Ignore my sleaze: Sen. Chris Dodd’s hearing today won’t explore the huge mortgage-meltdown role of his benefactor, Angelo Mozilo (above)
Ignore my sleaze: Sen. Chris Dodd’s hearing today won’t explore the huge mortgage-meltdown role of his benefactor, Angelo Mozilo (inset). (
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Nearly 90 percent of home owners have stayed current on their mortgages throughout the housing meltdown. Yet, in what should be his final act as chairman of the Senate Banking Committee, Chris Dodd is holding a hearing today about how the 10 percent of homeowners who are either seriously delinquent or in default on their loans are being screwed by the banking system.
The hearing, of course, won’t dwell on the mistakes of the vast majority of alleged victims of this scandal — namely, how they rolled the dice on the housing bubble, taking out loans they knew they couldn’t afford.
Its title — “Problems in Mortgage Servicing From Modification to Foreclosure” — tells you all you need to know about the goal: to stoke anger at the big banks by portraying all those who’ve been forced from their homes in the last two years as innocent victims, seduced into taking out unaffordable loans and now victimized by the same banks and their teams of “robo-signers,” who denied them “due process” by rubber-stamping foreclosure documents without proper review.
Dodd, of course, should have a special insight into the seamy side of the housing bubble and its ultimate meltdown. He got VIP treatment from one of the bubble’s biggest instigators — former Countrywide CEO Angelo Mozilo, whose business model centered on lending money to subprime borrowers. When it wasn’t handing out subprime loans to risky borrowers (loans that were then guaranteed or bought by Fannie Mae and Freddie Mac, thus contributing to their demise), it was helping “influentials” like Dodd gain access to low-cost loans through its “Friends of Angelo” program.
Don’t expect to hear much today about Friends of Angelo, or whether Fannie Mae and Freddie Mac stoked the housing bubble by enabling Countrywide to lend to anyone with a heartbeat. No, Dodd & Co. want to “know” about how the little guy is getting screwed by evil bankers, even if the facts demonstrate that there were no real victims of the foreclosure “scandal” — except possibly those homeowners who haven’t defaulted, yet now face declining property values.
According to Bank of America, the average person “victimized” by a robo-signer hadn’t made a mortgage payment in nearly two years. Many (about a third) had abandoned their homes long ago. In fact, people at BofA tell me they’ve yet to find a “real” victim — that is, a family that was evicted from its home even as it met all its obligations.
On the other hand, people at banks such as Bank of America and JP Morgan tell me they’ve found dozens of examples of people not paying their mortgages but still making money renting out their home to others.
Of course, there are cases of banks misleading homeowners about the terms of their loans — but those are the exception rather than the rule, because doing so is so costly. Since the housing meltdown began about two years ago, banks have lost a combined $100 billion on housing-loan defaults.
Meanwhile, the various probes — from Dodd’s inquiry (the senator decided not to run for re-election as his Countrywide deal came to light) to a broad examination by 50 state attorneys general into the foreclosure mess — have created so much uncertainty that banks have ceased foreclosures in much of the country.
The politicians leading the charge appear oblivious to the economic implications of these moratoriums: Property values suffer as banks are prevented from reselling those homes to people who can afford them. Municipal budgets are being squeezed because vacant homes don’t pay property taxes.
The banks do deserve some of today’s abuse — and off the record they’ll concede as much. “We’re prepared for a shellacking because mistakes were made,” an executive at BofA recently told me. Too often, the robo-signers were people with minimal skills who were making serious legal decisions in an assembly-line foreclosure process — thanks to the sheer volumes of default (nearly 5 million homes will need to be foreclosed in the next year).
A senior JP Morgan official says he expects the banks will pay “gazillions” when the probes are finished, through a settlement of some kind. They expect the state AGs to force them to “modify” many mortgages so people who were allegedly denied their due process by a robo-signer might stay in their homes.
But that’s often just going to wind up delaying the inevitable. According to government statistics, nearly six in 10 loan modifications ultimately fail, and the majority are delinquent.
Speaking of due process, it’s ironic that the state regulators, Dodd and most of the media have all but concluded that the big banks both committed massive fraud and that the fraud produced scores of real victims. This, even though, if you look at today’s witness list, you won’t find any.
Charles Gasparino is a Fox Business Network senior correspondent; his latest book is “Bought and Paid For.”