HUD Secretary Shaun Donovan was on The Daily Show on Monday to chit chat with Jon Stewart about a grab bag of housing topics, the most recent cabinet official to swing through TDS’s studio. Most of their conversation focused on homelessness, and Donovan’s clear unfamiliarity with Stewart by asking the frequently-in-mourning Met’s fan if he liked the Yankees. But in the last minute of the interview it shifted to the mortgage settlement, and that is when Shaun “The Spin Doctorvan” Donovan came out to play (video below). Donovan said:
You remember when we heard these stories about people losing their homes because the banks weren’t even looking at the paperwork… You (Stewart) did a story about an elderly woman who was locked into her home because they thought they were locking her out of her home. The changed the locks. We went and looked, we found as high as 60 percent of foreclosures were being done wrong. And we went after the banks for it. And we got $25 billion dollars a few weeks ago. And it is the single biggest settlement in the history of the country between states and Feds. And what we are gonna get is actually writing down people’s mortgages, to keep them in their homes.
Stewart is normally able to spot BS from his political guests, whether they are Mike Huckabee, Bill O’Reilly, or Nancy Pelosi, and push back politely. But he didn’t even step up to the plate on this interview, giving The Spin Doctorvan a free pass to mix and match his facts and figures. Let’s break down the logical sequence of what Donovan said:
- “You did a story about an elderly woman who was locked into her home because they thought they were locking her out of her home. They changed the locks. So we went and looked, we found as high as 60 percent of foreclosures were being done wrong.”
Okay, here is the first misdirection. They way Donovan sets it up, 60 percent of foreclosures were locking grandma out of her home. He makes it seem like “as much as” 60 percent of foreclosures were on homes that were fine, that were making payments. In reality, most of the robo-signing was on homes that needed to be foreclosed on anyway. It just mean the paperwork was processed faster. Only a handful of homes were actually seized without cause. We are still waiting for the court filing to see if the administration has anymore evidence on this.
- “And we went after the banks for it. And we got $25 billion dollars a few weeks ago.”
I guess it is a bit unprofessional for a cabinet secretary to say he “went after” any private sector institution, but the servicers royally screwed up and that was what needed to happen to get them in line for breaking the law. Anyway, from this we can assume that Donovan helped secure $25 billion for those people wrongly foreclosed on. But just 60 seconds of reviewing the settlement overview shows that to be wildly misleading, as everyone foreclosed on by the banks in the settlement is eligible for a check. And only 6 percent of the money is actually going to people remotely related to robo-signing.
- “And what we are gonna get is actually writing down people’s mortgages, to keep them in their homes.”
So, the money in this settlement is going to keep people who were wrongly foreclosed on in their homes? That is what would be natural to take away from this. But that is not what is happening. The money is going to come from MBS investors, taking a hit on the principal owed to them for loans they gave to homeowners who have not yet been foreclosed on nor are related to the robo-signing debacle in any way.
The Spin Doctorvan’s story is that the banks began taking people’s homes who were as innocent as grandma, and then the states and Feds came to the rescue, pried $25 billion from the banks, and wrong down the principal of those people the banks hurt so help them avoid foreclosure. That is easily the message that could be taken away by this appearance.
The real story is barely a reflection of that though: The mortgage settlement is going to give a $2,000 check to those foreclosed on from 2008 to 2011, and is going to write down mortgage principal for homes that might be foreclosed on in 2012 and 2013. But all of the robo-signing happened back in 2009 and 2010.
So if you’re confused about what the hell this whole mortgage settlement was really about then you are not alone. See full details on the settlement here and the argument for having a court reject the settlement here.
And see The Spin Doctorvan in action below: