Banks Get Off Too Easy in Foreclosure Fraud Settlement

This morning, the federal government and state Attorneys General announced a major settlement through which big banks will offer some compensation for fraud and consumer abuses that helped cause the financial crisis. Holding the banks responsible for their misconduct is a good thing—but, unfortunately, this settlement is disappointing in its scale and in the leeway it gives to these banks.

The settlement is set to include 49 states (all but Oklahoma, whose Attorney General, Scott Pruitt, apparently objects to the idea that banks who broke the law should face any penalty whatsoever).

Here’s what we do know about the deal. It represents about $26 billion coming from the banks, of which the majority will be used to reduce the principal on underwater mortgages. For homes that are underwater, that’s a good thing—but the housing collapse led to $700 billion in lost home value, far beyond what this settlement will cover.

Some homeowners affected by specific abuses of the foreclosure process, like “robo-signing,” will be compensated—but not much, certainly far less than the loss represented by a hasty or unjust foreclosure.

The remainder of the money from the settlement will go to other forms of homeowner assistance, like helping mortgage-holders refinance at lower rates.

The amount of money we’re talking about here will be a help to some hard-hit homeowners, but it’s way out of scale to the size of the problem.

The other question about the settlement is one of responsibility and justice, not just monetary compensation. On the bright side, the settlement comes alongside a new task force to investigate misconduct in the housing market—but, unfortunately, it also releases the banks from liability for many of the most destructive foreclosure-related practices. We have laws against fraud for a reason, and it’s the responsibility of our officials to actually see to the enforcement of those laws.

For now, the first part of this fight has come to a close—and, despite the flaws in this settlement, working people have won some victories over the banks along the way. But here are the questions we’ll be asking as we move forward. Will homeowners who need it actually get the help this settlement provides in a timely manner? Will the investigation task force be able to uncover and actually penalize misconduct on the part of the banks? And, most importantly, will the settlement and the next steps have enough force to prevent large-scale abuses like this from happening again?

(Image via Felix Salmon)

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Schneiderman Heard You

Last week we emailed you to urge you to express your support for New York Attorney General Eric Schneiderman to hold banks accountable for foreclosure fraud and other abuses.

Over 5,000 of you sent emails, tweeted, and wrote on AG Schneiderman’s Facebook page encouraging him to investigate the banks, stand strong against pressure from financial institutions and Administration officials, and use his authority to hold lawbreakers accountable.

Today, it’s clear: Schneiderman heard you. And he isn’t wasting any time:

Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process.

This lawsuit doesn’t target some small players. Schneiderman is already tangling with the big boys:

The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as “MERS certifying officers,” have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.

What’s more? This is in addition to Schneiderman’s role as co-chair of the “financial crimes unit” that President Obama announced at the State of the Union. As Dave Dayen points out, the latter role is dealing with “pre-bubble” conduct, activities that lead to the 2008 economic crisis. This lawsuit is dealing with the “post-bubble” world, where banks allegedly took actions to stick it to homeowners just the sky was falling.

Schneiderman, along with fellow Justice Democrats Kamala Harris, Martha Coakley, Beau Biden, and Catherine Cortez Masto, is showing what public service is all about. Thanks for listening to us, Eric – as long as you’re holding banks accountable and fighting for homeowners, our members stand with you.

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“Justice Democrats” at Work: California Pushes Back Against Settlement with Banks



Photo by Casey Serin on Flickr, via Creative Commons

Despite the announcement at the State of the Union of a task force to investigate predatory lending and other sketchy bank practices, the settlement between the state Attorneys General and the five biggest banks is still on the table. Yes, we were successful in stalling the settlement, but that doesn’t discount the fact a deal is still being worked out, and that a draft has been submitted to the states AG’s for approval.

The deal calls for only $25 billion in assistance, which as we’ve said is a great deal of money until you compare it with U.S. homeowners $700 billion in negative equity. Despite the fanfare, that amount would only help a small percentage of affected homeowners – many Working America members among them.

We don’t think that’s enough. And now, we’re not alone:

Calif. Atty. Gen. Kamala D. Harris’ office has called a proposed $25-billion settlement with the nation’s mortgage industry “inadequate.”

“We’ve reviewed the details of the latest settlement proposal from the banks, and we believe it is inadequate for California,” Shum Preston, a spokesman for Harris, said in a statement. “Our state has been clear about what any multistate settlement must contain: transparency, relief going to the most distressed homeowners and meaningful enforcement that ensures accountability.  At this point, this deal does not suffice for California.”

Kamala Harris, along with Attorneys General Schneiderman (New York), Coakley (Massachusetts), Biden (Delaware), and Cortez Masto (Nevada), have been leading the charge against a weak settlement for months. Harris’ statement is a big deal because California, in addition to being a big state with a great deal of resources, has one of the highest foreclosure rates in the country. We agree with Harris – agreeing to this pittance of a settlement would be an abdication of her duties as California’s chief law enforcer.

If you want a great example of abdicating your duty as law enforcer, take a gander at Florida’s Republican Attorney General Pam Bondi. Bondi, a frequent Fox News guest and ally of the exceedingly unpopular Rick Scott, is also skeptical of a settlement, but not for the same reasons we are. She’s worried about the Big Banks being treated unfairly:

[With] a settlement taking shape last year, Bondi broke ranks with her counterparts and rejected it. That’s because the settlement would have mandated principal reduction—a measure that could help keep more homeowners out of foreclosure, but that would force banks and lenders to take a bigger hit on their balance sheets. “It seems like she’s balancing the interest of businesses with the interest of Floridians when it comes to principal reduction,” state Rep. Darren Soto (D-Orlando) told the Sentinel. “When you’re the AG, you have one interest: Floridians. You’re supposed to be the consumer advocate, first and foremost.”

When you follow the money, you can see one possible reason why Bondi is interested in a slap-on-the-wrist settlement: she’s received campaign contributions from executives and employees of ProVest and Lender Processing Services – two big foreclosure mills.

We’re cheering this move by Kamala Harris, as well as the efforts of her fellow “Justice Democrats” Eric Schneiderman, Martha Coakley, Beau Biden, and Catherine Cortez Masto. Our members have acutely felt the pains of mass foreclosures in their neighborhoods, communities, and families. These AG’s shouldn’t stop fighting until we get a full investigation of foreclosure fraud; something with a strong budget, adequate staff, and the authority to go after the people accountable for kicking millions of Americans out of their home.

As for Pam Bondi, whether her inaction on the foreclosure crisis really is the result of her campaign contributions or mere negligence, it’s just a reminder of why people are so cynical. Owning a home used to be part of the American promise – this is an area where government needs to help, regardless of party.

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Why We Need An Investigation: Alissa’s Story

The following is a guest post from Working America Member Alissa Kowal from Pittsburgh, Pennsylvania

I am so happy to see that in just 10 days, over47,000 people participated in Working America’s campaign to hold big banks accountable for their unethical foreclosure practices.

I am a Working America member, a Pittsburgh native, a single mother of three, and a Duquesne University graduate. I have worked in an array of fields, including interior design, real estate, and architectural sales.

A few years ago, one of the companies I worked for went bankrupt due the housing and construction crisis in America. As challenging as that experience was, it is not the worst encounter I have had with unethical bank practices.

In the spring of 2009, just after the federal program to assist homeowners was established by the Obama Administration, my mortgage company sent me a notice saying that I may qualify for home mortgage remodification. I called my bank, and it took them just ten minutes over the phone before they let me know that I qualified for a modification, and they gave me a lower payment.

After following the modification payment plan, to my surprise I received a foreclosure notice in the mail. The bank informed me that my modified payments did not actually apply to my mortgage. I was then “re-modified” several times, each time at a different amount. I again maintained my payment agreements, yet still continued to receive foreclosure notices. None of the payments that I made went to the balance of my mortgage or the interest that I owed, they were applied to “fees” that the bank added to my account for late and missed payments and my tax escrow account.

After receiving my third foreclosure notice I contacted my State Representative who sent me to Community Action Southwest. They assisted me in dealing with the bank to ensure they followed the remodification guidelines they had been ignoring. I was finally refinanced, with no credit check or financial documents.

I am now stuck with a mortgage that is fifteen years longer than it originally was. The bank took all the modification payments I made and, after applying them to escrow, kept the rest as profit. They decided those months were “missed payments” and added that sum to the original mortgage, increasing it by $25,000. My equity is completely gone and my credit is destroyed.

Per Community Action Southwest, I am one of hundreds of homeowners in my area who have been misled by banks like Wells Fargo and Bank of America. I feel lucky that I have experience in business and real estate, because I knew something ethically was wrong. How many other people went through this and simply had no idea what to do in such a complicated financial situation?

Right now, the Obama administration, the Department of Justice, and the banks are discussing what consequences the banks will have to face because of their exploitation of the American taxpayer, the American homeowner, and the federal modification program. Last night, the President has also announced the creation of a special unit to investigate financial crimes.

We need to ensure that any final agreement includes a thorough investigation into bank practices, and sufficient financial assistance to homeowners struggling due to unfair practices.

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AFL-CIO President Trumka’s Statement on Proposed Foreclosure Fraud Settlement


Photo by scad_lo on Flickr, via Creative Commons.

The following is a statement from AFL-CIO President Richard Trumka on the Possible Bank Mortgage and Foreclosure Fraud Settlement.

We need to hold banks accountable for the fraudulent practices that brought about the worst economic crisis since the Depression.  State Attorneys General have been investigating bank fraud, and these critical investigations must not be undermined by a premature and inadequate settlement.  We call on the administration to reject any deal that insulates banks from full responsibility.

It is critical that the Department of Justice lead a comprehensive investigation together with the state Attorneys General to prevent banks from engaging in future unlawful and deceptive practices that could exploit homeowners and put the economy further at risk.

We commend state Attorneys General like New York’s Eric Schneiderman and Delaware’s Beau Biden for their leadership and courage in calling for a real investigation and relief on a scale that helps the millions of homeowners who face a new wave of foreclosures.

The economy is currently weighed down by $750 billion in negative home equity, so relief on a massive scale is needed to lift home values and stimulate the economy by increasing consumer demand. A comprehensive settlement must force banks to write down underwater mortgages. A sum significantly larger than the rumored $25 billion is needed for the economy to grow and create jobs.

Specifically, the administration must stand strong against the big banks and insist on:

1) A full and thorough investigation into problems tied to the residential mortgage-backed securities (RMBS) market, and

2) A guaranteed minimum amount of money set aside for reducing the mortgage principal of “underwater” homeowners in key states impacted by the foreclosure crisis.

This is an opportunity for the administration to demonstrate leadership and show that it has the political will to do what’s right for homeowners and right for our economy.

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Obama Administration and Banks Close to Unacceptable Foreclosure Settlement – Take Action

You’ve got to be kidding me.

The Obama Administration, led by Associate Attorney General Thomas Perrelli, is in final negotiations with state Attorneys General to give the tiniest slap on the wrist to the five biggest banks for years and years of reckless foreclosure fraud activities.

There was talk over the past few months about a $25 billion settlement, which would help less than 10 percent of underwater homeowners. Now today we’re hearing about an even smaller settlement, valued at around $19 billion.

Of course these are huge numbers in theory, but we’re talking about the combined financial power of Bank of America, Citigroup, J.P. Morgan Chase, Wells Fargo, and Ally Financial. It’s not even a slap on the wrist – this is like a tap on the shoulder, or a Facebook poke.

Dave Dayen at Firedoglake points out that there is $750 billion in negative equity in America, and a $19 billion settlement will deal with about 2.5 percent of that. And helping a million homeowners is great, but there are about 11 million homes in foreclosure and another 7.5 million homes on the precipice.

Not to mention that, according to reports, the proposed settlement with the banks would keep the participating states from “pursuing various claims against them in the future.” Translation: Banks don’t want anyone to really investigate the acts they committed against the American homeowners and communities. So-called “robo-signing,” the practice of assigning one person to approve thousands of foreclosures over a short period of time without checking the paperwork, is the focus of the settlements, but could be the tip of the iceberg if the Administration launched a full-scale investigation.

This could be the last chance we have to really find out what caused the housing bubble and the economic crisis that followed. This could be the last chance to hold the real financial criminals accountable. This could be the last chance to show the foreclosure fraudsters that they can’t negotiate their way out of the consequences of ruining millions of American lives and livelihoods – they’ll go to jail for robbing us the way anyone else would go to jail for robbing a home or a store.

Luckily, Thomas Perrelli, the man at the Justice Department overseeing the settlement with the banks, is leaving the post in March. Reports say he wants to get the settlement deal before he leaves.

He needs to hear from you now. He needs to know you think this tiny slap on the wrist for years of fraud is unacceptable. And he needs to know you won’t stay quiet about it.

Write to Thomas Perrelli now. Tell him to stand up for homeowners, not the Big Banks. Tell him that Bank of America and their friends might be rich and powerful, but they aren’t above the law.

Take action now.

 

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How Seven Elected Officials Are Standing Up to the Banks

“You have really been fantastic!” wrote William from Bearsville, New York, “Rarely have I been able to write that someone I voted for has actually acted as I would act…truly representative government! I love it!”

Congress is at record low approval, and distrust of government is at record highs. Occupy protesters have taken to the streets across the country to voice their anger at the current political system. In this day and age, what would possess William from Bearsville to gush over an elected official?

Turns out William was writing to Eric Schneiderman, the Attorney General of New York state. Schneiderman, elected in 2010, is one of a handful of state officials resisting a proposed “50 state settlement” with big banks that would amount to a slap on the wrist for years of unethical and sometimes illegal foreclosure practices.

The first reaction we all have to a politician doing anything we even remotely approve of is: What’s their game? What do they have to gain from this? Given what we’ve seen the last few years, it’s a fair question. Matt Stoller, a fellow at the Roosevelt Institute, gave his answer in an August blog post:

I’ve known Schneiderman for a few years, back when he was a state Senator working to reform the Rockefeller drug laws. And my answer to this question is pretty simple. He wants to. That’s it. Eric Schneiderman is investigating the banks because he thinks it’s the right thing to do. So he’s doing it. This guy has thought about his politics. He wrote an article about how he sees politics in 2008 in the Nation, and in his inaugural speech as NY AG he talked about the need to restore faith in both public and private institutions. Free will still counts for something, apparently.

But the New Yorker isn’t the only one stepping up to the plate. Joining Schneiderman are Martha Coakley of Massachusetts, Catherine Cortez Masto of Nevada, Jack Conway of Kentucky, Beau Biden of Delaware, Kamala Harris of California, and Lori Swanson of Minnesota. “Thank goodness Lori Swanson is standing up for homeowners and holding financial companies accountable,” wrote Elizabeth from Fergus Falls, Minnesota.

It’s true that these seven AG’s happen to be Democrats. But foreclosure fraud is not – or at least it should not be – a partisan issue. Even our most conservative, rabid anti-Obama friends and relatives would probably agree that those who used dirty tactics to make a killing while millions of families lost their homes should be brought to justice.

The biggest reason that there are seven AG’s standing up to the banks instead of 50 is that the price for messing around with those large financial institutions – literally trying to extract more restitution and deny blanket legal immunity – can be very high. A bunch of these guys are up for reelection, and some of them have ambitions for higher office. In an age of Citizens United, tangling with the likes of Bank of America and Citigroup can put a huge pair of crosshairs on your political career; the banks don’t care whether there is a D or an R next to your name if you vote their way.

That’s why it’s even more important to laud these seven for standing up to the banks. Take action here and send a message to your state Attorney General that an investigation into fraud isn’t just good for our economic future – it’s the right thing to do.

Photo of New York Attorney General Eric Schneiderman from the Office of New York Attorney General.

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Workers Tell Their State Attorneys General: Banks Aren’t Above the Law

“Banks don’t need a slap on the wrist, they need a kick in the ass.”

Jim from Escanaba, Michigan, wasn’t mincing words when he wrote his message to Attorney General Bill Schuette. Jim was one of thousands of Working America members and union members who sent messages to their state attorneys general about the impending settlement with Big Banks on the issue of foreclosure fraud.

As Seth wrote yesterday, state Attorneys General will be deciding soon on a “50 state deal” that could let banks off the hook for their shady, deceptive, and possibly illegal foreclosure methods. Stories about tactics like “robo-signing” – where a bank employee signs thousands of documents and affidavits approving mortgage foreclosures without really looking at them – are widespread, but if the state AG’s take sign on to a proposed deal, none of these cases will be thoroughly investigated. Worse, the very people responsible could get legal immunity.

It would be one thing if the large financial institutions were truly doing their part to aid in the recovery of the economy they helped destroy. But what we’re seeing now, and throughout 2011, is that the wealthiest are having their own private recovery while the rest of the 99 Percent remain stuck in the mud. “Please stand up to these greedy banks and punish them as though it was one of us 99 Percenters,” wrote Doug from St. Clair Shores, Michigan, “Why did my house’s value decline by nearly 50 percent while their bonuses grew?”

As for homeowners, 7.5 million homes have entered the foreclosure process, and 11 million are at risk. The problems that started the mess in 2008 have not yet abated.

If your state Attorney General doesn’t call for an investigation, and instead takes the lazy, easy way out by taking a deal, the people responsible for our economy’s collapse will never be held accountable. There will be no reason for the robo-signers, fraudsters, and predatory lenders to change their ways. Stephanie from Greenwood Lake, New York, in her message to AG Eric Schniderman, says that she has seen these dirty tactics firsthand:

As a foreclosure prevention counselor at a local non-profit for the past 6 years, I know the devastating effects of the financial crisis; I see first-hand the irresponsible behavior of the big banks towards homeowners. There is clear evidence of misconduct, fraud and out-and-out crime perpetrated against the American people and no one is doing anything about it!

If any of us did our jobs the way the Big Banks did theirs, we’d not only get fired – we’d probably go to jail. “Ordinary Americans who commit a sliver of what high financiers did over the past half-decade would be lucky to see sunlight for the rest of existence,” wrote Jim from Gatlinburg, Tennessee to his AG Robert Cooper, Jr. Stephanie from Greenwood Lake, New York echoed those sentiments: “If I ever attempted to commit any of the acts the big banks perpetrated before, during and after the mortgage crisis, I would be in jail for a very long time.”

The central issue here is not revenge, but fairness. Many messages mentioned the fact that if you or I committed theft, or if a fellow American lost their home because of our negligence, we would be summarily punished. Unless we want history to repeat itself, we need a thorough investigation of these shady mortgage practices and put a stop to them.

We know that Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial aren’t above the law. The question is, do our state Attorneys General agree with us?

Photo by scad_lo on Flickr, via Creative Commons.

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Housing Collapse Likely to Worsen

From Michael Snyder via alternet:

We are officially in the middle of the worst housing collapse in U.S. history – and unfortunately it is going to get even worse. Already, U.S. housing prices have fallen further during this economic downturn (26 percent), then they did during the Great Depression (25.9 percent). Approximately 11 percent of all homes in the United States are currently standing empty. In fact, there are many new housing developments across the U.S. that resemble little more than ghost towns because foreclosures have wiped them out. Mortgage delinquencies and foreclosures reached new highs in 2010, and it is being projected that banks and financial institutions will repossess at least a million more U.S. homes during 2011. Meanwhile, unemployment is absolutely rampant and wage levels are going down at a time when mortgage lending standards have been significantly tightened. That means that there are very few qualified buyers running around out there and that is going to continue to be the case for quite some time to come. When you add all of those factors up, it leads to one inescapable conclusion. The “housing Armageddon” that we have been experiencing since 2007 is going to get even worse in 2011.

There are a lot of grim facts in this article, but this is one of the grimmest:

The housing market is not like other financial markets. It is difficult to artificially pump it up with funny money. If the U.S. housing market is going to rebound, it is going to take lots of average American families getting qualified for loans and going out and buying houses. But they can’t do this if they do not have good jobs. Today, only 47 percent of working-age Americans have a full-time job at this point. Without a jobs recovery there never will be a housing recovery.

Without a jobs recovery, there will never be any kind of a recovery, including the deficit reduction that is all we hear about from D.C. these days. There is no acknowledgement of how serious the unemployment situation really is.

This is not good news for the homeowners who are locked into mortgages that are now higher than their homes are worth. It’s not good news for communities full of empty houses. Every other house on my street is for sale; there are no jobs here. Those houses will stay on the market for years and years.

Meanwhile, as the number of empty houses increases, the number of apartments decreases. From the Houston Real Estate Observer:

The nation is heading for a shortage of apartments, the result of several years of weak multi-family construction, according to the National Association of Home Builders.

“We are going to have a supply/demand imbalance and we will have rental increases,” said Sharon Dworkin Bell, senior vice president of the multifamily division of the NAHB.

Rental increases will likely translate into more homelessness amongst the working poor.

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Read of the Week

Matt Taibbi’s look at fraudclosure has too much information to do justice to here; the only thing to do is go read the whole thing.

Here’s the big picture—and it is big:

But in reality, it’s the unpaid bills that are incidental and the lost paperwork that matters. It turns out that underneath that little iceberg tip of exposed evidence lies a fraud so gigantic that it literally cannot be contemplated by our leaders, for fear of admitting that our entire financial system is corrupted to its core — with our great banks and even our government coffers backed not by real wealth but by vast landfills of deceptively generated and essentially worthless mortgage-backed assets.

You’ve heard of Too Big to Fail — the foreclosure crisis is Too Big for Fraud. Think of the Bernie Madoff scam, only replicated tens of thousands of times over, infecting every corner of the financial universe. The underlying crime is so pervasive, we simply can’t admit to it — and so we are working feverishly to rubber-stamp the problem away, in sordid little backrooms in cities like Jacksonville, behind doors that shouldn’t be, but often are, closed.

Along the way you get a courtroom where the judge has it as his goal to go through 25 cases per hour, objects to a reporter witnessing what he’s doing (and threatens the lawyer who brought Taibbi to court), and in every case gives the banks the benefit of the doubt while foreclosing without a second glance on person after person. Taibbi explains the scope of the fraudulent paperwork the banks are pushing, and why it’s in their interest to foreclose no matter what—which gets back to the fact that they were selling mortgages as investments without regard for whether the mortgages actually were sound investments.

The scope of what’s going on is astounding, and it’s a story that’s playing out on so many levels—the huge question of securitization and Wall Street pushing risky “investments,” the day to day bank practices of going to court with robosigned foreclosure documents and no clue where the actual mortgage note is, and people losing the homes they have actually paid for, or made a good-faith effort to negotiate reduced payments on. Read the whole thing.

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