Rep. Maxine Waters Responds to State Attorneys General Settlement with Mortgage Servicers
Today, Housing and Urban Development Secretary Shaun Donovan and Attorney General Eric Holder announced an historic settlement between 49 state attorneys general and 5 major mortgage servicers regarding allegations of servicing and foreclosure fraud.
Today marks an important milestone in a struggle many of us have been engaged in for the last 5 years: the fight to bring justice to millions of American homeowners and accountability to our nation's mortgage servicers.
With today's settlement announcement between major mortgage servicers, state attorneys general, and the federal government, we are now seeing the first serious effort to impose national mortgage servicing standards since the start of the foreclosure crisis. These process changes will not only take the obvious step of stopping illegal practices, but will also institute process changes that provide borrowers with a basic right of due process as they try to negotiate a loan modification. As someone who first introduced mortgage servicing reform legislation in 2008, and has been dutifully fighting for national standards over the ensuing years, I applaud these long-overdue improvements. I will continue to fight to codify servicer reform, so that we can effect systemic change that lasts beyond the expiration date of this settlement.
With regard to the settlement figure of $26 billion, I'm disappointed that the amount of principal reduction and funding to foreclosure relief programs doesn't begin to equal the value of the harms caused. In California alone, about one million foreclosures have hit since 2008. More than 30 percent of California homeowners owe more on their homes than they're worth, to the tune of about $93,000 a piece. To address all the negative equity in California, the settlement would have to provide $214 billion to our state alone. Moreover, we know that mortgage servicers have saved billions of dollars since the start of the housing crisis by deliberating under-resourcing their customer service operations. The result has created billions in wrongful profits for the banks, and a nightmare for American homeowners. I believe that the settlement figure announced today should have been larger, and hope that efforts by the mortgage-backed securities task force will continue to bring relief to homeowners.
Though I believe that the settlement figure ought to have been larger given the scale of the abuses, I must applaud Attorney General Kamala Harris for standing firm, and ensuring that California received a share of the settlement that's commensurate with the damage done in our state. I also applaud HUD Secretary Shaun Donovan and Attorney General Eric Holder for their leadership on this issue and their commitment to helping America's homeowners.
I am also pleased that the settlement brings some justice to our nation's servicemembers and veterans, ensuring that mortgage servicers will pay hefty fines for wrongful foreclosure or for charging excessive interest rates. But it is also important to keep in mind that each violation of Servicemembers Civil Relief Act represents a criminal misdemeanor offense which is punishable by a sentence of up to one year of imprisonment. I hope that the Department of Justice and the new mortgage-backed securities task force make pursuing these criminal offenses their first priority.
It's important to note that the settlement will only be as strong as the enforcement power behind it. We all remember the 2008 Countrywide settlement, and the bank's lack of compliance with that agreement. The Treasury Department announced in December that at least one servicer is still failing to comply with HAMP requirements. Moreover, previous efforts by the Office of the Comptroller of the Currency and the Federal Reserve to crack down on mortgage servicer abuses have been tainted by weak provisions that allowed servicers to hire their own investigators. We must have constant, real-time, and unforgiving enforcement of every word of this settlement, or the public will continue to lose confidence in the institutions of government meant to protect them.
Finally, I should note that this settlement doesn't cover loans held by Fannie Mae or Freddie Mac, representing 60% of the mortgage market. I will continue pressing Federal Housing Finance Agency Acting Director DeMarco to stop impeding progress on our housing recovery, and will continue to advocate for my bill, H.R. 3841, the Principal Reduction Act of 2012, which would compel Fannie Mae and Freddie Mac to reduce principal on mortgages that they own or guarantee.