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Bloomberg reported on Saturday that Bank of America and Wells Fargo/Wachovia, the biggest mortgage lenders, are anticipating significant fines, penalties, and legal costs to come from the many current investigations into questionable mortgage lending and foreclosure practices. This news comes as the "Homeowner's Bottom Line" campaign has been meeting with states' attorneys general across the country to press for justice in the foreclosure crisis.
Of course, the devil is in the details. What will and will not be addressed in the results of the foreclosure investigation has yet to be seen. However, these big banks see enough significant impact coming that they felt the need to inform the public in a recent report filed with the Securities and Exchange Commission.
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Big Banks See Fines and Penalties Coming
I hope that the 50 Attorney Generals go after these mortgage companies with the same intensity they go after defaulted loans. I hope finally the chickens are coming home to roost.
-Gordon McKinney
My optimism and naivete leave me with a question that I'm sure lots of consumers are asking: Why are more bank shareholders not upset by the questionable lending practices that have lowered real estate prices for much of the country, thus threatening to lengthen a recession that all would love to see end?
My pragmatic side realizes that shareholders are usually only concerned about the return on their investment and as such care little about the turmoil of lost homes and displaced families as long as they are unaffected.
I guess the evidence is in the law suit. I was reading this article on your blog and thought that I'd add this new article to show that the fees have started.
http://money.cnn.com/2011/09/02/news/companies/government_mortgage/index.htm
Government goes after financial firms over mortgage losses.
The federal agency overseeing Fannie Mae and Freddie Mac filed lawsuits Friday against 17 financial institutions, in an attempt to recover billions of dollars in losses from risky mortgage investments.
It will be interesting to see if the government continues to sue banks after the 2012 Presidental Elections. My question is: what has caused all the attention now. Where was the government agency when the lending rules were being made, where was the government when prudent lending practices were being ignored, who approved the interest only mortgages. It seems that no one cared as long as stockholders were making money; the problem came about after investors started losing money and not gaining a return on their income. If we had not experienced 9/11 and the economy crumbled, would we be suing and tightening up on credit standards? I think not.
Big Banks see fines and penalties coming.
I guess this was an accurate blog after reading the CNN's article; The Government sues 17 banks over risky mortgages.
http://news.blogs.cnn.com/2011/09/02/government-sues-17-banks-over-risky-mortgages/?iref=allsearch
However, I wonder if the government would have gone to such extremes if hte economy had not faltered. Lets consider this perspective: the government allowed interest only loans many years ago. People knew that they could not afford the houses; that is why they opted for an interest only option in many cases. People got caught in the bubble crunch after 9/11 happened and the economy started crumbling. If the real estate market had not faltered along with the economy; everyone would have continued to flip houses at inflating prices; people would have continued to purchase homes that they could not afford; and the government would have continued to allow these actions.
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