Just because state and federal regulators reached a settlement with banks over foreclosure fraud – we think – doesn’t mean that the banks have rid themselves of their liabilities, even on these foreclosure fraud-related issues. In Massachusetts, a new ruling by the state Supreme Court may formally grant borrowers the ability to contest their foreclosures on the grounds of faulty document processing. And there are similar cases dealing with commercial property mortgages.

I think you can divine what I think of the foreclosure fraud settlement, which releases liability on a host of fraudulent conduct for only a $5 billion guarantee from the banks, as well as $20 billion made up mostly of “credits” that HUD believes will translate into around $34.5 billion overall. The credits play out over three years, so you can adjust for inflation, and in fact if you adjust in that way, as Matt Yglesias does, you find that this is around 10 times less than the tobacco settlement of the late 1990s.

Housing and Urban Development Secretary Shaun Donovan sought to clarify comments to reporters made over the weekend about expectations of “substantial” principal reduction payments from the foreclosure fraud settlement made out of loans owned by private-label investors in mortgage-backed securities, not the banks themselves. In fact, Donovan told FDL News, the “large majority” of principal reduction would instead come from the banks’ own books. But the details and sequencing matter.

Housing and Urban Development Secretary Shaun Donovan mostly confirmed that private-label mortgage-backed securities investors, not banks or servicers, will end up shouldering the cost of much of the imminent foreclosure fraud settlement despite the risk of litigation from investors who are likely to challenge the forced losses on their securities in court.

On a small conference call for progressive media, Donovan claimed that the money available in the settlement for principal reduction for underwater borrowers would actually come to $35-$40 billion, over double the $17 billion in nominal principal reduction that has been widely reported.

Four years ago, the bank Credit Suisse Group announced investigations of traders for misleading investors on the value of mortgage bonds. After four years, the US Attorney just got around to announcing indictments of the same people Credit Suisse handpicked as responsible. The announcement occurs just as the Administration wants to prove their bona fides on financial fraud, with their shiny new task force and everything.

Douglas Holtz-Eakin, a Republican commissioner on the FCIC who did not sign onto the final report, made some statement to the media about how the FCIC already investigated the areas of inquiry concerning the crash of the housing bubble and found no criminal wrongdoing. But the Chair of the FCIC, Phil Angelides points to the FCIC’s report noting there were criminal referrals, and that was a year ago.

Eric Schneiderman, co-chair of the newly titled “RMBS working group” investigating financial fraud, appeared on the Rachel Maddow Show last night (the interview starts around the 5:00 mark), and there were a few interesting moments. First you have his assessment of the the fraud involved here, which he definitively cast as a pre-crisis issue. Schneiderman, from his public statements, is less concerned with the faulty documentation used to foreclose on borrowers; I would imagine he sees this as the cover-up for the initial crime of securitization fraud, and going back even further origination fraud. He sees that as where the banks’ real exposure lies. And so the working group will look at “all of the conduct that blew up the economy,” not the conduct being engaged in to paper over (literally) all that.

This is a $25 billion settlement when there is $700 billion in negative equity in the country. This is a settlement that, according to HUD Secretary Shaun Donovan, will help 1 million homeowners, when 10.7 million are underwater and millions of others have been wrongfully foreclosed upon. This is a settlement that could put $17 billion of credits toward principal reduction (the rest of the money would go to legal aid, refis, short sales, token payoffs to foreclosed borrowers, and penalties), when there is more than twice as much sitting unused in an account as part of HAMP.

The latest from the never-going-to-happen foreclosure fraud settlement – and I think a good New Year’s resolution would be to stop writing about this folly until it actually happens – concerns the disposition of the roughly $19-$25 billion “penalty.”

Judge Jed Rakoff delivered a final blow to the enforcement paradigm followed by the Securities and Exchange Commission today by rejecting their $285 million settlement with Citigroup on an illegal mortgage backed securities deal, calling it “neither fair, nor reasonable, nor in the public interest.”