In Proposed Mortgage Fraud Settlement, a Gift to Big Banks (ProPublica)

[chill_wind]

In Proposed Mortgage Fraud Settlement, a Gift to Big Banks

by Jesse Eisinger
ProPublica, March 16, 2011, 3:13 p.m

Lurking in a proposed mortgage fraud settlement with the state attorneys general is a clause that could be worth billions for the big banks.

Yes, I mean the settlement that might extract the supposedly large sum of $20 billion from the banks to settle foreclosure fraud. The one denounced as a "shakedown" by Sen. Richard Shelby of Alabama.


Despite such rhetoric, the settlement might let the banks avoid tens of billions of write-downs, thanks to a clause with a biblical flavor: the last shall be first.

The proposed agreement -- which is preliminary and subject to intense negotiations being led by Tom Miller, the attorney general of Iowa -- would allow banks to treat second mortgages, like home equity lines of credit, just like the first mortgages. Under the proposal, when a bank writes the principal down on the first mortgage, the second should be written down "at least proportionately to the first."

To see "So how is this a gift?"- read more: http://www.propublica.org/thetrade/item/in-proposed-mortgage-fraud-settlement-a-gift-to-big-banks/

[eilen]

1. I also posted about this see my link in message.

http://www.nakedcapitalism.com/2011/03/guest-post-curbing-the-credit-cycle.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29


This blog post gives a really good examination of the policy/program that is being proposed. It sucks. It is a whitewash. It is not unlike the "great deal" brokered with BP.

[chill_wind]

2. Thanks eilen.. Will check it out. n/t

[slipslidingaway]

3. knr nt

[chill_wind]

4. kick

[badtoworse]

5. Why would or should the second lien be wiped out if the first lien is reduced?