February 9, 2012
Struggling Homeowners and Holding Banks Accountable
WASHINGTON, D.C. – The U.S. Department of Justice and Attorneys General from 49 states announced a $25 billion settlement today with five major banks in the country to settle allegations of fraudulent robo-signing of mortgage documents and other abusive practices that contributed to a record number of foreclosures in recent years. According to news reports, some additional banks are considering the deal so the value of the settlement could grow if they decide to sign on.
The settlement represents an important step in the effort to help homeowners harmed by the foreclosure crisis and will require the participating banks to implement reforms to prevent certain foreclosure abuses in the future. But more is needed to hold financial institutions accountable for their role in precipitating the nation’s economic crisis, according to Consumers Union, the nonprofit advocacy arm of Consumer Reports.
“Millions of American families have lost their homes or seen the value of their homes disappear because of fraudulent foreclosure practices,” said Pamela Banks, senior policy counsel for Consumers Union. “This settlement represents an important down payment toward assisting struggling homeowners and holding banks accountable for foreclosure abuses. But clearly much more work needs to be done to ensure banks are held liable for their misdeeds and homeowners hurt by unfair mortgages practices get the help they need.”
Under the proposed settlement, $25 billion will go to nearly 2 million homeowners harmed by the mortgage mess. An estimated one million homeowners are expected to be eligible for a reduction of the principal on their mortgage or refinancing to lower their rates. The settlement also provides $2,000 to approximately 750,000 homeowners who lost their homes to foreclosure from September 2008 through 2011. The settlement also requires the banks to implement reforms to stop abuses related to how they service mortgages and handle foreclosures.
The banks participating in the settlement are Ally Financial, Bank of America, Citigroup, JP Morgan Chase, and Wells Fargo. The settlement covers privately held mortgages but not mortgages owned by Fannie Mae and Freddie Mac. A national monitor will oversee the settlement to ensure that banks comply with its terms.
The states agreed not to pursue certain civil charges against the banks for the types of abuses covered by the settlement but state and federal prosecutors can still pursue criminal charges. In addition, banks can still be prosecuted for their role in the nation’s financial crash. President Obama recently named New York Attorney General Eric Schneiderman to investigate how risky mortgage backed securities contributed to the collapse of the economy.
“Americans are still waiting for financial institutions to be held accountable for their role in causing the biggest financial downturn since the Great Depression,” said Banks. “Now, more than ever, we need a vigorous investigation so that the culpable are held accountable and there is meaningful relief for homeowners.”
More information on the settlement can be found at:
http://www.nationalmortgagesettlement.com/
Contact: Michael McCauley mmccauley@consumer.org, 415-902-9537 (cell) or David Butler dbutler@consumer.org, or Kara Kelber kkelber@consumer.org, 202-462-6262