Neil Barofsky, Matt Stoller, and Your Humble Blogger on Why the Mortgage Settlement Sucks

Lauren Lyster of RT TV spent a bit of time discussing the mortgage settlement with us and I thought you might enjoy seeing it:

This Bloomberg interview with Neil Barofsky and Matt Stoller gives a nice high-level overview of why the mortgage settlement is terrible. It’s particularly useful if you are looking for a few key issues to present to someone who has bought the Obama administration PR or is late to the topic.

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  1. Glen


    The banks skate out on paying HIGHER penalties, and are now ALLOWED to break the law with a certain percentage of illegal title transfers a year.

    This is a sick joke on the American people.

    1. Sharon

      Yes but it is one Americans signed up for. I’ve been watching for 25 years as Americans asleep at the wheel have consistently given up their rights to corporations. In my opinion we are to blame for focusing on divisive issues such as gay rights and abortion while allowing corporations to take over our country. Am I totally disgusted with this settlement? Yes. But we as citizens need to stop listening to 30 second sound bites and actively get involved in putting our country back together again. Don’t forget, we elect these corporate shills, it’s what we allow.

      After the banks get through with us just wait and see what the pharmaceutical companies have in store for us.

      1. sgt_doom

        (First, I love Lauren Lyster of RT and especially their glass table!)

        “..we are to blame for focusing on divisive issues such as gay rights and abortion while allowing corporations to take over our country.”

        “We,” kemosabe??????

        Sorry, Sharon, but either you are a plant or rather gullible — whenever anyone says “we” they are usually acting as professional apologists for Wall Street (such as Lessig and Ferguson of Harvard are well-paid to do).

        On the possibility you are for real, it WAS and IS the corporate-owned myth-media which has focused on it, because they are paid to do so as the Bankster Strategy 101 (as moronically explained by the very non-creative Geo. H.W.Bush, who lifted their stragegy for his inauguration speech years back), is their 1000 points of confusion strategy.

        But, as the great sociologist and former investigative journalist, Ferdinand Lundberg wrote back in 1958, it may be the Treason of the People.

        But today, the global bank cartel have everything covered.

      2. sgt_doom

        “..we elect those corporate shills..”

        But are you sure? Do you know who actually owns the top three voting machine corporations?

        Point made, point taken!

      3. Lambert Strether

        “I’ve been watching for 25 years…” I know, I know. And we’re not leaving things in very good shape, are we? I keep seeking a point of leverage and not seeing it. Maybe the thing to do isn’t to occupy homes in onesies and twosies, but bank servicing operations. Maybe form a human chain around the building….

      4. Wendy

        You are blaming the victim. The options at the ballot box are Evil and Eviler. You have to be filthy sticking rich to lodge a primary challenge and get elected. If you at efilthy rich, you are very unlikely to really want to change this system of governance, which actually works relatively well for your economic strata.
        This is why the largest political party in the US is the one that stays home on election day. Because there is literally almost no difference between your options. And, voting for these jack holes only lends credence to a wholly corrupted and broken system.

        What else, exactly, are Americans supposed to do? The system renders us powerless. To blame the citizens of this country is to refuse, deliberately, to acknowledge e power and control of organized moneyed interests.

        1. Rotter

          your right. Before WW2 might have been the time to change “the system” without too much suffering. Most people dont understand that “the system” which is beggining to look so sinister and wrong, is the same system we’ve been enthusiasticaly building for several decades. In earnest since the end of WW1. It was never a sure thing that the ultra reactionary capitalists would win, and for a century there were bigger fish to fry. Nazis getting greedy in Europe, and the staggeringly unexpected Peoples revolution in Russia(of all places). Now that they have their hands firlmy on all the levers, they have the time to start frying us little fish and BECAUSE of the power we handed to them through those earlier conflicts, and due to 50 years of non-stop- maximum volume behavior conditioning, all the apparatus is in place and we are as apathetic and weak and divided as we are ever likely to be. The time is now for them.

          1. Ray Phenicie

            Of course, get of jail cards start at $2,000,000 each. Or talk to your rep or Senator in Congress, or better yet, go on down to 1600 Pennsylvania Ave and talk to one of the better connected staff there.

        2. Ray Phenicie

          The most succinct statement I have seen on the political parties is “Two parties with one owner.” The website Open gave away Obama’s so called ‘progressive’ base in the lead up to the 2008 campaign when they showed the millions that were flowing to his fund from the financial sector. I guess this trillion dollar write off-oh yeah, it’s a settlement – is the payback for those measly millions. A new version of Monopoly where players can buy stacks of ‘go past jail’ cards to the extent those are needed.

      5. Carla

        “After the banks get through with us just wait and see what the pharmaceutical companies have in store for us.”

        No need to wait — they’re doing it constantly…Take Fosamax, Lipitor, Metformin? You may want to have a really serious talk with your doctor about stopping. Or switch doctors.

        1. Sharon

          Carla, I don’t have to wait I’ve already been poisoned with GE’s product Omniscan or as some of us like to call it Omnikill and Bayer’s product Magnevist (gadolinium based contrasting agents used for MRIs). These products have been injected into people over 300M times and they are a toxic rare earth metal and also heavy. They are neurotoxic and nephrotoxic and they are being found in brain tumors and the reproductive organs of both men and women of childbearing years that have been exposed. I was being sarcastic when I said “just wait” as I know they are already poisoning us on a mass scale.

        1. just me

          From the RT video:

          LAUREN LYSTER: …I do want to know where you think the banks derive this power when they’re dealing with the law.

          YVES SMITH: Because they are the second biggest donors, second to the healthcare industry, in presidential and congressional campaigns. It’s all about the campaign money.

      6. orionATL


        i could not agree with you more.

        americans have bought “values” politics completely.

        and why not?

        one does not have to know much of anything about the actual workings of american politics, about a particular politician, about a particular policy or issue,

        to confidently expound on and act on one’s opinion of religious, sexual, and political party values.

        where’s the beef?

        no beef needed.

        1. Sharon

          Thanks. I’m very frustrated with people that refuse to understand why we are in the situation we are in. I could blame the banks till the cows come home but when I talk with people and they give me that deer in the headlights stare I have to walk away.

    2. Susan the other

      the 10% error allowance. What? This can only be intended as cover for a system that is so riddled with error and fraud it needs a release valve. They can just say oops! we goofed; we’ll fix that for ya. And titles? I can only wonder how title law will be updated to meet modern mortgage industry needs. The US can claim to own everything within its borders and maybe put an extra layer of ownership on all titles to override the mess. That could help the banks and the lenders out of this current mess, but it will make buyers and investors nervous. Because titles would be even less clear then. It would be easier to simply do away with mortgages and deeds of trust as securitizing instruments; wipe titles clean; and go with the government as the securitizer. The bag holder. That’s probably the only thing that will salvage the land title system as we know it.

      1. nonclassical


        I love your comments almost always…can you imagine fundamentalist teeth knashing at the concept of government control of land titles..?

      2. just me

        I heard 1% error allowance (10,000 families can have their homes taken illegally “and that’s okay under this agreement, if there’s a million foreclosures”) — and 10% of underwater mortgage credit that could be met through deficiency judgments. And Matt Stoller laughed and Neil Barofsky said it would be comical if it wasn’t so tragic. That was money the banks write off as impossible to collect anyway. Yves called it blood from a stone.

        The number Neil Barofsky didn’t explain out of his “5, 10 and 45” was 45.

  2. gyges

    Thank you Yves, good appearance, much appreciated. Capital Account is good show and Barofsky and yourself improved it with your well spoken knowledgable commentary.

  3. Stephanie

    As just a regular Joe/Jane, is one way to extract oneself from this mess to refinance with local banks and credit unions, if possible?

    1. Sharon

      In our case we had refinanced several times with the same lender that supposedly sold our loan to Countrywide. The last lender TBW couldn’t perfect the lean on our property. We had to do a Quiet Title Action to clear the title. We don’t know how it will go. It is going to take decades to clean up title issues.

      1. pelham

        Why isn’t it perfectly clear to everyone that once a bank forfeits its right to foreclose on a property, they automatically forfeit ANY right to that property or the right to collect on the mortgage? This shouldn’t be a matter of going to court. If the chain of title is broken, the occupants of the house own it, free and clear. Period. This is not complicated.

          1. Stephanie

            Well, it’s also because many of us (including me) never learned, and never thought it was necessary to learn. This little thread here just sent me researching all over the place to learn what y’all are talking about. “Perfect the lien” “quiet title” “chain of title”. Many of us are illiterate about this stuff….completely illiterate…and it’s to our detriment.

    1. jawbone

      Good grief. How can any judge approve this growing like topsy Rube Goldberg contraption an “agreement”?

      And how can the states attys general, DOJ attys (or whoever worked this POS) show their faces in public when calling this an “agreement”?

  4. craazyman

    Well. I have to say, it cracked me up even at 8 am that someone thinks talking points about the mortgage settlement would be useful props as I spar and parry with the personalities in my life.

    hahah ahaha hah

    Only here, at Naked C., do I find those types. Everywhere else, mostly, it’s the eye roll or the blank stare — and talk of the weather or the NFL or what goes in the recycling bin and what goes in the trash.

    I guess that’s why we’re in the mess we’re in, as a society. Sort of anyway. And the Redskins still don’t have a franchise QB. It’s 0 for 2 down there in DC.

  5. Lauren Lustmilk

    1. Smiling Army guy. A regular PTSD afflicted dude, who was just troubled, killed a bunch of people. Jeepers, maybe it wasn’t his actual fault.

    1. (The Military *routinely* kills women and children during war, this is called… war. Millions of Americans are stuffed into prisons, many because we don’t even consider mental health in US criminal justice Inc.)

    2. Ossama plotted against Ofrauda and Hero ‘Murican Military Men

    2. (Afghanistan remains a wealth filled prize, Americans must support the immense cost of never ending conflict and we’ll publish, print and report any bullshit to that end)

    3. Go Skins!

    3.(College dropout surrounded by a cadre of banksters, good information, lawyers, gets real rich. Then buys a very profitable sports team.)

    1. EH

      “Ofrauda?” Give me a break. Also: your numbering system includes too many intoxicants. Something to think about.

  6. Aquifer

    One comment in the Bloomberg piece stuck me – to the effect that property rights were NOW subject to political power – as if they haven’t always been, going back to the days of one of the first SC decisions – M’Intosh, i think, wherein the Right of Discovery was sanctioned.

    A law prof in the Property course I took was noted for asking on a final exam “What is property?” And the answer, basically, was “whatever the law says it is”.

    1. MERS is Illegal

      Here’s an economics prof:

      “There are $7 trillion of securitized mortgages. It was (mostly) the securitization process that demanded fraud.” –
      Randall Wray

    2. LucyLulu

      A law prof in the Property course I took was noted for asking on a final exam “What is property?” And the answer, basically, was “whatever the law says it is”.

      ….and the law is whatever the judge hearing the case says it is.

      1. Carla

        And Aristotle said: Money is whatever the law says it is.

        And the U.S. Supreme Court, starting WAY before Citizens United with Buckley v. Valeo in 1976, said that Money is Speech.

        But a lot of Americans who have signed the petition at, while understanding all too well that Money Talks, actually do not think Money is Speech.

      2. just me

        And the Constitution and the first Supreme Court Chief Justice said that the law is whatever the jury decides it is. See Georgia v. Brailsford (1794). “We the people” once meant something. Before Santa Clara County v. Southern Pacific Railway (1886) made persons out of corporations via court clerk pixie dust, and before Sparf v. US (1895) made it okay to not let juries be informed of their true power and duty.

    3. Pat

      Aquifer, real property and mortgage law are as fixed as anything in the whole legal system.
      You can’t go around cramming down first liens and leaving second liens perfectly intact – that’s outrageous. You might as well throw all laws about everything into the rubbish bin.
      This reminds me of a law passed in Indiana about a hundred years ago that changed the value of pi from 3.14 to 3.2.

      1. LucyLulu

        I get your point and am inclined to agree with you. That’s how the legal system SHOULD be operating in these cases. I think Aquifer, if I understand correctly, is referring more to the reality of the system, and not only as it applies to property law. There are two types of law that judges will use, statutory law, based on applicable written statutes, the type that you prefer, and case law, or interpretations of the law as applied to cases with similar facts in previous court decisions.

        At risk of defending the present system, when it comes to foreclosures, the primary questions before the courts are whether there IS a debt obligation, has there been a default, and if so, has proper procedure been followed to collect and file for foreclosure, and by the property party. The first three questions pass scrutiny. Without getting too technical*, its possible for the fourth question to meet statutory requirements even if being enforced by one who does not own the debt (or their agent), but generally the courts have been willing to not inspect the issue too closely. The assumption is made that since its known that the borrower owes somebody, it will be the lender that is filing suit, and the vast majority of the time, that assumption is correct, at least on a practical level (of extinguishing borrower’s debt, whether true legal owner or not). Maintaining the integrity of land records is not a question that is put before them. Or such is my understanding.

        *For example, foreclosure can be enforced by holder of the note, which state statute may define as an entity who has physical possession of the note endorsed in blank, while the trust itself that is enforcing the debt may require the note be endorsed as payable to the trustee in order for the assignment of the note to the trust to be valid.

    1. sgt_doom

      IMHO, when it comes to econ bloggers, Nomi Prins and Yves Smith have the finest legs.

      sgt_doom, League of Dirty Old Men

      1. Then There's Maud

        Ellen Brown:

        “Government-owned banks, on the other hand, have less freedom to engage in speculative strategies that result in quick enrichment for bank insiders and politicians. Moreover, politicians tend to be held accountable for wrongdoings or bad management in the public sector but are typically only indirectly blamed, if at all, for the misdemeanors of private banks. It is the shareholders who are expected to prevent these but lack of transparency and weak governance stops them from doing so in practice. “

  7. Fraud Guy- Also

    Looking at the settlement documents, it appears that there are many hidden goodies for the banks, well more than these two videos expose. The one that struck me, reading the BofA settlement (it may well be in the others, I haven’t looked yet), is that the burden of proof for proving FHA mortgage fraud is raised going forward.

    Previously, it was sufficient under the False Claims Act to prove that an FHA originator/servicer failed to comply with the terms of its annual certification to HUD that it had robust quality control systems. Under this old legal doctrine, prosecutors (and qui tam whistleblowers) merely had to show things like quality control reports being stuffed in a closet unread (as occurred in the Deutsche Bank FHA settlement), or management direction to overlook irregularities in FHA loan documents (as occurred in the recent Citi FHA settlement). Under the proposed “Master Settlement”, the federal government is agreeing that it will not bring cases based on theories of “false annual certification of robust quality control systems”. Instead, the settlement specifies that the government can only bring cases going forward based on evidence of originator/servicer fraud with respect to specific mortgages. This is clearly a much higher burden of proof and a significant damper on the magnitude of monetary exposure (hence also a reduction in incentive for qui tam whistleblower to bring a case). At the most basic level, it is a release of any accountability under the FHA lending program, which is designed with the idea that participating banks are delegated broad discretion so long as they maintain appropriate quality systems. So, this is basically a license to steal.

  8. Lambert Strether

    I like Barofsky’s “three numbers to remember” riff (5, 10, 45? I actually remembered…).

    That might be recycled with profit; it’s very handy to have this kind of roadmap at the very start of the interview (and clearly the interviewer was fed it beforehand, which actually makes life easier for them and helps manage the complexity of the story in the timeframe).

    Although, I suppose that in finance, the numbers would be 5%, 10%, =45%

    Could be anything, “Three words to remember,” “three people to remember,” “three dates to remember”….

    1. Carla

      I humbly suggest that important numbers to remember are 1% and 99%. And I disagree with folks who say things like “It’s the 99% against the 1%.”

      It seems to me they have it exactly wrong. It has (at least almost) always been the 1% against the 99…

      Please join Yves Smith in supporting Occupy! They are us. We are them.

  9. Extortion One Bank

    More from Wray:

    “Rep. Kaptur stood on the steps and told homeowners facing foreclosure to stay in their homes. She was right: the banksters have no legal claim on the homes they are foreclosing. Foreclosure is theft. Any bank that used MERS has no legal claim on property — there are 65 million such mortgages to which no bank has a legal claim to foreclose.”

  10. XRayD

    So the rule of law and private property rights don’t matter in this country as far as banks are concerned?

    How is this different from what we say is wrong with China?

  11. PBlacque

    Yves, are you (or Wray or Pilkington or Auerback et al.) going to address Chris Whalen’s pejorative comments about “chartalism”, “keynesians” and “believe in printing money to create Demand” when discussing the Fed stress tests on CNBC or RT TV in the last couple of days. On one hand, you and he seem to agree on the awful Fed tests and on the other, you seem to disagree on MMT… It would be great to have your take. Thank you.

  12. XRayD

    And how is this different from finding that Greece had not defaulted when wiping out half the principle and most of the interest on its “sovereign” bonds?

    Since when is the law not the law, and math not math?

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