The revelations from the subprime mortgage fiasco just keep getting uglier. Federal investigators confirmed this past week that the major banks replaced subprime mortgage mills with foreclosure mills after the real estate bubble burst. Yet no one has gone to jail. Few bankers have even been prosecuted.
The HUD inspector general began investigating the five biggest servicers of FHA-backed mortgages after reports surfaced in the fall of 2010 about abuses in the foreclosure process, including "robo-signing" of thousands of sworn documents. Essentially, bankers approved foreclosure paperwork without examining whether it was true and correct, resulting in errors or even fraud. The big five are Bank of America (which purchased subprime mortgage mill Countrywide Financial in 2008), CitiMortgage (a unit of CitiGroup), JPMorgan Chase, Ally Financial (the former GMAC) and Wells Fargo.
In February of this year, the Department of Justice and 49 state attorneys general, including Utah's, cut a $25 billion settlement deal with the five banks for their reported violations. Each bank will pay a portion of the settlement and provide consumer relief, including modifed loans, including reduced principal and refinancing. The settlement could help an estimated 2 million current and former mortgage borrowers, although that is just a fraction of the 4 million families who lost their homes to foreclosure between the beginning of 2007 and early 2012, according to The New York Times.