Submitted by Tyler Durden.
Plunging deeper into the farce-hole, the FT reports tonight that Obama’s foreclosure settlement with the banks over their improper seizure of tax-paying US citizens’ homes will in fact be subsidized by those very same US taxpayers. It is a hidden clause (that has not been made public yet) that allows the banks to count future loan modifications under the $30bn (taxpayer funded) HAMP initiative towards their $35bn agreement to restructure obligations under the new settlement. As the FT goes on to note, BofA will be able to use future mods made under HAMP towards the $7.6bn in borrower assistance it is committed to provide – which means, in a (as TARP inspector general Neil Barofsky describes) ‘scandalous’ turn of events the bank will receive payments for averting a borrower default and be reimbursed by the taxpayer for the principal write-down. We have much stronger words for how we are feeling about this but Barofsky sums it up calmly “It turns the notion that this is about justice and accountability on its head“. Are the Big Five banks truly beyond the law?
US taxpayers are expected to subsidize the $40bn settlement owed by five leading banks over allegations that they systematically abused borrowers in pursuit of improper home seizures, the Financial Times has learnt.
However, a clause in the provisional agreement – which has not been made public – allows the banks to count future loan modifications made under a 2009 foreclosure-prevention initiative towards their restructuring obligations for the new settlement, according to people familiar with the matter. The existing $30bn initiative, the Home Affordable Modification Programme (Hamp), provides taxpayer funds as an incentive to banks, third party investors and troubled borrowers to arrange loan modifications.
Neil Barofsky, a Democrat and the former special inspector-general of the troubled asset relief programme, described this clause as “scandalous”.
“It turns the notion that this is about justice and accountability on its head,” Mr Barofsky said.
BofA, for instance, will be able to use future modifications made under Hamp towards the $7.6bn in borrower assistance it is committed to provide under the settlement. Under Hamp, the bank will receive payments for averting borrower default and reimbursement from taxpayers for principal written down.
Andrea Risotto, Treasury department spokeswoman, said this system “leverages a way to help more people”.
But people familiar with the matter told the FT that state officials involved in the talks had had misgivings about allowing the banks to use taxpayer-financed loan restructurings as part of the settlement. State negotiators wanted the banks to modify mortgages using Hamp standards, which are seen as borrower-friendly, but did not want the banks to receive settlement credit when modifying Hamp loans. Federal officials pushed for it anyway, these people said.
Alys Cohen, an attorney at the National Consumer Law Center, said that if the arrangement increased help, then it was ”good for homeowners in the long term”.
“But in the end the servicers are not really being punished. They’re getting off easy,” Ms Cohen said.
As if the banks have not been spoon-fed enough over the past three years? We look forward to the mutually assured destruction spin (what would happen if they had to ‘spend’ that money themselves?) that will be propagandized should this be questioned openly and perhaps a glance at the level of bank reserves sitting on the Fed balance sheet might bring the citizenry off the couch, away from American Idol, and at minimum write a sternly worded text message to their closest BFF on Facebook.
Just to be clear: the guilty party in a fraud against taxpayers has their ‘punishment’ paid for by the innocent taxpayer who had the crime committed against them? ok, thank you.