Corker to Donovan: How Will $26 Billion Foreclosure Settlement Cost Americans Saving for Retirement?
WASHINGTON – In a letter to Housing and Urban Development Secretary Shaun Donovan, U.S. Senator Bob Corker, R-Tenn., a member of the Senate Banking Committee, requested information regarding how the $26 billion settlement with banks over improper foreclosure practices would impact Americans’ retirement savings. Earlier this month, the nation’s five largest banks agreed to execute $20 billion in mortgage relief and provide $5 billion in payments to states as restitution for failing to comply with filing regulations when foreclosing on homeowners who were not making their mortgage payments. Investors have warned the mortgage relief will be borne in part by pension and 401k plans invested in mortgage securities that will lose value when banks reduce principal on the underlying home loans.
“I would like to know how the settlement will impact the retirement funds of millions of Americans who have 401(k) or pension plans that may be invested in mortgage securities. It appears that the draft proposal may allow losses from principal write downs to be borne by private mortgage investors who are investing on behalf of retirees and pensioners,” Corker wrote in his letter to Donovan. “While press coverage of this settlement and statements by the administration make it sound like the biggest banks are the ones paying into the $26 billion fund, it appears that the losses will actually be borne by private investors, which actually includes the savings of hard working public and private sector workers of all stripes like teachers, firefighters, computer programmers, nurses, among others. Using the funds of these individuals to provide principal reductions or cash payments to homeowners who did not pay their mortgage is un-American, and it is wrong…We absolutely must not shun the concerns of these investors, who are acting largely on behalf of savers and retirees, or we risk entrenching ourselves even further in a dangerous cycle of government dependence and taxpayer losses for mortgage credit.”
A complete copy of the letter to Donovan, who testified today in the Banking Committee regarding the state of the housing market, is attached below.