A settlement between attorneys general, federal officials, and the nation's five largest mortgage lenders is reportedly anything but final following push back from advocacy groups and some of those attorneys general who worried the deal was too soft on banks. The $25 billion settlement, stemming from a 2010 effort launched to examine foreclosure abuses, would stipulate principal reduction for many homeowners facing foreclosure, as well as set aside funds for famiiles whose homes were wrongfully foreclosed on.
But news that New York State Attorney General Eric Schneiderman would co-chair a special unit of prosecutors and attorneys general to, as President Obama said in Tuesday's State of the Union address, “expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis,” came as a welcome announcement. After the president's address, the Woodstock Institute wrote on its blog that a Financial Crimes Unit “will play an important role in holding mortgage lenders and servicers accountable for how their actions impact families, communities, and the market.
Making it clear that criminal activity in the financial sector will not be tolerated is necessary to restore confidence in the mortgage market and the broader financial system.
The plan could restore confidence, or, as President Obama said, give a chance for banks to “repay a deficit of trust.” We like the sound of that.
Concerns remain, however, that the pending settlement with the banks will be light in the way of assigning culpability, and that, as Colorlines' Kai Wright says, this new unit will simply be “window dressing for a get-out-of-jail-free settlement with banks.”
Still, advocates are hopeful. The Alliance of Californians for Community Empowerment (featured in the fall 2011 Shelterforce) posted on Facebook Tuesday evening, “This is a great start! Let's make sure they don't let the banks off the hook.”
It'll be interesting to see how this plays out. While we would have liked to have seen this type of aggressive approach much, much sooner, this is good news.
Photo by citizenactionny via Creative Commons