Robo-signing Settlement Could Be Next Step in Holding Banks Accountable
By Janis Bowdler, Director, Wealth-Building Policy Project
Today, after a year of negotiations, American families learned what lenders and attorneys general (AGs) have decided regarding the damages wrought by the national “robo-signing” scandal. According to an Associated Press article, the AGs have secured $25 billion in relief for families who lost their home in a rush of hasty, mass foreclosures; the majority of these funds—a reported $17 billion—will be available for principal write-downs. While news of the approaching deal is welcome, important details are still unknown.
From what we know about the multistate settlement, the deal offers some relief, but it will not be the silver bullet of enforcement for which the civil rights community hoped. Notably, two-thirds of the settlement will go toward principal reduction, making it the largest such effort to redeem underwater homeowners. But the deal has flaws. For example, the $17 billion earmarked for principal reduction is overshadowed by need: 11 million homeowners owe more than their home is worth. Moreover, important questions remain, such as those surrounding the sort of legal releases that have been granted to the five servicers.
More than anything, the deal sheds light on the next steps that the Obama administration and the 50 state AGs must pursue to fully realize justice for America’s homeowners and taxpayers. This should be regarded as a critical step in a series of enforcement actions to hold accountable the culprits behind the nation’s financial collapse for their predatory lending, fraud, deception, and wrongful foreclosures. Coupled with the Department of Justice’s settlement with Countrywide last month, today’s news indicates progress toward the accountability that the public deserves, but our work is not done. We are counting on the relentless efforts of people like Massachusetts AG Martha Coakley, Nevada AG Catherine Cortez Masto, New York AG Eric Schneiderman, Delaware AG Beau Biden, and California AG Kamala Harris to continue their investigations and pursuit of justice for families.
President Obama will likely laud this hard-fought settlement in his State of the Union address on Tuesday, January 24, 2012. If the deal shakes out as expected, there will indeed be aspects to celebrate, but it is too soon to declare victory. The president must continue his efforts to hold servicers accountable to their victims and to taxpayers. He can start by turning the spotlight on Ed DeMarco and the servicing policies of Fannie Mae and Freddie Mac.
