There is no big bad wolf in the financial services industry. The National Mortgage Settlement was supposed to compel the top 5 banks into complying with the law and their agreements to modify loans under Home Affordable Mortgage Plan (HAMP). In essence, the banks got immunity from governmental lawsuits in exchange for promising to do what they were already obligated to do including the processing loan modifications within 30 days.
Wanna-be Wall Street Sheriff Eric Schneiderman, the New York Attorney General, is threatening to sue Wells and Bank of America for violating the terms of the agreement, which was brokered last year between 49 attorneys general and the nation’s five largest mortgage servicers over foreclosure abuses. Wells and Bank of America couldn’t care less.
They know that the National Mortgage Settlement lacks “teeth”; it provided for huge margins for error in compliance by banks, mild penalties and lax oversight. There are no criminal or substantial monetary consequences. State Attorney General’s can’t enforce the Settlement without suing under this sweet heart deal. He’s hoping the make some minimal effort to comply so he doesn’t have to waste his office’s resources. As such, the banks have minimal incentive to comply and will continue to slow play compliance and drag out the process. Can you imagine the difference if bank behavior if non-compliance resulted in punative fines that affected share prices? Not under our version of democracy.