Friday, March 29, 2024
Hawai'i Free Press

Current Articles | Archives

Tuesday, March 27, 2012
Banks to Pay only 20% of Mortgage Settlement
By NCPA @ 2:25 PM :: 6272 Views :: National News, Ethics

The Investor's Case against the Mortgage Settlement

From NCPA

Mortgage-backed securities (MBS) investors are upset after details on the $25 billion national mortgage settlement emerged recently. The settlement confirmed that they might have to forfeit $17 billion to $20 billion to pay for most of the deal. As was long suspected, the headline figure of banks paying $25 billion for their robo-signing of foreclosure documents is false, and banks may only wind up paying $5 billion in cash of the overall deal, says Anthony Randazzo, the director of economic research at the Reason Foundation.

It is understandable that MBS investors are upset about this, but do they have a case in court?

  • The first complaint from MBS investors will be that they were ignored.
  • The second complaint from MBS investors will be that they are innocent of any wrongdoing in this matter -- MBS investors have no authority over how foreclosures are processed or whether the right fees are being charged.

Then there's the third point investors will make: the national mortgage settlement wrongly incentivizes banks to modify private securitized mortgages before modifying loans on their own balance sheets.

  • While only one-fifth of the mortgage settlement is cash payments from the banks to a trustee, $20 billion of the settlement is "consumer relief" efforts including writing down principal, refinancing loans and funding short-sales.
  • The settlement draws up a "menu" of different ways that banks can get "credits" toward their portion of the consumer relief efforts.
  • For example, banks will get a $1 credit for every $1 of principal reduced on mortgages in their own portfolio and a $0.45 credit for every $1 of principal reduced on an investor owned mortgage.

The structure was intended to incentivize banks to favor their own mortgages for principal, but it turns out that the incentive structure suggests that banks would prefer to write down more than double the amount of investor principal for the same credits while strengthening their own balance sheets and avoiding increased losses.

Collectively, these arguments would give MBS investors a credible case that the national mortgage settlement unjustly excluded their participation in the talks, that it unfairly asks them to pay for robosigning failures they had nothing to do with, and that it improperly incentivizes banks to pass losses on to them rather than bite the bullet themselves.

Source: Anthony Randazzo, "The MBS Investor's Case against the Mortgage Settlement," Real Clear Markets, March 22, 2012.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

Aloha Pregnancy Care Center

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii

FIRE

Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Moms for Liberty

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

MentalIllnessPolicy.org

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT