CBS news is highlighting an article from the Financial Times that highlights a clause from the settlement that "allows the banks to use the government's Home Affordable Modification Plan, or HAMP, to cover the principal reductions." I don't have access to Financial Times articles, but here is CBS on the issue:
2. $20 billion in "credits" the banks will receive for principal write-downs and other aid to nearly 1 million homeowners at risk of default, up to $20,000 per loan.
It's part two that's coming under scrutiny. A clause in the provisional agreement allows the banks to use the government's Home Affordable Modification Plan, or HAMP, to cover the principal reductions. Neil Barofsky, the former special inspector-general of the TARP, described the clause as "scandalous." Says Barofsky: "It turns the notion that this is about justice and accountability on its head."
Yves Smith of Naked Capitalism has this to say of the clause:
There is nothing wrong with also using HAMP to try to get more principal mods. But the incentives in HAMP, as Shahien points out, were already enriched to get the banks to play ball. They should have remained separate from this deal. But instead, banks get to game HAMP payments as part of the settlement.
This episode also illustrates the danger of agreeing to a deal where the terms were not final. We and AGs still don’t know where the settlement will shake out. Any negotiator or attorney will tell you there is a world of difference between an agreement in principle and a definitive agreement. Rest assured will find more instances of the AGs being baited and switched before this pact is inked.
Business as usual?