Pro Publica continued its jihad against Ed DeMarco yesterday with yet another piece blaming him for the sins of the Administration’s housing policy. This is just an overview piece that muses about how to best get rid of DeMarco. Actually, it’s a bit off-message, because they’re just supposed to say that the White House has no choice and this one dude is holding up an economic recovery single-handedly.

On March 13, I read the foreclosure fraud settlement documents and noticed that the banks would be eligible to get credit for their penalty for performing routine actions, like waiving deficiency judgments, bulldozing or donating homes. Two full weeks later, the New York Times got around to reading the documents and noticing the same thing.

One of the big arguments against Gretchen Morgenson’s quasi-defense of Ed DeMarco and the implications of principal reductions on Fannie and Freddie loans was that surely nobody is suggesting that the GSEs write down their primary loans while the second liens are kept intact. But in fact that is the argument, DeMarco makes, while ignoring cases in which there is no second lien.

Since the publication of an article from Pro Publica’s Jesse Eisinger and NPR’s Chris Arnold about alleged new analyses by Fannie Mae and Freddie Mac finding that principal reductions are good business, the growing community has been on the warpath around demanding that the FHFA, which oversees Fannie and Freddie, allow a principal write-down program to go forward. Organizations like The New Bottom Line and the Campaign for America’s Future have confidently said that the Pro Publica article proves that Ed DeMarco must stop holding up write-downs for delinquent underwater borrowers before they slip into foreclosure.

I’ve met Katie Porter one time. She writes at Credit Slips and, back in 2007, did one of the first clinical studies of mortgage servicer misbehavior and abuse, in that case with respect to bankruptcy. She is one of the pre-eminent legal scholars in this field, and she knows every single trick that the servicers have done over the past decade. There are few other people as equipped to handle the job of the monitor than her, in my estimation. And I hope that she uses this pathway, with the evidence she will compile, to make a broader effort to blow the whistle on a broken and corrupt mortgage servicing industry. And that’s likely.

One of the things I looked at in an earlier installment of the foreclosure fraud settlement documents is how banks can satisfy their obligations by modifying mortgages they don’t own. HUD again tried to push back on this with a blog post about “myths v. facts” in the mortgage settlement. But it seems they’ve confused the issue, and investors who could be hurt by paying for the banks settlement credits don’t agree either.

Part II in this series discusses credits the banks get towards meeting their multi-billion dollar settlement obligations. The federal government and state AGs want you to assume that means a set amount of principal reductions that the banks will grant. But in reality, the banks can employ a variety of non-modification strategies to receive credit toward the settlement, including a number of routine actions they would probably undertake whether or not there was a settlement in place.

The foreclosure fraud settlement has been filed in federal court in Washington. The Justice Department has provided the relevant documents, over a month after the settlement was announced. So now we can finally begin to assess the settlement and what it will mean for housing policy. At first glance, the list of offenses for which the banks are granted release from further liability is so long, you have to wonder why these banks are allowed to stay in business. More to come.

Throughout the life of HAMP, the banks have had discretion to string along borrowers, to deny permanent modifications for obscure reasons after granting trial mods, and to trap homeowners and threaten foreclosure after the fact. The 7th Circuit just revived a case against this practice, allowing it to go forward, which means that similar plaintiffs may now go after the banks for unlawfully denying loan modifications.

Fresh off his Daily Show appearance, HUD Secretary Shaun Donovan announced that Bank of America will provide additional assistance to homeowners under the as-yet undisclosed foreclosure fraud settlement. BofA will write down to market value, according to Donovan, over 200,000 loans that correspond to certain criteria: if the homeowners are underwater, delinquent by more than 60 days, and saddled with payments that are over a quarter of income, then they must be offered the mod. These are slightly better terms, we are told, than the rest of the settlement (other banks aren’t required to offer mods to everyone who fits the criteria, and they can write down to within 120% of loan-to-value, not market value).