February 23, 2012

Statements on the $25 Billion Settlement with Mortgage Servicers to Address Loan Servicing and Foreclosure Abuses

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Photo Attribution: The Philadelphia Inquirer, Dean Rohrer, 2.22.12

Two weeks ago today, the federal government and state attorneys generals for 49 states and the District of Columbia reached a landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses. The agreement will provide substantial financial relief to homeowners and establish significant new homeowner protections for the future. Support for the settlement came from a wide range of organizations. Their statements are below:

 National Association for the Advancement of Colored People (NAACP) President and CEO Benjamin Todd Jealous, February 9, 2012

“This monumental settlement is a strong step towards assisting the millions of current and former homeowners that were exploited, discriminated against and taken advantage of by major mortgage servicing banks. The principal reductions, refinancing and other relief will provide desperately needed relief.  Moreover, the creation of new mortgage servicing standards, including increased notice and documentation requirements during foreclosure and measures to deter community blight will initiate a new and important relationship between borrowers and lenders and help advance the much needed protection of homeowners in the future.”

National Community Reinvestment Coalition (NCRC) President and CEO John Taylor, February 9, 2012

“The settlement recognizes that all homeowners have been damaged by widespread abuses in the servicing of mortgage loans. It will be beneficial to every homeowner who receives relief, but it is not a full reparation of the harm caused to communities and to the economy. While the settlement is not the full dose of medicine this country needs to fix the foreclosure crisis, it is a much-needed treatment. The settlement establishes a foundation for national servicing standards that the Consumer Financial Protection Bureau can build on. Ensuring fair treatment of homeowners, and respect for the laws governing that relationship, is critically important to the future of a functional mortgage lending industry in America. Like many of these deals, the devil here is in the nuances of the legal terms, and the enforcement of the entire agreement. It is significant that only the parties to the agreement are releasing claims, leaving open efforts by individual homeowners and other institutions to seek additional relief on this and other issues. The biggest issue still facing homeowners and the economy is the refusal of Fannie Mae and Freddie Mac to write down principal balances. The mortgage settlement does nothing to address that. And, while the mortgage settlement will compel the lenders involved to make significant principal reductions, it will not reach every borrower who needs one. The government must continue to use every stick and carrot at its disposal to ensure that all homeowners get the relief they deserve. This is a national economic priority.”

National Urban League (NUL) President and CEO Marc Morial and National Council of La Raza (NCLR) President and CEO Janet Murguía, February 9, 2012

“We at the National Urban League and National Council of La Raza celebrate this significant move as one in a series of essential enforcement steps that will restore the public’s faith in our housing system. The closure of these proceedings is incredibly important to healing our families and neighborhoods. The entire nation has felt the burden of the enduring foreclosure crisis. Black and Hispanic homeowners have been especially hard hit. One in four Black and Hispanic borrowers in the U.S. lost homes or are at serious risk of losing their homes, more than half the number of White borrowers. Asian, Black, and Hispanic families were 1.7, 3, and 2.2 (respectively) times as likely as White borrowers to receive subprime loans even after accounting for similar credit profiles. Through foreclosures, our families have battled substantial wealth loss, emotional distress, and an uncertain financial future.  The AG settlement will bring relief to our families, with approximately $17 billion dedicated to principal reductions. Writing down principal has proven to be a win for both borrower and lender alike, especially when compared with the costs of foreclosure, property maintenance, and a sheriff’s sale for pennies on the dollar. However, up until this point, servicers have not made it a priority. This settlement and a recent announcement to increase incentives for principal reductions should compel servicers to help families and clear the logjam on write-downs. We are also confident that rapid uptake of these new resources will soon generate the empirical information needed to convince naysayers that write-downs are vital to stabilizing the market. We are encouraged by the AG settlement and plan to do everything we can to ensure that affected families have access to these new resources. Finding homeowners is no small endeavor, especially finding those who have slipped through the cracks. Outreach will be an enormous undertaking in its own right and National Urban League and National Council of La Raza hope to deploy their housing programs to seek out eligible clients. Despite the challenges, we believe this AG settlement will set families up for success and will bring true accountability and systemic improvement to our housing market.”

 AFL-CIO President Richard Trumka, February 9, 2012

“The Attorneys General settlement announced today is a step towards addressing the housing and foreclosure crisis that plagues our country. The banks broke the law by railroading homeowners through the foreclosure process. Today’s settlement provides compensation for foreclosure victims without requiring individuals to waive their legal claims. The settlement also includes needed principal write-downs so homeowners can stay in their homes. We applaud Attorneys General Eric Schneiderman, Kamala Harris, and others who fought to improve the terms of the settlement.  We also recognize Housing and Urban Development Secretary Shaun Donovan for his hard work. Because of their efforts, these banks have not been released from liability for fraud and other illegal conduct in the creation of mortgage backed securities that were central to the Wall Street financial crisis. Law enforcers can still investigate and prosecute criminal activity against the banks, and pursue broader civil claims for illegal conduct that brought down our housing market. We now look to the work of the federal investigative task force and the state attorneys general to investigate the full range of illegal bank activities that caused this crisis, so we can hold fraudsters accountable for their actions. We urge President Obama to provide the federal investigative task force with the resources necessary to address the $750 billion in negative home equity that is the result of illegal conduct by banks. The 99% demand a fair economy and a judicial system that holds the rich and powerful accountable for their illegal behavior.”

Center for Responsible Lending, February 9, 2012

“The foreclosure settlement announced today will help build a stronger housing market while keeping more people in their homes. But, while a significant step toward fixing the foreclosure crisis, this settlement was never intended or able to provide a comprehensive remedy. Much more work is required. Despite its limitations, the settlement requires real reforms in the mortgage servicing industry to stop sloppy business practices and out-and-out fraud. It also will help stabilize housing markets and property values by giving more homeowners a chance to restructure or refinance out of unaffordable loans that are underwater. The settlement calls for ramping up foreclosure prevention through large-scale use of loan modifications that lower loan balances for struggling homeowners. This approach could become a model for the rest of the market, especially Fannie Mae and Freddie Mac, which control 50% of the market.”

The Leadership Conference on Civil and Human Rights President and CEO Wade Henderson, February 9, 2012

“The Obama Administration and state attorneys general involved in this settlement deserve praise for negotiating a much improved settlement over what had been considered 16 months ago. The civil and human rights coalition recognizes this hard work on behalf of the communities that have been ravaged by these lenders and the fallout from their misdeeds. Today, these homeowners got some promise of principal reduction for their underwater homes and banks must now act with integrity by not obstructing borrowers with the run around of multiple points of contact and cannot foreclose on families that are in the midst of modifying their loans. To be clear, $26 billion doesn’t even come close to matching the monetary value of the damage perpetrated against our communities, but it is a significant step on a long path for advancing justice for these homeowners. We view the outcomes of the President’s interagency working group announced last month as the next vital step on this path. You cannot put a dollar value on the suffering of these families but we can seek progress. And today’s settlement is a step in the right direction.”

National Fair Housing Alliance President and CEO Shanna L. Smith, February 9, 2012

“Today’s settlement between the state attorneys general and five of our nation’s largest mortgage servicers is an important first step toward correcting some of the problems that have led to our current housing crisis. These attorneys general and federal officials have worked diligently to reach an accord that will begin to provide much-needed relief to struggling homeowners. We are pleased to see that banks guilty of civil rights and fair housing violations can and will still be prosecuted for their behavior, and are not being released from liability for such actions. African American and Latino homeowners were disproportionately steered into unsustainable loans, resulting in billions of dollars of lost wealth. Lenders and servicers put excessive profits above the well-being of these families and their communities. It’s only right that banks should begin to repair the damage they have caused. This settlement will not compensate borrowers who have lost their homes unfairly, and we look forward to further efforts to redress the harm they have suffered. The settlement includes a number of provisions that NFHA and other civil rights groups have worked hard to attain. These include the end to dual tracking, a single point of contact for borrowers, principal reduction and special benefits for service members and veterans. These actions and others should be extended to all homeowners, so they can stay in their homes and rebuild our neighborhoods. In particular, we think the time has come for the Federal Housing Finance Agency (FHFA) to allow Fannie Mae and Freddie Mac to offer principal reduction for loans those entities back. That would increase the impact of this settlement and further restore stability for our families, our communities and the nation’s housing market.”

Center for American Progress (CAP) Associate Director for Financial Markets Policy David Min, February 9, 2012

“The $26 billion mortgage servicing settlement announcement brings the hope of long-awaited relief to American homeowners who have borne the brunt of the housing crisis. The agreement provides meaningful financial assistance to struggling homeowners, ensures that banks are not allowed off the hook for other lending and servicing violations, and holds accountable those responsible for protracting the effects of our recent housing crisis.”

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