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NY Attorney General could be squeaky wheel in settlement with Foreclosure Scandal principals

In which I reveal more personal info about battles over mortgages, with servicers, goons and foreclosure attempts


You, family, or friends enmeshed in foreclosure?

Are you hoping to see the states'-and-feds' combine quickly heel in the largest banks involved in the Great Foreclosure Scandal? If you're in one of the more than 5 million homes that currently stagnate somewhere in the foreclosure process, you may be  thinking a quick settlement with the banks will allow you to save your home without having to file bankruptcy.

Attorneys General may be better off listening to Schneiderman-- he just may be better in touch with public opinion, not to mention justice

If so, maybe you'd better go ahead and start interviewing bankruptcy attorneys in preparation for receiving bankruptcy protection, which in most cases will entail a Chapter 13 filing. Here's why you might not want to wait:

  1. Because of the lack of unity within the combine versus the single-minded focus of the banks, a short and sweet resolution is highly unlikely.

  2. For many lenders, the power of bankruptcy is about the only thing they respect, coming from an individual consumer.

  3. It might not even be a good idea to settle with the banks, given the concessions they want regarding future litigation.

  4. The settlement figure most commonly used--about $20 billion--may well be a fraction of what an authentic, accurate amount should be.

On Aug. 23, New York Attorney General Eric Schneiderman was dismissed from the executive committee of the Mortgage Foreclosure Scandal combine, comprising the 50 states' Attorneys General; the Justice Department; the Housing and Urban Development Department; and, as consultant, the recently launched brainchild of Elizabeth Warren, the Consumer Financial Protection Bureau.

Dismissal announced via group e-mail

Running the show for the Attorneys is Iowa's AG, Tom Miller, who bounced Schneiderman, accusing the Democrat elected  in November of "undermining" the negotiations process. Curiously, Miller did not personally serve Schneiderman his walking papers, according to an Aug. 23 account at WashingtonPost.com:   "Miller did not speak with Schneiderman before he sent word about the decision. Rather, Iowa assistant Attorney General Patrick Madigan e-mailed counterparts around the country just before 1 p.m. announcing that New York had been booted from the key group of states overseeing the negotiations, 'effective immediately.' "

Taibbi weighs in, heavily, with one crucial error: Schneiderman not alone

The lack of unity stems from Schneiderman's desire to continue "conducting his own investigation into the era of securitizations – the practice of chopping up assets like mortgages and converting them into saleable securities – that led up to the financial crisis of 2007-2008," according to Matt Taibbi in his Aug. 24 blog at RollingStone.com.

"On the other side," writes Taibbi, "is the Obama administration, the banks, and all the other state attorneys general.

"This second camp has cooked up a deal that would allow the banks to walk away with just a seriously discounted fine from a generation of fraud that led to millions of people losing their homes."

Except for one detail in his colorful-as-usual account, Taibbi well describes the logjam. However, Taibbi, as well as other reporters at a variety of news and opinion sites, have gotten this aspect wrong: Schneiderman is not a lone voice in the wilderness. According to CNN Money and an opinion piece at Time.com, fellow Attorneys General from Massachusetts, Delaware and Nevada agree that the settlement should neither be too narrow nor preclude further charges.

Banks want this to go away with a known, fixed cost--and no further charges

Essentially, the banks want the authorities to keep the focus restricted to the so-called "robo-signing" aspect of the scandal, which broke big-time almost a year ago (although the shady practice was known of long before becoming a national headline) and triggered a few months' moratorium on foreclosures. In return, they're willing to pay what sounds like big bucks (their first offer was $5 billion, so the much-bandied $20 billion is an improvement); however, they also want language in the settlement that will prevent further investigation that may reveal evidence of wrongdoing on a much larger and deeper scale, leading to really huge payouts--and perhaps criminal charges.

NY AG wants the full picture revealed

Schneiderman, the other dissenting Attorneys General, and various consumer groups do not want to rush to an easy, early settlement that in retrospect will be seen to have the banks off way too cheaply from the perspective of victimized homeowners. Schneiderman, in particular, wants to retain the right to also investigate and bring charges--if warranted--for investors who might have been duped by the bank. And we know they exist, from testimony before Congress and other legal actions.

$20 billion? One Florida fund alone lost nearly $70 billion

As far as the dollar-amount apparently on the table--which Schneiderman critics say will be vastly reduced if New York backs out altogether--Taibbi maintains that twenty bil is ridiculously low. From his blog, linked previously:
To give you an indication of how absurdly small a number even $20 billion is relative to the sums of money the banks made unloading worthless crap subprime assets on foreigners, pension funds and other unsuspecting suckers around the world, consider this: in 2008 alone, the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion) thanks in significant part to investments in these deadly MBS.

So this deal being cooked up is the ultimate Papal indulgence. By the time that $20 billion (if it even ends up being that high) gets divvied up between all the major players, the broadest and most destructive fraud scheme in American history, one that makes the S&L crisis look like a cheap liquor store holdup, will be safely reduced to a single painful but eminently survivable one-time line item for all the major perpetrators.

Home and hearth primary considerations

And of course it's well and good to know about these things and the various national arguments, but if you're facing financial ruin and the loss of your home, you simply must think of your family, household and neighborhood first. I'm no attorney and therefore unqualified to offer legal advice. But from personal experience, I can testify that I've had months-into-years' battles with various mortgage companies and, both indirectly-and-directly, with one bank.

A personal history with mysterious, bizarre behavior

One home was vandalized by thuggish goons sent, ostensibly, to "secure and protect" the property; one mortgage-servicer absolutely screwed up my escrow account; when proven that my records were accurate, same servicer conceded I was correct, then promptly "sold the note"; the new servicer tried to foreclose on me while I was unconscious for several weeks in the hospital, and then shorted me several thousand dollars when I paid off the mortgage--despite my having a so-called "foreclosure expert" as an attorney;  at my current home, the bank that holds the note has tried to foreclose on me twice, even though I've never missed a mortgage payment (at either house).

Bank eventually recognizes power of bankruptcy

The only way this bank got stopped was by my filing for Chapter 13 protection. Finally--during the second foreclosure attempt--the lead banker in the case (did I say, finally, finally?) realized that the wrath of the Federal Bankruptcy Court might be about to rain sanction-havoc upon his bank. As I say, I'm no attorney, but I hope you'll believe me in this: After speaking with my attorney, the banker engaged his own bankruptcy attorney who promptly advised said banker something to effect that violating a stay from a bankruptcy court is tantamount to begging for a federal lashing.

Since then, no further threats to taking my new home have appeared.

Consumer bankruptcy for yourself

If you're considering filing for consumer-level bankruptcy protection, be aware that legally you can file the petition yourself. You can also hire "advocates" who can point you toward the correct forms and provide a minimal amount of information--although they can not offer legal advice. That being said, bankruptcy experts and legal authorities recommend hiring a trained, experienced attorney who keeps up with changes to the code and is familiar with all the principals in your area's bankruptcy court.

Consider free case evaluation

If you're interested in learning more about the power of bankruptcy protection, please, browse our site for more information; if you need help filing for bankruptcy protection for yourself, consider signing up for a free case evaluation.

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