Tuesday, March 8, 2011

AG Foreclosure Settlement: Parts to like, but at what cost?

Yesterday I posted on the AG Foreclosure Settlement, today I was finally able to read the 27 page draft that was allegedly sent to the biggest banks in America.  There are certain aspects of the proposal that have merit.  It contains tools such as closing the option of Dual Track Foreclosure which we discussed last week.  There are also requirements of providing documentation in Nonjudicial foreclosure states like Washington which are not otherwise required.  The proposal also includes the forced use of NPV analysis on determining the value of modifications and short sales as opposed to foreclosure, principal loan modifications, single point of contact with the servicers, and increased use of short sales.

These tools are really not all that different than many of the tools that we already have at our finger tips as attorneys.  Certainly, the tools are more spread out.  We have to weave together items of Consumer Protection, Real Estate, Tort law, agency, bankruptcy, and contract law to come up with some of our answers, but that doesn't mean the answers are not already available.  The AGs are packaging it into a nice little kit if you will. 

The problem that I have with the kit is going to be the expense.  If you look on page 26 of 27, you will find item VI Monetary Relief and there is a little phrase there that reads, "settle claims owed the government and/or to fund programs..."  This is where I find this proposal suspect as reported yesterday.  What is it going to cost to get the protections listed in the other twenty five pages, plus the money?  I believe that the banks are going to be asking for immunity from suit on the bad acts from private parties.  I believe that the tools already in place will be made ineffective by the AG's settlement and the only way to be allowed to use them is to fight with the AG who is supposed to be helping consumers beat harmful business practices.  Who is going to protect us from a duped AG?

It is too early to tell what the actual ramifications of this proposal will be, but considering that most AGs are political in nature, ie Rob McKenna from Washington using the AG office as a stepping stone to run for Governor, it is not surprising to find short sighted fixes.  Especially when we are dealing with all 50 states AGs and the banking industry and a handful of federal bureaucracies.  Stay informed, put in your two cents, because if we stand idly by, our government may give away our rights in the name of protecting the society.

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