On Thursday, President Obama and a host of state and federal officials announced a $26 billion residential mortgage settlement with major banks.
Typically, prior to announcing anything, the parties to a settlement or a business deal will come up with a document—known as a term sheet—that defines the fundamental terms of the agreement and limits the ability of the parties to back out of the deal. American Banker reports that no such term sheet exists for the “settlement” announced on Thursday:
“A person familiar with the mortgage servicing pact says that a settlement term sheet does not yet exist. Instead, there are a series of nearly-complete documents that will be attached to a consent judgment eventually filed with the court. That truly final version will include things such as servicing standards, consumer relief options, legal releases, and enforcement terms. There will likely be separate state and a federal versions of the release.
Some who talked to American Banker said that the political pressure to announce the settlement drove the timing, in effect putting the press release cart in front of the settlement horse.
Whatever the reason for the document’s continued non-appearance, the lack of a public final settlement is already the cause for disgruntlement among those who closely follow the banking industry. Quite simply, the actual terms of a settlement matter.”