Making Sense of Reverse Mortgages Information you need to make a good decision!

November 20, 2013

Feels good, but…

Filed under: mortgage,Uncategorized — Scott Larson @ 11:39 am

Not exactly on the reverse mortgage theme, but I had to comment on this article in the Wall Street Journal today.

J.P. Morgan Is Haunted by a 2006 Decision on Mortgages

The justice department fined Chase 13.6 Billion dollars in a settlement for bad behavior during the mortgage crisis.  Now I don’t have a problem with that, for Chase being fined for bad behavior.  They had a bunch of it going on, and they underwrote to bad standards just like the rest of the industry. Then they ignored internal warnings, bundled and sold those poor loans to investors and made big bucks on fees.

That’s bad behavior and should be punished.

But there is more.  Read this paragraph (emphasis mine)

Mr. Dimon, in a statement, said the bank is “pleased to have concluded this extensive agreement” and noted the settlement “covers a very significant portion” of the mortgage-backed securities issued by J.P. Morgan, as well as Bear Stearns and Washington Mutual, two companies J.P. Morgan bought during the financial crisis. On a conference call, however, Mr. Dimon added that J.P. Morgan “simply wouldn’t undertake” a deal like the Bear purchase again. “We never expected this kind of stuff to happen.”

In pursuing the bad behavior, the Feds went after Chase for mortgages they had no part in originating, underwriting or selling.  When Chase stepped in to buy Wamu and Bear, they negotiated with the FDIC to say we (Chase) will take on these banks, but would be “held harmless” for the bad loans. As the old joke says – no good deed goes unpunished.

The Justice Department basically said… too bad, we don’t like big banks and we have the power to make you pay up… In my opinion this is another example of the Obama Administration picking winners and losers, and there will be consequences to this short term “win”

As the WSJ said in another article

The only thing clear from this settlement is there will be no willing buyers during the next crisis.

The articles are here and here though with the WSJ, i am not sure if is behind a pay wall

No Comments »

No comments yet.

RSS feed for comments on this post. TrackBack URL

Leave a comment

Powered by WordPress