Banks Use Republican Governors To Voice Opposition To Nationwide Foreclosure Settlement

Florida Attorney General Pam Biondi is one of the four voicing her displeasure with the proposed settlement.

A very detailed write-up on the state AG settlement is here...

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Source - Bloomberg

Foreclosure Terms May Pose ‘Moral Hazard,’ State Attorneys General

A plan to resolve a nationwide probe of foreclosure and mortgage-servicing practices is being opposed by four more Republican state attorneys general, who say the terms of a deal may foster a “moral hazard.”

In a letter to Iowa Attorney General Tom Miller, a Democrat who has taken the lead in the investigation, the officials objected to new documentation requirements and principal reductions outlined in the proposed settlement submitted to the country’s top mortgage-servicing companies this month.

Yesterday’s letter, a copy of which was obtained by Bloomberg News, was signed by attorneys general Kenneth Cuccinelli of Virginia, Greg Abbott of Texas, Pam Bondi of Florida and Alan Wilson of South Carolina. The attorneys general of Oklahoma, Alabama and Nebraska sent Miller a letter with their objections on March 16.

The settlement offer “appears to reach well beyond the scope of our enforcement role, and, in some instances, far exceeds the scope of the misconduct which was the subject of our original investigation,” according to the letter, which was verified by Brian Gottstein, a spokesman for Cuccinelli.

A key objection is the “moral hazard” created by the proposal to reduce homebuyers’ loans because it “rewards those who simply choose not to pay their mortgage,” the attorneys general said.

Borrowers who are enrolled in a trial loan modification under a federal program and make three loan payments on time would get a permanent loan modification under the proposal. The document would give attorneys general and the Consumer Financial Protection Bureau responsibility to police servicers’ compliance with any settlement.

Continue reading...

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Pitchfork here.  I agree with the governors. It just wouldn't be right to let people who borrowed too much and own more assets than they can afford to be bailed out by government fiat. The banks who hold second liens on underwater mortgages should take the losses that are coming to them, not get a bailout from unaccountable, rogue bureaucrats. That would constitute a "moral hazard."

Oh wait, I see. They're worried some undeserving pleb might get a mortgage mod. My bad. I thought they were worried about the massive giveaway the settlement will be for the banks and servicers.

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More detail on this story:

Why Is Wall Street So Afraid Of Elizabeth Warren?

Comments

[Dr. Pitchfork]

I agree. It just wouldn't be right to let people who borrowed too much and own more assets than they can afford to be bailed out by government fiat. The banks who hold second liens on underwater mortgages should take the losses that are coming to them, not get a bailout from unaccountable, rogue bureaucrats. That would constitute a "moral hazard."

[BilyMack]

Very difficult to believe. This must be an early April Fool's joke.
A REPUBLICAN??? A guardian of freedom and champion of the people??? Our protectors of freedom, liberty and property rights??? The right wing?
Naw!
Someone mistakenly, or intentionally replaced "democrat" with "republican.

[Dr. Pitchfork]

Oh, I see. They're worried some undeserving pleb might get a mortgage mod. My bad. I thought they were worried about the massive giveaway the settlement will be for the banks and servicers.

[DailyBail]

well said pitch...

[DailyBail]

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[DailyBail]

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[DailyBail]

Time for Obama to Speak to Us About Libya

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[DailyBail]

add your comments to the story pitchfork...

[David]

Foster moral hazard?

How about festering criminal, fraudulent, Ponzi schemish, and reckless activities?

[debi]

OMG -- the attorney generals are opposing any settlement which would "let me get this straight" REDUCE the principle of the mortgage of the person enduring all the FRAUD??? Are u kidding me? Who's payroll are all these AG's on any way. This is so retarded the position is not even viable. Why in the world would this even be the suggestion? And then the banks don't want to reward the deadbeats right!? Sure. Go ahead and bury our courts in complete FRAUD and want to settle?? The greedy fuks need to go to jail. This is insane. The AGs are insane. They all must benefit some how. Either that or they are so stupid they are useless. Fire them all at very least and put some of these greedy fuks who committed felonies to serve real time. And not on television. This is the worst time in our history and its the greed that is so frightening. It is so blatant, that its become comical. That's the only way to get through this. We need class actions now!! I am so sick of feeling so sick over what humans are capable of. Maybe the gas chambers were a good idea after all---just ask the newest potential buyers of the NYSE. America is actually thinking about allowing Deutche bank to buy the NYSE. I am so perplexed every single day now. What stupidity and greed scenario will appear out of the devils cave today. But my idea would be to put all the rich white sick greedy old fuks in the chambers and free America once and for all. Greed kills and fat pigs get slaughtered. Debi

[Greg Diablo]

Debi, the French took your suggestion in 1789 and it didn't work very well. The problem is systemic because the system incentivizes bad behavior. The Fed backs up the bad behavior with currency debasement which shifts the onus of the bad behavior to the people in the form of inflation.

The primary moral hazard here is the Fed, and it has to go. This is our country's third try at a central bank, and I say three strikes, you're out. No mas. The people must have sound money and a justice system that prosecutes white collar criminals like Hank Paulson and Alan Greenspan.