward.  

It amazes me that people who can't pay their mortgage actually move out of their house.  In Florida at least they have a minimum of 24 months to get their lives back on track while keeping a roof over their heads, kids in school, etc. rent free. The bank does not want the house empty.

Accounting rules say the banks have to recognize the loan asset impairment on a foreclosure. Although accounting rules probably mean no more than mortgage documentation rules, so the mark to fantasy bank balance sheet and "earnings" game will continue for big banker bonuses.

But in any case, this is a middle act in the play.  The end is a complete collapse and then Dictatorship.  We might skip the complete collapse part and go straight to Dictatorship.  But is it clear that the Rule of Law only applies to the Little People. 

Wed, 02/08/2012 - 23:53 | 2140527 Misean
Misean's picture

Idiot, tool or plant?

Thu, 02/09/2012 - 09:33 | 2141188 krispkritter
krispkritter's picture


Wed, 02/08/2012 - 23:54 | 2140529 pods
pods's picture

Of course some bloodsucker will only see dollar signs and not think of the ramifications of tossing out a couple hundred years of property law.

It's all good bro.


Thu, 02/09/2012 - 00:01 | 2140547 Seasmoke
Seasmoke's picture

Mitt Romney is that you ?

Wed, 02/08/2012 - 23:27 | 2140461 palmereldritch
palmereldritch's picture

Well they've completely trashed the Constitution so why not set a policy precedent on destroying contract law for good measure...did they miss anything?

Wed, 02/08/2012 - 23:50 | 2140518 FeralSerf
FeralSerf's picture

They set the precedent with the GM bondholders.  We live in a kleptocracy.

Wed, 02/08/2012 - 23:29 | 2140467 Babushka
Babushka's picture

Off topic, but I was thinking the Qatar was a friend of revolutionery Lybia...


Ministry of Foreign Affairs State of Qatar:

«The State of Qatar has announced that its Embassy and the Ambassador’s residence in Tripoli were looted and burnt in a targeted attack today».

Wed, 02/08/2012 - 23:29 | 2140470 blunderdog
blunderdog's picture

Wow you'd really think they're like trying to kill the dollar or something...

Wed, 02/08/2012 - 23:31 | 2140474 mayhem_korner
mayhem_korner's picture



They won't sink that "lifeboat" until everyone's in it...

Wed, 02/08/2012 - 23:29 | 2140472 Caviar Emptor
Caviar Emptor's picture

Breaking:...US sues itself. Yes, the banks will cover the lawsuit settlement with money they were gifted by the US taxpayer via the Fed. Any shortfall will be covered by zero-interest rate loans (from yours truly) and proceeds from prior loans at 0% now collecting 3% from yours truly. 

Wed, 02/08/2012 - 23:33 | 2140479 mayhem_korner
mayhem_korner's picture



You just got a boatload of unemployed law-school graduates frothing at the mouth. 

Thu, 02/09/2012 - 01:16 | 2140724 ghostfaceinvestah
ghostfaceinvestah's picture

It will be more direct than that.  The banks will get credits for modifications for which the Treasury pays them via HAMP.

Wed, 02/08/2012 - 23:32 | 2140476 vh070
vh070's picture

And the alternative is…?

Wed, 02/08/2012 - 23:57 | 2140535 David449420
David449420's picture

When the time comes, HANG THEM ALL.

Thu, 02/09/2012 - 08:04 | 2140974 Miss Expectations
Miss Expectations's picture

Liberty and Justice for all.

Wed, 02/08/2012 - 23:34 | 2140481 xcehn
xcehn's picture

Absolutely nauseating and predictable; The law is the tool of the corrupt to fashion their cloak of legitimacy.  Money and might make right.

Wed, 02/08/2012 - 23:34 | 2140482 bob_dabolina
bob_dabolina's picture

Didn't Goldman just buy a bunch of this from the Fed? 

Tyler(s) not hitting on Goldman like he(s) use to.

Donate button must be getting hit harder than the CTRLP over at the Fed. 

Wed, 02/08/2012 - 23:52 | 2140521 Tyler Durden
Tyler Durden's picture

What do subprime mortgages that are trading at 20 cents on the dollar have to do with proper mortgage paperwork and contract rights in the US?

One must not be hitting the button to explain the most basic of things, as much as one hits the save button in the zero hedge comment box containing the most utterly meaningless statements

Thu, 02/09/2012 - 00:50 | 2140679 slewie the pi-rat
slewie the pi-rat's picture

speaking of which, this hyperwarp vortex of complete lack of spammerz is pretty cool

hope it lasts!

Thu, 02/09/2012 - 08:54 | 2141059 Implicit simplicit
Implicit simplicit's picture

By the time u get thru the other side of the wormhole  u will recognize the defensive software being being primed to support the false reality to come. Spam is on its way

Thu, 02/09/2012 - 01:42 | 2140761 bob_dabolina
bob_dabolina's picture

Thanks. I was just trying to entice a response. It's good to know I can encourage you to come out on the battlefield at my beck and call. 

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