By Matt Stoller, a fellow at the Roosevelt Institute. He is the former Senior Policy Advisor to Rep. Alan Grayson. You can reach him at stoller (at) gmail.com or follow him on Twitter at @matthewstoller
everyone I know is working on some type of RMBS litigation. investors suing issuers, issuers suing originators, insurers suing issuers. wild – A tweet from a NYC corporate lawyer, 8/17/2011
Doesn’t it seems like we’ve been on the verge of a 50 state Attorney General settlement with the banks over robo-signing and mortgage securitization liability for nine months? It does, doesn’t it? Why is that? Maybe it’s because… that’s what journalists keep writing.
Here’s what I mean.
July 15, 2011, Huffington Post
As Government Nears Accord With Banks, Questions Swirl Over Scope Of Investigation, by Shahien Nasiripour
Even so, state and federal officials are nearing a settlement that would release companies like Bank of America and JPMorgan Chase from legal liability in exchange for a cash settlement, reduced payments for homeowners, transition assistance for troubled borrowers and promises to improve performance and comply with state and federal rules.
July 7, 2011, Bloomberg Businessweek
BofA, JPMorgan Near Foreclosure Deal With U.S., States, by Dawn Kopecki
Bank of America Corp., JPMorgan Chase & Co. and three other U.S. mortgage servicers are in advanced talks to resolve state and federal claims over faulty foreclosures, according to two people briefed on the matter.
Negotiators tentatively set a July 13 target for a settlement, which may exceed $20 billion, the people said, speaking on the condition of anonymity because the talks are private.
July 7, 2011, Charlotte Observer
Negotiators make progress in mortgage talks, by Rick Rothacker
Banks and state and federal officials negotiating a settlement over mortgage servicing practices have made “substantial progress” but there’s still “work to do,” a spokesman for the attorney general leading the effort said.
July 7, 2011, Fortune
Can Brian Moynihan fix America’s biggest bank?, by Shawn Tully
Then, in late June, Moynihan rocked Wall Street by unveiling a landmark settlement that takes a giant step toward finally putting the home loan mess behind Bank of America. Moynihan announced that BofA will pay $8.5 billion to 22 big investors — from BlackRock (BLK) (to the Federal Reserve Bank of New York — which claimed that Countrywide had misrepresented the quality of loans it sold them. In a single stroke, he effectively removed the biggest cloud over the company’s future The deal is so comprehensive, covering all of Countrywide’s disputed mortgages sold to private investors, that it should serve as a model for the rest of the industry and a bullish sign for the broader economy. It may be the single best headline in financial services since the credit crisis began. “It’s a win on the board that Brian Moynihan needed,” says Credit Agricole analyst Mike Mayo, a famously tough critic of the big banks. “The challenge is to ensure that the momentum continues.”
This one isn’t about the 50 state AG deal, as such, but it’s on mortgage liability. Besides, it’s such an obvious PR plant for Moynihan that I had to include it. And BofA stock has dropped 32% since it came out!
June 2, 2011, LA Times
Foreclosure settlement to come in a ‘matter of weeks,’ HUD secretary says, by Alejandro Lazo
June 10, 2011, Businessweek
Foreclosure Probe ‘Closer’ to Settlement, Iowa Official Says, by Margaret Cronin Fisk and David McLaughlin
Iowa Attorney General Tom Miller, leader of a 50-state probe of foreclosure practices, said a settlement is “closer” and that state and federal officials want a monitor to ensure that banks keep their promises.
March 15, 2011, Reuters
Geithner seeks swift foreclosure pact with banks, by Dave Clarke and Rachelle Younglai
A comprehensive settlement between U.S. authorities and banks over alleged mortgage servicing abuses needs to be reached quickly to help the housing market heal, Treasury Secretary Timothy Geithner said on Tuesday…
Iowa Attorney General Tom Miller, who is leading the states’ probe of mortgage servicing problems, said last week that he hoped to have a settlement with the nation’s biggest banks in the next two months.
March 7, 2011, Reuters
Iowa AG looks to foreclosure deal within 2 months, by Dave Clarke
The Iowa attorney general, who is leading the 50-state probe into mortgage foreclosure problems, said on Monday that he hopes to have a settlement with the nation’s biggest banks in the next two months.
February 24, 2011, Washington Post
State and federal officials, who have been negotiating with financial firms over how to address widespread abuses in foreclosure practices, are moving closer to a settlement that could force banks to reduce the principal on mortgages for some borrowers who owe more than their homes are worth.
November 16, 2010, Reuters, CNBC
Banks, state AGs near foreclosure settlement: report, by Jonathan Stempel and Jonathan Spicer
U.S. banks and a task force of the nation’s 50 state attorneys general are nearing a settlement of an investigation into the lending industry’s foreclosure practices, CNBC said on Tuesday.
October 12, 2010, AP
States aim to force changes in foreclosure process, by Alan Zibel
The top law enforcement officials of states around the country are launching a joint investigation into the problems with foreclosure documents that surfaced in recent weeks. They are already weighing the outlines of a potential settlement with the industry, said Iowa Attorney General Tom Miller, who will lead the investigation.
And so, the moral of the story is, the robo-signing/chain of title/overall mortgage securitization liability issue is a bear of a problem. It isn’t going away. So here’s a tip to journalists writing about the housing market. Don’t trust what Bank of America, Iowa Attorney General Tom Miller, various Federal regulators, Obama officials, and probably other bank-associated parties tell you.
Don’t trust the bank-friendly conventional wisdom, because it will end up making otherwise good stories inaccurate (this goes for headline writers as well). The banks don’t know their legal liability and the regulators don’t know how to fix this problem. And everyone’s suing everyone.
So how can you write about it? Well, do what other analysts (like Yves Smith) do, look at the actual content. Felix Salmon has a good example of how to do that here, with his post on The well-intentioned but doomed mortgage settlement. And the first story I cited, by Shahien Nasiripour, (aside from the “they’re on the verge of a settlement” CW) is great, showering important details on the actual state of the investigation. Or press your sources on why they told you a settlement was coming, when it didn’t. It’ll be an interesting explanation, which I’d like to hear.
Maybe the AGs will come out with a settlement tomorrow. But for the last nine months, that’s pretty much what the reporting has been saying. And it’s been wrong.