Media Alert: Feb. 9, 2012

UMD-Smith School of Business Experts Available to Discuss Implications of $26 Billion Foreclosure Abuse Settlement

Finance professors Cliff Rossi, Albert "Pete" Kyle and Ethan Cohen-Cole are available to the media to discuss the broad range of implications surrounding the federal government’s $26 billion settlement with five major lenders that allegedly committed foreclosure abuses against homebuyers.

The agreement settles yearlong federal and state probes against Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co.

The deal is reported to be the largest government-industry settlement since the 1998 multistate deal with the tobacco industry.

Among related subtopics, Rossi and Cohen-Cole can discuss:

• Whether the agreement is an equitable remedy for affected mortgage holders
• Whether the agreement can effectively mitigate future wrongdoing – as allegedly committed by the banks
• Implications for home buyers and banks in the home-lending market

Cohen-Cole says the agreement is unlikely to have any impact on the housing market in the short run. "The agreement allows banks to dispense with considerable legal risk in exchange for a relatively small sum -- 'small' in the sense that there is about $700 billion in underwater equity right now." He also sees no deterrent effect. "The payments are not punitive," he said. "(The payments) are largely structured to ensure that the banks can pay them without significant harm. This provides some short-term, minor relief to some homeowners without the specter of under-capitalized banks."

Formerly a financial economist at the Federal Reserve Bank of Boston, Cohen-Cole’s research interests include consumer finance and financial institutions. His work on consumer finance includes work on the supply of credit, the determinants of the consumer bankruptcy decision, and decision making in delinquency. Cohen-Cole's work on financial institutions has focused on the linkages between bank regulation and monetary policy as well as the nature and path of the 2007-2009 financial crisis.

Contact Ethan Cohen-Cole at ecohencole@rhsmith.umd.edu or 301 541 7227.

Rossi, executive-in-residence and Tyser Teaching Fellow, also can address the implications for the metro Washington D.C. real estate market. He has 25-plus years in the banking and regulatory industries, including senior risk management positions at Freddie Mac and Fannie Mae, plus live-interview experience on CNN, C-SPAN and others.

Contact Cliff Rossi at crossi@rhsmith.umd.edu or 301-908-2536.

Kyle, the Smith School's Charles E. Smith Chair Professor of Finance, focuses his research on theoretical market microstructure and covers such topics as market manipulation, price volatility, information content of market prices and market liquidity. He is a fellow of the Econometric Society and a board member of the American Finance Association. He served as a staff member of the Presidential Task Force on Market Mechanisms (Brady Commission) after the stock market crash of 1987 and is a currently a member of NASDAQ's economic advisory board.

Contact Albert "Pete" Kyle at akyle@rhsmith.umd.edu or 301-405-9684.