The Funding Source Syracuse

The Funding Source Syracuse

Tuesday, February 3, 2015

Wells wins case

We have all read about the numerous legal challenges that banks have faced. 

Some have paid billions of dollars on behalf of banks that they purchased in 2009 at the direct request of the US Government, for the actions of the banks that failed.    To re-iterate, as this is surreal, the President lined up the CEO's of healthy banks at a meeting and specifically requested that they purchase specific banks that were failing.   The economy was a day away from another Great Depression and the successful banks did their good deeds and complied.   But, the banks that they purchased had engaged in subprime loans that were not illegal then - but today are considered illegal lending practices.

So, fast forward from 2009 to 2012 and the US Government and various US Attorney General's began a slew of lawsuits against banks for the practices of the former banks they purchased at the direct request of the US Government to bail out the failing banks.

This resulted in billions and billions of dollars in fines, settlements, agreements and funded the US Government significantly.   Various states also got into the free for all and settled with banks getting billions themselves. 

While this was going on, Warren's unregulated regulator - the Consumer Financial Protection Bureau - born out of the Frank-Dodd legislation - began to hire individuals with no mortgage banking, banking or any real life experience to..... yes to regulate mortgage banking, banking and financial professionals.

And this led to more regulations that in the eyes of many banks and other groups have resulted in the closing of smaller lenders who can not afford the increased costs to meet the regulations, the closing of companies accused or found to have "violated" or been "sanctioned" for immaterial items.  As smaller lenders closed, larger lenders have grown larger (the very thing the government and Sen. Warren rightfully did not want to have - the "too big to fail" banks).  And, lending constricted because no one wanted to originate a loan that was going to be punted back for immaterial issues unrelated to sound underwriting that resulted in no harm to the consumer.   Even JP Morgan announced they were throttling back on government mortgage lending themselves.

Then the US Government began to push for more lending because banks were not lending (why anyone was surprised banks were not lending is curious).   They rolled out former Chairman Ben bernanke who said he himself was denied on his mortgage (because he did not have the required two-years of stable income as he had recently retired as Chairman - and those rules were in place by the regulators and agencies run by the government such as Fannie Mae and Freddie Mac - so again, no surprise.).

So, banks again bended in return for the agencies (Fannie, Freddie, HUD) agreement not to push back loans for immaterial findings.  The banks announced with great fanfare the new expanded criteria in lending that really were just the old 97% LTV loans from the 1990's.   And, in response, HUD lowered their crushingly high mortgage insurance premiums to lower the cost to get an FHA loan.

It would have been nice if it ended there. 

It did not

Apparently, NYS decided that Wells Fargo violated an agreement they signed and paid into a 25 billion settlement (along with 4 other banks) regarding the servicing of loans. The claim was that bank was not responding to some struggling borrowers who were seeking loan modifications as quickly as timetables under the settlement.

The Judge rejected this overreach by the government stating " does not require absolute perfection in loan servicing" and ruled for Wells Fargo.

It's time that the public understand that banks lend money.  People borrow money.  What occurred between 2000 and 2008 was the result of greed.  That greed was fueled by the US Government pushing banks in the 1990's to lend more and more to people with lower credit standards, lower income and to give them more borrowing power.  And, the US Government tied that to the Community Re-investment Act - the more banks lent to those people the more CRA credits they got.

And, let us not forget that even the New York Times in the mid-2000's marveled how marginalized individuals got out of poverty and were now millionaires - having obtained homes that increased in value, or purchasing and fixing up run down houses that now were worth 2 and 3 times the amount invested.  

And, let us  not forget that mortgage fraud then came about as greedy people entered the mortgage business seeing a way to make a fortune and they ruined it for everyone - the professionals in the business, the borrowers, the banks - everyone.  And, let's not forget that there were many people on the street who were just as guilty as the get rich boys and girls in the mortgage divisions of banks and mortgage bankers who were not ethical in the least.

The blame for what occurred can go from Bush and Clinton wanting to increase the level of individuals who own homes, to wall street investors looking to make a buck, to mortgage brokers looking to make a buck to average Joe and Jill seeing a shot at making money through real estate. 

Consumers were not all victims.  Bankers were not all bad people.  This Elizabeth Warren story line has to come to an end.  People who do not pay their mortgage should be foreclosed so that the banking industry is able to recoup it's money and lend to the next person.  Not everyone in foreclosure was abused, used, ripped off and should gain our sorrow.  They may have seen a big house they could not afford and bought it.  Just as the lender should have better assessed their ability to re pay, the consumer should have sat down and thought "hmmm......Do I need the McMansion and the Suburban?  Will I have enough for food after I pay those payments?".   They did not think that one out.  Pretty basic.

So, now we have NYS being slapped down in their attempt to, again, get a payment from a bank for allegedly violating some new regulation put in place to stop some practice that was A-Okay with the government when they wanted the banks to lend lend and lend some more.  

Now, let's end it.  Let's figure what part of the regulations need to go and what parts need to stay and lets adjust it.  And, lets educate the regulators about life and the politicians about taking private sector money to fuel government spending.

The public should really ask - where did that settlement money go to that the government got?  I think in New York it went to re-build a bridge.   I am not sure how, if there were injured and harmed tax payers, that the re-building of a bridge gets their homes back.   Maybe I'm just naive and dumb.  But, it is not ethical and it is not fair and it needs to stop.