Jan 25, 2012
President Obama’s State of the Union announcement of a new investigation into bank fraud represents a victory for community groups, said National Peoples Action on Wednesday.
“We’ve been calling for a full investigation for over a year,” said Liz Ryan Murphy of NPA. “This is a big win, but we still need to see results.
“We need a complete investigation to get to the bottom of what they’ve done, with penalties and restitution that are commensurate with the crimes.”
The Woodstock Institute also hailed the announcement. “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,” said Tom Feltner.
Obama announced that New York Attorney General Eric Schneiderman will head a new task force looking into abuses in the mortgage origination and securitization sector.
Schneiderman’s appointment came as NPA and other groups (including IIRON in Chicago) expressed concern that the administration was pressing for a settlement in the robo-signing scandal that would release banks from legal claims covering a sweeping range of misconduct. Schneiderman was among state attorney generals said to be raising similar concerns
If it is narrowly focused on relieving claims arising from fraudulent foreclosure filings, a settlement could begin to bring relief to hard-hit communities in the form of loan modifications which reduce principal to reflect depressed home values, Feltner said.
Principal reduction is “a critical missing piece in the response to the foreclosure crisis,” he said.
NPA has argued that homeowners have lost billions of dollars of equity since the housing market collapsed due to the malfeasance of big banks, and that wholesale principal reduction would constitute a massive economic stimulus.
Both groups have called on the Federal Home Finance Authority to direct Fannie Mae and Freddie Mac, which own 70 percent of home mortgages, to allow principal reduction.
Murray said Obama should replace Edward DeMarco, acting director of the FHFA, who has ruled out principal reduction.
The president “should consider a change in leadership” at FHFA, Feltner said.