California AG panders to loan owners, withdraws from foreclosure talks

The California Attorney General has pulled out of foreclosure settlement talks from a desire to pander to loan owners.

Irvine Home Address … 14 BOWIE Pl Irvine, CA 92602

Resale Home Price …… $649,000


Right now, right now, right now

Someone get me outta this place

Get me outta here

Esmée Denters — Outta Here

I have mixed emotions about the settlement talks with banks. First, I think the entire issue of foreclosure improprieties is political theater and an effort to extort money from the banks for doing what was completely within their rights. On the other hand, I want to see the banks endure more pain for the problems they created. They should have been nationalized back in 2008. It's a bit like football when the refs blow a call then make up for it with a bogus call against the other team. Two wrongs don't make a right.

Since this issue is political, the attorneys general who are involved are responding to different political constituencies in their home states. Periodically, one or another will pull out of the talks to appease their political base. It's just like the drama we just witnessed with the debt ceiling. The latest political grandstander is our own Attorney General, Kamala D. Harris.

California Pulls Out of Foreclosure Talks

Move Is Serious Blow to Federal and State Effort to Reach $25 Billion Deal With Banks Over Questionable Practices

California Attorney General Kamala D. Harris pulled out of settlement negotiations with the nation's biggest banks over alleged foreclosure abuses, calling the proposed deal “inadequate for California homeowners.”

At the Attorney General for the State of California, isn't her duty to protect California residents and taxpayers? Protecting loan owners should not be her highest priority.

The decision by Ms. Harris delivers a serious blow to efforts by the Obama administration and 50 state attorneys general to forge a $25 billion settlement with the nation's largest banks over “robo-signing” and other questionable foreclosure practices.

Her actions follow the withdrawal of New York from the talks. Without the participation of California and New York in the negotiations, banks will be far less likely to agree to the multibillion dollar settlement that federal and state officials have spent months pursuing.

Without California and New York, there is no agreement. California has the largest mortgage market and the greatest number of underwater borrowers. New York has a large market filled with squatters in shadow inventory. The bulk of the problems with mortgages are in these two states and perhaps Florida.

California remained a critical constituent for any deal because it has more borrowers who are underwater, or owe more than their homes are worth, than any other state. California also has more borrowers that are behind on their mortgages or in foreclosure than any other state but Florida.

The move by Ms. Harris, who took office in January, comes after 11 months of often-frustrating negotiations between big banks such as Bank of America Corp., J.P. Morgan Chase & Co. and Citigroup Inc. Representatives for the three banks declined to comment.

A spokeswoman for Ally Financial Inc., the fifth-largest mortgage servicer and parent of GMAC Mortgage, called the decision “disappointing for borrowers in California” who are in financial distress.

LOL! Ally Financial is concerned about borrowers? Give me a break. California pulling out of the deal is disappointing to lenders and mortgage insurers who are looking to limit their liability.

One key point of contention has been the extent to which banks should be released from additional legal claims involving the mortgage crisis in exchange for signing onto the foreclosure settlement.

In recent months, other states, including Delaware, Massachusetts, Nevada, Minnesota and Kentucky, have also expressed concerns over the scope of any settlement. Some states and critics of the banks argue that officials haven't done a thorough investigation of other potential improprieties.

In a letter sent Friday to Associate U.S. Attorney General Thomas Perrelli and Iowa Attorney General Tom Miller, who have been leading the negotiations, Ms. Harris said her decision to break off from the group was driven in part by those two key concerns. “It became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated,” she said.

This is really about the release of liability. If the conduct of banks in California has not been investigated by now, that is the Attorney General's fault.

She added that “the relief contemplated would allow too few California homeowners to stay in their homes.” Ms. Harris also cited a recent “troubling surge in foreclosures,” which had plummeted in the wake of the robo-signing scandal.

This is where it becomes obvious she is pandering. Why should loan owners be granted relief to stay in homes they cannot afford? This directly places the interests of loan owners in conflict with the interests of prudent future buyers who could afford those properties. She is choosing sides and placing the interests of imprudent and overextended California loan owners over the interests of buyers who can sustain ownership.

Further, there is nothing troubling about the recent surge in foreclosures. Foreclosures are essential to the economic recovery. Our attorney general is a pandering politician meddling in a financial market in a way that will encourage moral hazard and slow the economic recovery. This woman is either well meaning and clueless, or shrewdly self serving.

In a statement, Mr. Miller called California “an important part of our team” but said that the states “fully expect to reach a settlement with the banks.”

A Justice Department spokeswoman said that discussions would continue “to ensure that the banks are held fully accountable for their actions.”

That's bullshit. If the banks were held fully accountable, they would have been nationalized in 2008, equity investors would have lost everything, bondholders would have taken a big haircut, and the idiots responsible for this mess would have been fired.

The split highlights a broader disagreement between some government officials involved in the negotiations. The Obama administration has argued that a settlement could help provide immediate benefits to borrowers, while creating certainty for the housing market. “We are 100% focused on providing relief to homeowners while it can still make a difference and save homes from foreclosure,” said Mr. Miller. “Providing relief after the foreclosure crisis is over would be a hollow victory indeed.”

Nice to know they are 100% focused on the wrong things, and they're hell bent on making this problem worse.

Friday's decision by California wasn't completely unexpected. As the talks have dragged on, political pressures have mounted, with both sides expressing unhappiness with any deal. Conservatives denounced the settlement as a “shakedown” of banks, while labor unions and liberal political groups warned of a bank giveaway.

Yes, it is both of those things. The banks should be shaken down to feel the full consequences for the mess they created. And any deal which limits liability is a giveaway to the banks.

Ms. Harris and other Democratic state attorneys general have faced intense lobbying from different factions, including critics who want the states to hold out for a bigger deal and the Obama administration, which has shepherded the deal. A spokesman for Ms. Harris said the attorney general made her decision based on “the evidence and the merits of the deal, not other considerations.”

Yeah, right.

The loss of California dims the Obama administration's push to force banks to write down loan balances as part of any settlement.

If principal write downs are part of a settlement endorsed by the Obama administration, it would clearly demonstrate that Obama is either clueless or listening to the wrong advisors.

Even if the remaining states and federal agencies reach a deal, it is likely to cover far fewer borrowers as the price tag drops. The settlement talks were prompted by so-called robo-signing, where bank employees signed off on hundreds of loans a day and falsely claimed they had personally reviewed documents to give the bank the right to foreclose.

The mess deepened as judges raised questions about how banks documented their ownership of loans and whether financial firms fabricated other paperwork. Regulators have found what they said are widespread weaknesses in mortgage-servicing operations.

Over the past year, banks have sharply slowed down foreclosures. Foreclosure delays have been most pronounced in “judicial” states where banks must foreclose on borrowers by going before a court. California allows foreclosures through a non-judicial process.

Regulators and banks say they have uncovered very few cases where borrowers entered foreclosure without missing payments.

Robo-signer was a political issued used by the Left to pander to loan owners. If there had been any legitimate problems where people current on their mortgages were being foreclosed on, then we could all rightfully agree there was a problem with the system. But since only people who were not paying their mortgages were facing foreclosure — and this group should face foreclosure — then the entire robo-signer issue is exposed for the political theater it was.

But the crisis has exposed numerous cases where banks couldn't prove they had the right to take back homes or where borrowers believed they were receiving loan modifications, only to lose their home.

Anyone who was not paying their mortgage and the bank foreclosed has no right to complain. Lenders have the right to call to auction any property where the borrower is not making their payments. Banks must adhere to the law regarding timelines and notices, but it is always at their discretion to foreclose if they want to. The real travesty isn't the prompt processing of foreclosures, it is the delayed processing and squatting in shadow inventory.

The unraveling of any settlement also raises the prospect that banks will face separate legal action from a handful of state attorneys general.

Ms. Harris traveled to Washington last week for a meeting with banks and state negotiators in an effort to resolve her concerns. She said that her office will continue to investigate questionable mortgage practices and will push for additional legislative and regulatory reforms. This year, she announced the creation of a “mortgage fraud strike force” to study all stages of mortgage lending, from origination to the servicing of troubled loans to the packaging of loans into securities.

Write to Ruth Simon at and Nick Timiraos at

Mortgage fraud strike force? More symbolic politics. Perhaps she should appoint a foreclosure czar too. I am surprised Obama hasn't done that yet. Whenever politicians want to look like they are doing something about a problem they cannot property address, they appoint a czar.

A flipper cleaning up after a HELOC abuser

The previous owners of this property were irresponsible with their mortgage borrowing. They imploded when the mortgage equity withdrawal income supplementation was shut off. A flipper bought the property at auction with hopes of profiting from the foollishness of the lenders and the borrowers.

  • The previous owners bought the house on 6/30/2000 for $349,500. They used a $279,600 first mortgage and a $69,900 down payment.
  • On 12/28/2000 they refinanced with a $275,000 first mortgage. They actually paid down their mortgage at that point.
  • On 6/24/2002 they obtained an $18,000 HELOC.
  • On 6/25/2003 they refinanced with a $295,600 first mortgage. They got their first taste of mortgage equtiy withdrawal. They must have liked it.
  • On 6/3/2004 they went back for their yearly cash infusion and obtained a $250,000 HELOC.
  • On 5/24/2006 they obtained a $424,750 HELOC. There is no way to be certain how much of this they took out and spent, but since they defaulted and lost the house in foreclosure, it must have been a signifant amount.
  • The quit paying in late 2009 and squatted through April 2011.

Foreclosure Record

Recording Date: 05/18/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 05/11/2010

Document Type: Notice of Default

Foreclosure Record

Recording Date: 02/04/2010

Document Type: Notice of Default

The flipper who bought the property is an investment LLC with a $5,000,000 HELOC attached to the property. They probably have a blanket line of credit on multiple properties to use for renovations.

Will they get their asking price and make a tidy profit?


This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707


Irvine House Address … 14 BOWIE Pl Irvine, CA 92602

Resale House Price …… $649,000

Beds: 4

Baths: 3

Sq. Ft.: 2000


Property Type: Residential, Single Family

Style: Two Level, Contemporary

View: City, Hills

Year Built: 1998

Community: West Irvine

County: Orange

MLS#: S675449

Source: SoCalMLS

On Redfin: 5 days


Amazing City View Home! Kitchen remodeled with new granite counters and new appliances. Kitchen opens to family room. Family room with fireplace. New carpet, paint, baseboards and travertine stone flooring. Recessed lighting. Mainfloor bedroom and bath. Large master bedroom with his and hers walk in closets and city and hills views. Granite counters in bathrooms. Indoor laundry room upstairs. STANDARD SALE!


Proprietary IHB commentary and analysis

Resale Home Price …… $649,000

House Purchase Price … $520,500

House Purchase Date …. 5/11/2011

Net Gain (Loss) ………. $89,560

Percent Change ………. 17.2%

Annual Appreciation … 54.1%

Cost of Home Ownership


$649,000 ………. Asking Price

$129,800 ………. 20% Down Conventional

4.03% …………… Mortgage Interest Rate

$519,200 ………. 30-Year Mortgage

$127,177 ………. Income Requirement

$2,488 ………. Monthly Mortgage Payment

$562 ………. Property Tax (@1.04%)

$100 ………. Special Taxes and Levies (Mello Roos)

$135 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$0 ………. Homeowners Association Fees


$3,285 ………. Monthly Cash Outlays

-$404 ………. Tax Savings (% of Interest and Property Tax)

-$744 ………. Equity Hidden in Payment (Amortization)

$182 ………. Lost Income to Down Payment (net of taxes)

$182 ………. Maintenance and Replacement Reserves


$2,502 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$6,490 ………. Furnishing and Move In @1%

$6,490 ………. Closing Costs @1%

$5,192 ………… Interest Points @1% of Loan

$129,800 ………. Down Payment


$147,972 ………. Total Cash Costs

$38,300 ………… Emergency Cash Reserves


$186,272 ………. Total Savings Needed


Remember Micheal T Pines, the attorney who lost his license for encouraging people to break into their foreclosed homes and steal them back? A student working on his PhD in Psychology emailed me and asked if readers would be willing to answer some questions about the story. The link to the questionnaire is here if you are willing to participate.

13 thoughts on “California AG panders to loan owners, withdraws from foreclosure talks

  1. JDSoCal

    Nationalize banks? You sound like Hugo Chavez. The last thing the taxpayers need or want is those banks being owned by the government!

    1. IrvineRenter

      Hugo Chavez would have kept the banks. What I have suggested is in 2008 we should have nationalized them, wiped out the equity shareholders, made the bondholders take a huge haircut, then recapitalized them with taxpayer money. After a time, the government could sell it’s interest and recoup the tax dollars. Sweden did this in the 1990s, and we did this with Citi in 2008 under a different guise.

      By not nationalizing the banks, we allowed an industry of zombie banks to survive similar to what Japan did in the 1990s. Zombie banks are given an unfair advantage over their healthy competitors which further weakens the industry. Plus, taxpayers have been subsidizing bank losses without opportunity to recoup its losses through the FDIC and other bailouts.

      In the end, the banks will be nurtured to health by the federal reserve who is diverting the interest that should be paid to depositors to the banks themselves. The banks have been borrowing at 0% and buying short-term treasuries yielding 3% in order to make some free money. Eventually, banks will earn their way out of the hole, but in the meantime, we are enduring the economic malaise induced by a over-indebted society and an under-capitalized banking system. All these problems could have been averted if the banks were nationallized in 2008.

      1. matt138

        And the only two options are to nationalize or bail out. we are truly a country of statist wonks. Truly nauseating

  2. FossieOC

    Has anyone heard of a first time homebuyer program that picks up 3% of the 3.5% FHA down (thus requiring the buyer to put down only 0.5%)? I’ve got a realtor pushing this, and of course it sounds fabulous and risk-free, but I’ve gotta believe there is some sinister fine-print that’s going to emerge…. Thanks for any feedback anyone might have!

  3. SanJoseRenter

    If banks cannot operate according to the terms of their charter, then they should be either closed or nationalized and sold off.

    Same thing with PG&E actually.

    They have demonstrated that they cannot manage a pipeline, so should be nationalized, brought up to standard, and handed off to a utility or coop that can meet their obligations.

  4. awgee

    Should have let them go bankrupt. Banks are nothing or no one special. The economy and the populace will do just fine if the TBTF banks go out of business. The idea that the economy will go belly up if the banks dissolve is a myth promulgated by all those with an interest win government subsidizing of bank losses and socialized profits for the banks.

    Get rid of the Federal Reserve.

    Let people decide what they want to use for money rather than the government. According to The Constitution, the federal government is suppose to coin money, not decide what it is.

  5. SanJoseRenter


    You’re still missing the point about robo-signing.

    This is a legal matter – you can’t file a foreclosure document without certifying that it is accurate by a representative of the owner.

    If somebody is signing hundreds of documents per day, there is no verification occurring.

    If even one of the those documents has a significant mistake and is filed with the court – that’s fraud.

    When judges hear “robo-signing”, what they really hear is “utterance of a forged document in my courtroom.”

    Many judges will not look the other way when that happens.

  6. Carl Pham

    Kamala Harris is a Bay Area grandstanding crony capitalism tool, and always has been. She should remind you strongly of Gavin Newsom. Pity she won that squeaker with Steve Cooley.

  7. SanJoseDavid

    You sound like Hugo Chavez

    LOL! Irvine Renter and his little dictatorship bias!

    Showing your true cards once again, eh, IrvineRenter?!

  8. newbie2008

    Irvine Renter,
    Several factors kept the country from nationalizing the bad banks:
    1. Political will and general feeling of free market PC’ness.
    2. The PTB don’t want nationalization but corporate hand-outs.
    3. That would requiring firing the offenders and that would trigger large severance payouts in the employment contracts. I’ve have not seen any big shots get fired without large severance or wrongful dismissal judgments, except at WalMart.
    4. People would have the records and demand a claw back.
    4. The statue of limitations had not expired, so the shuffling needs to continue until they expire.

  9. ca renter

    IR: Why don’t you title this article:

    “Irving Blogger panders to the select right-wing, withdraws from using logic and common sense.”

    You obviously have an ideological bias against this woman because you haven’t presented any real
    arguments proving she is “pandering” to of all people the evil “loan owners”.

    You state in a number of your blogs how the banks are at fault (even more so you’ve said a number of times) and when the attorney general actually shows some spine at political cost to herself (this is not what Obama and Timothy Geihtner want her doing) she is “pandering” and to whom “loan owners” as if the loan owners struggling are the evildoers in this system. Is it that you hate democrats or that you hate women that you feel you have to pander to some right-wing agenda.

    I for one applaud her for not pandering to the banks and the current administrations whims to get a quick and dirty “sweep it under the rug”
    solutions giving the banks a free pass. This person should be one of your heroes if you believe as you have stated many times that the banks hold the majority of the blame for the current situation and should be penalized for it.

    Your bias is obvious in your title and your robosigning comments. As the sanjoserenter commenter says above you are missing the point: it is a legal matter involving fraud on the part of the banks. You seem to want to sweep everything under the rug to get the foreclosures moving including our legal system and rights for expediency.

    I used to enjoy reading you blog, but misplaced rants like these articles are showing your true colors I think.

  10. Russ Wetherill

    I think the CA AG did the right thing for the wrong reasons. The banks should be held liable for any fraudulent behavior in connection with the foreclosure process.

    But that doesn’t mean that non-paying mortgagees should be considered “owners” in any real sense. They gave up their property interest by failing to pay on time.

    The job of the AG is to enforce the laws, not to rewrite contracts via judicial fiat. We have a method in place for that, it’s called bankruptcy.

    Besides, as an attorney, the AG should know that rewarding the improvident borrower at the expense of the prudent saver is bad precedent. See Clean Hands Doctrine: “equity will not grant relief to a party, who, as actor, seeks to set judicial machinery in motion and obtain some remedy, if such party in prior conduct has violated conscience or good faith or other equitable principle.” Breaching the mortgage contract by late or non-payment demonstrates, to a certain degree, lack of good faith in contract execution.

  11. Honcho

    There is virtualy no legal recourse for defaulted borrowers in California. All of the robo-signing/show me the note arguments have been tried and the courts have rebuffed them at every opportunity. It is a non-issue in California.

    The AG should take what she should get. She has no leverage in these discussions. She knows that, the banks know that. She can issue press releases and hold press conferences but it is pure political posturing. The settlement is going forward even without California. If the banks feared they had significant exposure, don’t you think that a state the size of California pulling out of the settlement talks would affect the settlement?

    It is a pain in the ass for lenders/servicers to deal with nuisance lawsuits that are raised, but it looks like they are making the business decision that it is cheaper to do that than to give the AG what she is demanding.

Comments are closed.