<<< (EMoney) So the AG Settlement doesn't really address the fraud and predatory lending practices that got folks into these bad loans in the first place? >>>
No. It doesn’t.
The (CA) AG settlement greatly fails the victims of predatory lending on the part of
CW/now BofA.
IMO, it’s more of a political capital settlement for the (CA) AG. It was more theatre vs. any true legal remedy for victims. Like all corporate defendants, BofA settled “without admitting any wrongdoing.” The consequence for BofA was just a legal slap on the hand vs. what it should have been for the predators: a legal bloody lip, black eye and lingering case of (white collar crime) PTSD to remind the predators to never attempt predatory lending again. The settlement appeared initially to be a victory for
CW victims at that time (early in the loan mod “movement”), because most lenders, including
CW/BofA, were playing total hard ball with struggling homeowners re giving ANY type of loan mod (i.e., lender stall and obstruct games (that still occur) like requiring homeowners go through painstaking tasks (over and over again) to “qualify” for loan mods of predatory toxic products i.e. fax this, do that, jump up, jump down, touch your nose, yes-you’re “approved,” oops, no, you’re not, fax it again, and again, sorry, no programs to help you, call us – we can help, then-sorry, we can’t help you, then-sorry - you make $10 too much, or make $10 too little, on and on and on). The real goals were/are to continue to take advantage of desperate homeowners across the board, so they will agree to just about any loan mod. Money and property continue to be more important than wronged consumers – even after predatory lending busts. No real consequences for predators. The beat goes on. Business as usual. So, by the terms of this settlement, the victims were reduced to just another struggling homeowner as “no wrongdoing admitted” wink wink wink. At the time of the settlement, ALL struggling homeowners were desperate to get ANY type of loan mod. So, the end result of this AG settlement just ensured that the victims GOT a loan mod, period (as they were not being routinely given). Not necessarily a true, fair, long-term, sustainable, loan mod. Just a mod. Hence, the resulting “settlement” mod for
CW victims is just a generic, vanilla, loan mod (lowered interest rate for a few years, with back loaded past due payments, predatory fees, etc.) which guarantees the “homeowner” remains a (grossly) overpaying, forever renter, as the bank will always own the “home” in this continuing downward market. Once the market stabilizes, it is expected to remain flat for years. Meaning no equity building. Ever. And stapped with the old, over-valued, loan balance debt. The ONLY true loan mod for victims (and everyone) is one with a reduced principal balance to current market prop value plus fixed, lowered interest rate (fair market value) for the life of the loan. Period. Anything else continues the orig predatory model. Because the settlement turned out so soft for victims, the predators now run the predatory loan mod game. The (CA) AG missed a good opportunity to lead the way to really put an end to predatory lending as we’ve known it. Because the opportunity was missed, we still have a guarantee that predatory lending will not only continue but THRIVE more than ever (see below article).
And, sorry, resolving this predatory mess is not to be shouldered by the victims of predatory lending. It is not the responsibility of the victims to “make more money over the next 10 years” in order to be able to now continue to (over) pay (as usual) in order to be able to keep up with the lousy terms of their new, predatory loan modifications of
CW/BofA.
And, I have no desire to understand a pred lender’s viewpoint who did not and continues to not play fairly with its customers (a lender who ducked all responsibility for defrauding millions of homeowners and has never made amends to anyone, of any sort, in any way). And, one that continues to exploit its distressed homeowners.
CW/BofA should be grateful every day that some of its struggling homeowners are too tired, broke, desperate and still way too emotionally attached to phantom homes that they think they own – which, unfortunately, makes these homeowners all too willing to continue to play the
CW/BofA pred loan mod game.
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EX-LEADERS AT COUNTRYWIDE START FIRM TO BUY BAD LOANS
By ERIC LIPTON Published: March 3, 2009
CALABASAS, Calif. — Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering. So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess. Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect. “It has been very successful — very strong,” John Lawrence, the company’s head of loan servicing, told Mr. Kurland one recent morning in a glass-walled boardroom here at PennyMac’s spacious headquarters, opened last year in the same Los Angeles suburb where Countrywide once flourished. “In fact, it’s off-the-charts good,” he told Mr. Kurland, who was leaning back comfortably in his leather boardroom chair, even as the financial markets in New York were plunging. As hundreds of billions of dollars flow from Washington to jump-start the nation’s staggering banks, automakers and other industries, a new economy is emerging of businesses that hope to make money from the various government programs that make up the largest economic rescue in history. They include big investors who are buying up failed banks taken over by the federal government and lobbyists. And there is PennyMac, led by Mr. Kurland, 56, once the soft-spoken No. 2 to Angelo R. Mozilo, the perpetually tanned former chief executive of Countrywide and its public face. Mr. Kurland has raised hundreds of millions of dollars from big players like BlackRock, the investment manager, to finance his start-up. Having sold off close to $200 million in stock before leaving Countrywide, he has also put up some of his own cash. While some critics are distressed that Mr. Kurland and his team are back in business, the executives say that PennyMac’s operations serve as a model for how the government, working with banks, can help stabilize the housing market and lead the nation out of the recession. “It is very important to the entire team here to be part of a solution,” Mr. Kurland said, standing in his office, which has views of the Santa Monica Mountains. It is quite evident that their efforts are, in fact, helping many distressed homeowners. “Literally, their assistance saved my family’s home,” said Robert Robinson, of Felton, Pa., whose interest rate was cut by more than half, making his mortgage affordable again. But to some, it is disturbing to see former Countrywide executives in the industry again. “It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margot Saunders, a lawyer with the National Consumer Law Center, which for years has sought to place limits on what it calls abusive lending practices by Countrywide and other companies. More than any other major lending institution, Countrywide has become synonymous with the excesses that led to the housing bubble. The firm’s reputation has been so tarnished that Bank of America, which bought it last year at a bargain price, announced that the name and logo of Countrywide, once the biggest mortgage lender in the nation, would soon disappear. Mr. Kurland acknowledges pushing Countrywide into the type of higher-risk loans that have since, in large numbers, gone into default. But he said that he always insisted that the loans go only to borrowers who could afford to repay them. He also said that Countrywide’s riskiest lending took place after he left the company, in late 2006, after what he said was an internal conflict with Mr. Mozilo and other executives, whom he blames for loosening loan standards. In retrospect, Mr. Kurland said, he regrets what happened at Countrywide and in the mortgage industry nationwide, but does not believe he deserves blame. “It is horrible what transpired in the industry,” said Mr. Kurland, who has never been subject to any regulatory actions. But lawsuits against Countrywide raise questions about Mr. Kurland’s portrayal of his role. They accuse him of being at the center of a culture shift at Countrywide that started in 2003, as the company popularized a type of loan that often came with low “teaser” interest rates and that, for some, became unaffordable when the low rate expired. The lawsuits, including one filed by New York State’s comptroller, say Mr. Kurland was well aware of the risks, and even misled Countrywide’s investors about the precariousness of the company’s portfolio, which grew to $463 billion in loans, from $62 billion, three times faster than the market nationwide, during the final six years of his tenure. “Kurland is seeking to capitalize on a situation that was a product of his own creation,” said Blair A. Nicholas, a lawyer representing retired Arkansas teachers who are also suing Mr. Kurland and other former Countrywide executives. “It is tragic and ironic. But then again, greed is a growth industry.” David K. Willingham, a lawyer representing Mr. Kurland in several of these suits, said the allegations related to Mr. Kurland were without merit, and motions had been filed to seek their dismissal. Federal banking officials — without mentioning Mr. Kurland by name — added that just because an executive worked at an institution like Countrywide did not mean he was to blame for questionable lending practices. They said that it was important to do business with experienced mortgage operators like Mr. Kurland, who know how to creatively renegotiate delinquent loans. PennyMac, whose full legal name is the Private National Mortgage Acceptance Company, also received backing from BlackRock and Highfields Capital, a hedge fund based in Boston. It makes its money by buying loans from struggling or failed financial institutions at such a huge discount that it stands to profit enormously even if it offers to slash interest rates or make other loan modifications to entice borrowers into resuming payments. Its biggest deal has been with the Federal Deposit Insurance Corporation, which it paid $43.2 million for $560 million worth of mostly delinquent residential loans left over after the failure last year of the First National Bank of Nevada. Many of these loans resemble the kind that Countrywide once offered, with interest rates that can suddenly balloon. PennyMac’s payment was the equivalent of 38 cents on the dollar, according to the full terms of the agreement. Under the initial terms of the F.D.I.C. deal, PennyMac is entitled to keep 20 cents on every dollar it can collect, with the government receiving the rest. Eventually that will rise to 40 cents. Phone operators for PennyMac — working in shifts — spend 15 hours a day trying to reach borrowers whose loans the company now controls. In dozens of cases, after it has control of loans, it moves to initiate foreclosure proceedings, or to urge the owners to sell the house if they do not respond to calls, are not willing to start paying or cannot afford the house. In many other cases, operators offer drastic cuts in the interest rate or other deals, which PennyMac can afford, given that it paid so little for the loans. PennyMac hopes to achieve a profit of at least 20 percent annually, and it is actively courting other investors to build its portfolio, which now consists of $800 million in loans, to as much as $15 billion in the next 18 months, executives said. For the borrowers whose loans have ended up with PennyMac, it can translate into an extraordinary deal. The Laverdes, of Porter Ranch, Calif., had fallen three months behind on their mortgage after sales at a furniture store owned by the family dipped in the economic crisis. Margarita Laverde and her husband were fearful that they might need to move their four children, three dogs and giant saltwater aquarium into a cramped apartment, leaving behind their dream home — a five-bedroom ranch on a suburban street overlooking the San Fernando Valley. But a PennyMac representative instead offered to cut the interest rate on their $590,000 loan to 3 percent, from 7.25 percent, cutting their monthly payments nearly in half, Ms. Laverde said. “I kept on asking, ‘Are you sure this is correct? Are you sure?’ ” Ms. Laverde said. Even with this reduction, PennyMac stands to make a profit of at least 50 percent, a company official said. Ms. Laverde could not care less that executives at PennyMac used to work at Countrywide. “What matters,” she said, “is that we know our house is secure and our credit is safe.
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