Monday, March 7, 2011

AG Foreclosure Settlement and the Little Red Hen

I am fond of the children's story, The Little Red Hen.  To me, it has always stood for self reliance and capitalism.  When individuals share in the work, they share in the rewards, but when an individual cannot be bothered to lift a hand in the cause of industry, they are left to what they put their hands.  The Little Red Hen offered to include everyone, everyone declined, until she had produced her bread and then everyone wanted a slice.

Last Thursday, the individual states Attorneys General gathered in Washington, DC to discuss a settlement with the biggest banks over the improprieties in handling foreclosures throughout the United States.  The number that was reached, at least as reported in some places is $20 billion.

To you and me, that sounds really big.  $20 Billion with "b."  But, as you start to delve into the number, I have a flash back to Austin Powers and Dr. Evil putting his pinky to his teeth when he says a "million dollars" as if that were some astronomical amount of cash which would shock the civilized world.  Instead, we pat our mouths as the yawn emerges.

Imagine that in the US, where we have a population of nearly 300 million people and of that vast number of individuals, there were 1 million households that were affected by the housing crash.  No imagine, that these people that have lost anywhere from 15 to 50% of their house value in the course of 3 to 4 years, would offering them $20 billion even seem like it would act like a bandaid for the financial scar on their lives?  The amount being sought, is $20,000 per household.  That doesn't even cover the down payment most of these people put on their now underwater homes.

These families have searched the internet, sought out housing counselors, short sale specialists, and the smart ones have found attorneys that understand the significance of the battle that is being fought and have put up a good fight.  These little red hens, if you will, have gathered the wheat, ground it, made their dough, and baked it.  As they sit down to eat, it would appear that every farm animal that was too busy to be bothered has enlisted the AG's to broker a deal to get them a slice.

To be clear, I am not for the settlement, I think the consumer is being sold down the river.  The banks are going to walk with a slap on the wrist while the little red hens are told they can't eat their bread because the AG's made a bad deal, with bad people, all in the name of taking care of everyone.  The fact is, if you want protection (bread) get your own.  I work with a handful of good attorneys in the Puget Sound that have secured settlements and negotiated deals that make $20k look like pennies on the dollar.  The AGs can keep their settlement if it means that I can't do for my clients what I have been doing.

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