Federal Hand Slap In Foreclosure Fraud Deal With Banks: What Will the State AGs Do Now?

Posted By on April 7, 2011

With all the news coverage of the possible shutdown of the federal government, there may not be enough eyes on what has happened this week regarding the national Foreclosure Fraud crisis.  The Foreclosure Fraud crisis may be impacting Florida more than any other state, and we pay close attention to what is happening to try and find justice for its victims (go here to read some past coverage).

Something major is developing that is going to impact all of Florida, as well as the rest of the nation.  We need to do all we can to prevent this from going unnoticed as the Shutdown news gains momentum.  What is happening?

The Feds have started finalizing settlement agreements with the banks — bypassing the states and their coalition of state Attorneys General.

After all that coordination to get the federal regulators (including Elizabeth Warren and her Consumer Financial Protection Bureau) together with the Attorneys General from all 50 states to work as a team to negotiate deals with the banks (the people who are responsible for the Foreclosure Fraud mess), the federal government appears to have made its own deal with the banks, pushing aside Florida and the rest of the states.

Basically, the feds and the banks are signing off on agreements without the states.  News reports are that (1) the Federal Reserve,(2) the Office of the Comptroller of the Currency, (3) the FDIC and (4) various other federal bank regulators are finalizing “consent agreements” with the big Foreclosure villains, like Bank of America and Wells Fargo, among others.

Want to read this “consent agreement” between the feds and the banks? You can.

The American Banker has a pdf online for all of us to peruse. Lawyers reading this thing (admittedly, the online version is labelled “draft” but we can assume this is basically what is being signed) will be shocked to see that the banks had really good counsel here.  Or maybe no one is surprised at this slam dunk:

  • The agreement doesn’t make the banks pay any fine.
  • The agreement doesn’t make the banks write down principal on these notorious foreclosure mortgage notes.
  • No one is admitting that anyone did anything wrong.  Forget about Robo-signing. No worries there for those guys.

What do the banks have to do?  Well, the feds are making them be a tad more serious about their foreclosure procedures.  They may have to be a bit careful about what loans they modify in the future, and how they do it.  But it’s such a walk in the park for these guys that you have to wonder.  What is going on here?

Federal Hand Slap.  Now, will the State of Florida (or any other state) do something more to punish all this evildoing?

The consent agreements between the banks and the federal government do not prevent the Attorneys General from pursuing their own actions under the various state laws. That wasn’t a strategic decision.  The federal government doesn’t have the power to make a deal for the states – there’s the sovereignty issue.  Some may argue that the feds have done all they could in shoving this deal down the states’ throats by making these agreements without the states.  The deal takes leverage away from the states and gives it to the banks as they turn now to negotiate with the various states.

Florida has been hard hit by Foreclosure Fraud.  We are the state where the Law Offices of David Stern operated, after all.  What will the Florida Attorney General do now?  Let’s watch and see.

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