February 4, 2012

Statement from the Campaign for a Fair Settlement

Pending Mortgage Servicing Deal Should Not Give Banks Broad Legal Immunity or Infringe on Future Investigations into Mortgage Securities Market

The Campaign for a Fair Settlement, a coalition of progressive organizations nationally and in states hard hit by the foreclosure crisis working to hold banks accountable for their role in the foreclosure crisis, and protect homeowners and taxpayers, released the following statement today on the pending Mortgage Servicing Deal between Wall Street banks, state attorneys general and the Obama administration.

“With millions of Americans having lost their homes to foreclosure and countless more suffering through a recession caused by the reckless action of Wall Street bankers, we are concerned about the steps being taking by the Department of Housing and Urban Development and the Department of Justice to forgive mortgage lenders for their misdeeds.

“The new mortgage crisis investigative unit co-chaired by New York Attorney General Eric Schneiderman could represent real progress toward holding Wall Street banks accountable for their role in crashing our economy and securing overdue relief for Americans who have seen their home values fall, if it is provided with the resources, investigative authority and capacity needed to do the job. The announcement by Attorney General Schneiderman Friday that he is bringing a major new lawsuit against big banks over the MERS system is an important sign that muscular efforts are underway to fully investigate banks practices with a full inquiry into problems related to mortgages and the residential mortgage-based securities market.

“But we remain deeply concerned about an apparent rush to a deal over mortgage servicing with big banks that could infringe on a full investigation of bank practices.

“A full and unfettered investigation into the role of big banks in creating the mortgage mess and the financial crisis is the only way to truly protect taxpayers and our economy by making it much harder for Wall Street CEOs to again act lawlessly in pursuit of profits at the expense of hardworking Americans.

“Most importantly, we are deeply troubled that a potential sweetheart deal with banks over mortgage servicing could still foreclose on the ability of Attorney General Schneiderman, the Justice Department, and other state attorneys general to conduct the full and complete investigations into the securitization process that Americans deserve. We will be monitoring this issue very carefully out of our deep concern that the full integrity of this investigation is protected.

“To fix the housing market and help the economy recover, any deal with the big banks must prioritize homeowners and taxpayers over Wall Street banks. The mortgage servicing deal should:

  1. Ensure any legal release for banks should be narrowly tailored to ensure there is no infringement on the power of the unit to investigate the residential mortgage-backed securities (RMBS) market;
  2. Guarantee adequate mortgage reductions to fair market value for “underwater” homeowners in all key states hit hard by the foreclosure crisis. A deal that pushes most of the money to California and fails to provide adequate relief for homeowners in other hard-hit states including Florida and Nevada would be deeply misguided. Additional funds should be contributed to ensure other hard-hit states get commensurate relief;
  3. Ensure that there are guaranteed adequate funds set aside for reducing to fair market value the mortgages of homeowners in the African American, Latino and other communities that banks disproportionately targeted with unfair mortgage schemes;
  4. Include the appointment of a strong commissioner with a background in these issues to oversee the terms of the settlement, including clearly defined court enforcement measures and reporting requirements to ensure banks comply with the terms of the deal, and significant penalties for banks that fail to comply. Given the banks history of not complying with prior settlements, clear enforcement capacity and authority are essential; and
  5. Not impair in any way the rights of borrowers to pursue remedies for the damages inflicted upon them in the servicing of their mortgages. The settlement should also not impair the rights of investors – particularly those representing pension funds and retirement accounts –from pursuing their remedies under law for damages inflicted upon them.

“Four years after the housing crash, it is outrageous that there has been no relief for homeowners, no real investigation into banks’ fraudulent practices and no indictments of the bankers who crashed the economy, destroyed home values and killed millions of American jobs. It is time for the administration to show it has the political will to do what’s right for middle class homeowners and the economy.”

The Campaign for a Fair Settlement is a coalition of progressive organizations nationally and in states hit hardest by the foreclosure crisis working to hold banks accountable for their role in the foreclosure crisis, and protect homeowners and taxpayers.