Before anyone starts to get all warm-and-fuzzy about the ounce of altruism 10 major banks had in reaching an $8.5 billion foreclosure abuse settlement deal, consider this: The timing of that settlement was in all probability carefully calculated to benefit the banks.
As our Miami foreclosure lawyers understand it, those familiar with the situation have leaked to reporters that the idea was to shove the losses in their fourth-quarter results so that they could present a cleaner picture to investors in the coming calendar year. This is on top of the fact that the amount they paid is likely far less than what they would have owed had the “independent” foreclosure reviews actually been done with a smidgen of integrity.
The deal was announced January 7, 2013, which allowed the major banks involved – JP Morgan Chase, Wells Fargo, Bank of America, Citigroup and others – to take advantage of something called subsequent-events accounting. Worth noting is that this same advantage applies to the $10 billion deal Bank of America separately reached with Fannie Mae over the risky mortgage loans it sold to taxpayers.
Subsequent-events accounting under U.S. law is essentially this: If a certain event, be it a profit or loss, occurs after the close of the previous fiscal year but prior to the time when the next quarter’s results are released, the firm is required to mark that impact in the previous quarter’s results.
So what this means is that the portfolio of these financial giants will be looking much cleaner for the current fiscal year – something that will ultimately lure more potential investors.
Bank of America, for example, will be reporting a $2.5 billion loss for the foreclosure settlement deal and another $2.7 billion loss for the Fannie Mae deal in its fourth-quarter earnings. Citigroup, meanwhile, will report a $305 million loss. Wells Fargo will report about a $645 million loss, and JP Morgan will report about $700 million in losses.
But none of them will have those blemishes on their reports for this year. The firms will essentially minimize their losses.
A former official with the Securities and Exchange Commission was quoted by The Wall Street Journal as saying it’s understandable that banks would want to move past all this. Sure – so would the millions of homeowners left out in the cold by the egregiously unethical and at times illegal practices of these too-big-to-fail firms. But instead, after much heartache and strife, some will be getting mere pennies on the dollar for their losses.
One bank official from Wells Fargo admitted pushing for a faster resolution, but said it was to expedite help to customers, not for any residual benefit it may have incurred as a result. Right.
Had these banks had their customers – and the taxpayers – in mind all along, we wouldn’t be in this mess in the first place.
If you believe you may be eligible for a foreclosure settlement or are seeking a loan modification, call us today to learn more about how we can help get you the most you deserve.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
Mortgage Deals Came Just in Time, Jan. 9, 2013, By Michael Rapoport, The Wall Street Journal
More Blog Entries:
Foreclosure Reviewer: “Independent” Reviews Were Rigged, Jan. 11, 2013, Miami Foreclosure Lawyer Blog