Or at least that's the direction that talks are going among assorted government officials and the banks, according to the Financial Times.
Let's back up a moment: This has to do with something known as the "multistate mortgage settlement." That little mouthful is an attempt by the White House and the 50 state attorneys general to punish bankers for things like foreclosing on homeowners when the bankers don't actually own the note because the note was sold off in a mortgage-backed security long ago.
This has fouled up the chain of title on potentially millions of homes -- to the point where people who buy their houses with cash end up receiving foreclosure notices.
Rather than pursue such fraud cases as -- well, fraud cases, complete with messy things like trials and prison time -- the assorted government leaders are trying to work out a settlement in which the banks would admit no wrongdoing, but instead fork over about $25 billion in principal reductions to underwater homeowners.
Except now it appears the banks wouldn't eat the losses.
Instead, "investors in U.S. home mortgage bonds may have to swallow losses" under the deal, says the Financial Times.
Let's make this really clear: If this deal comes about, the banks that knowingly sold off "crap" mortgages (to use the words of their own internal emails) to unknowing mortgage investors would skate... while the mortgage investors would be left holding the bag.
"It would be a Pyrrhic victory," protests Chris Katopis of the Association of Mortgage Investors, "to settle the mortgage crisis with the money of public institutions, pension funds and seniors."
Aw, c'mon, Chris... you ought to know by now that as bondholders, you stand at the bottom of the totem pole and your legal rights don't mean squat. Remember General Motors and Chrysler?