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Robo-signing settlement called ‘good step,’ ‘sell-out’

Responses from community groups and advocates to the robo-signing settlement announced Thursday ranged from “good first step” to “sell-out to Wall Street.”

The Woodstock Institute emphasized the significant precedent of requiring banks to write down principals for homeowners who owe more than their homes are worth – an approach lenders have generally avoided taking until now.

The settlement “won’t end the troubles of homeowners” but is a “significant step in the right direction,” said Dory Rand.  She said resources need to be targeted to the hardest-hit communities. She called it “a real victory for homeowners.”

The $1 billion in homeowner relief expected for Illinois “will not suffice to restore all of homeowners’ lost wealth” but “it can potentially turn back the tides of default in hard-hit communities,” she said.

Woodstock estimates that 400,000 Chicago-area homeowners are underwater on their mortgages, together owing nearly $25 billion more than their homes are worth.

Rand reiterated Woodstock’s call on the Federal Home Finance Authority to stop blocking Fannie Mae and Freddie Mac from writing down principals in mortgage modifications.

Paltry restitution

In contrast, a coalition of community groups said the settlement “let banks off the hook.”

“Our elected officials completely sold out the people again to their Wall Street friends,” said IIRON, a regional network including Northside POWER and Southsiders Organized for Unity and Liberation.

IIRON emphasized the paltry sums given in restitution to homeowners who lost their homes due to fraudulent foreclosure practices.  They stand to receive up to $2,000 each.

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Bank fraud investigation hailed

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

Principal reduction

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.

Groups tell Madigan, Donovan: ‘No’ to foreclosure deal

Community groups confronted HUD Secretary Shaun Donovan and Illinois Attorney General Lisa Madigan on Monday over a foreclosure fraud settlement the groups say is entirely inadequate.

Protestors sang, prayed, and testified outside a room in the O’Hare Hilton where Donovan and Justice Department officials were meeting with staff from state attorney generals to urge them to sign on to a settlement in a case arising out of the “robo-signing” scandal of October 2010 (see 10-21-10 Newstip).

The groups object to the deal with the five largest mortgage services – including Bank of America and JPMorgan Chase — as a “slap on the wrist” that would shield them from legal liability for a wide range of foreclosure misconduct.

(Van Jones of Rebuild The Dream and George Goehle of National Peoples Action spell out some concerns at Huffington Post.)

“President Obama and Attorney General Madigan must choose,” says Rev. Marilyn Pagan-Banks of Northside POWER. “Will they settle for a deal that benefits the 1 percent and lets the big banks off the hook? Or will they stand with the 99 percent and fight for accountability and a solution that will help millions of people?”

The O’Hare meeting may have been called to create an aura of inevitability around the settlement, Firedoglake reports, but none of the state attorney generals who have criticized its provisions were expected to attend.

Dissension in the ranks

Attorney generals of New York, California and other states have opposed provisions of the settlement that would give banks blanket immunity for misconduct and shut down ongoing investigations in New York and elsewhere.

Last week attorney generals from a dozen states (not including Illinois) met in Washington DC to discuss coordinating investigations — and their displeasure with settlement talks, according to Huffington.

Madigan is on the committee that is negotiating the settlement. After 50 state attorney generals began an investigation in 2010, the Obama administration began pressing for a settlement. (At Politico, Simon Johnson calls the case the administration’s “last chance” to stand up to banks.)

Several weeks ago members of the regional organizing network IIRON met with Madigan staff to express their displeasure with the deal. “They seemed surprised that we didn’t think the settlement is a great thing,” said Kristi Sanford.

When they learned of the meeting Monday, they organized a rally at the State of Illinois building – and upon learning the meeting’s location, a contingent set out for O’Hare.

There a couple dozen members of community groups from across the city asked a Madigan staffer if the attorney general could spare a few minutes to talk with them. The aide never returned – but police came to ask the protestors to leave, Sanford said.

The groups want banks to agree to write down underwater mortgages, and they say there must be a full-fledged investigation of bank misconduct. Criminal behavior by banks in the scandal is alleged to include perjury, filing false documents, illegal foreclosures, and investor fraud.



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