Here’s an outrageous number for you: of the 4.3 million or so foreclosed-upon borrowers set to receive payments from the big banks as part of the 2011 foreclosure-abuse settlement with regulators, the number of people who were actually improperly foreclosed on-that is, they were current on their loans but the banks tried to take their houses anyway-comes to . . . . 53.
Out of 4.3 million. At first I wasn’t sure there were enough zeroes on my calculator to do the math, but that works out to be 0.0012% of affected borrowers. (I’d even trust a surgeon with that failure rate.) Another 1,023 were improper military foreclosures. Everybody else in the settlement defaulted on their loans just like the banks said, but are getting checks anyway, $300 each, because the banks committed some paperwork screwup or other, such as robo-signing, in the course of foreclosing.
This is monumentally, disgracefully unfair. To begin with, those 53 blameless borrowers deserve to be made 100% whole, with a penalty kicker added on, to compensate them for the ordeal they’ve had to go through. They did nothing wrong and lost their homes (or almost did) anyway. Instead, they’re just getting $125,000 each. The improper military foreclosures should be made 100% whole, too, with a penalty. They’re just getting $125,000 each, as well. Shameful.
Worse, why are the rest getting anything at all? They entered into a mortgage contract and, for whatever reason, failed to live up to their end of the deal. For this, they deserve to get paid? So what if the lender didn’t manage the paperwork properly; the foreclosed borrowers didn’t suffer any material harm as a result of it. You can argue if you want that the banks need to pay something for having screwed up their foreclosure processes so badly. Fine. They’ve already agreed to fork over $5.7 billion in foreclosure-prevention aid. Further, servicing and foreclosure regulation was heavily tightened by Dodd-Frank. So the banks have paid a big price for messing up.
Bank critics will say these defaulted borrowers are victims who deserve to be compensated. I prefer to think of them as “adults.” They knew exactly what they were doing when they signed on the dotted line. What’s more, a non-insignificant portion of the borrowers were the ones doing the victimizing. They didn’t call them liars’ loans for nothing, after all. Many borrowers lied about their incomes. They lied about their assets. They lied about their planned use of the properties. And they’re the ones getting checks? It’s nuts.
A lot of bad behaviors happened as the housing bubble inflated and even more after it popped. But random, misguided cash transfers at this point don’t undo any of the damage. They just make a crazy situation crazier. This settlement is idiotic.
What do you think? Let me know!