Mortgage Deal Is Close, and May Not Offer Much Immunity

Mortgage Deal Is Close, and May Not Offer Much Immunity

Mortgage Deal Is Close, and May Not Offer Much Immunity

The big banks might not get off the hook so easily for widespread mortgage fraud practices.


The federal government is closer than ever to a deal with five major banks over mortgage fraud practices—and, with some exceptions, the emerging details may hearten progressives who feared banks would get off the hook.

The White House provided an outline to the Huffington Post, and it appears that immunity has largely been removed from the deal—except in the area of state prosecutions against robo-signing. (Robo-signing is when banks use fake signatures, or stipulate to documents they hadn’t read or that didn’t exist, in order to foreclose on a home).

According to the Huffington Post story, banks would not receive immunity in the following areas:

1. Criminal liability.
2. Tax liability
3. Fair lending, fair housing, or any other civil rights claim.
4. Federal Housing Finance Agency or the GSEs [Fannie Mae and Freddie Mac]
5. CFPB claims for the period after they came into existence in July 2011
6. SEC claims
7. National Credit Union Association Claims
8. FDIC claims
9. Federal Reserve Board claims
10. MERS claims

State-level robo-signing prosecutions are the simplest form of fraud to prove, however, and the banks wouldn’t face any more investigations. But they would have to fork over $25 billion to help homeowners who were either wrongfully foreclosed on, or have homes that are underwater as part of the settlement.

With almost everything federal still on the table (though the White House says only that a “vast majority” of securitization and origination claims will be exempted), this is not a terrific deal for the banks—especially given that the administration is ramping up federal investigations with a new task force headed by New York Attorney General Eric Schneiderman. “I think it is fair to give [New York Attorney General] Eric Schneiderman and the other progressive attorneys general a lot of credit for holding the line,” a source intimate with the negotiations told the Huffington Post. “This is a big victory for them.”

That assumes the new taskforce will be aggressive and effective, which nobody is yet fully confident about. (Delaware AG Beau Biden voiced concerns about that this week).

Then two serious hurdles must still be cleared: one, will state attorneys general—particularly those who already have robo-signing investigations underway or in planning stages—agree to this deal?

And now, with the limited immunity, will the banks agree? Mike Lux, of Progressive Strategies, has reported that JPMorgan Chase CEO Jamie Dimon is not happy with the deal and may walk away.

A lot of details remain to be worked out or disclosed, but if JPMorgan Chase is threatening to walk, it means the administration is indeed playing hardball.

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