Rep. Johnson on mortagage settlements: Fraudulent corporations must be held accountable & help millions of consumers they harmed
Today, Ranking Member Rep. Hank Johnson (GA-04) issued the following statement for a House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law hearing on consumer protection and mortgage lending settlements:
Built on the back of predatory loans, toxic mortgage securitization, and regulatory failure, the mortgage-foreclosure crisis has blighted entire cities across the country while destabilizing the home market and countless other industries.
But the effects of foreclosures go far beyond simple economics.
Since the start of the Great Recession, foreclosures have sent shockwaves throughout entire communities, taking children out of schools, pulling families and friends apart, undermining religious congregations, and creating other forms of social instability.
Although recent data indicates that the foreclosure-filing rate is dropping to its lowest level since 2006, these positive figures do not capture the continued hardship of low-income and minority and households, which lag far behind national homeownership rates. Andrea Levere, the president of the Corporation for Enterprise Development, notes that this trend threatens “to exclude an increasing percentage of Americans from our mainstream financial systems.”
We can’t allow this to happen.
It is therefore incumbent on the federal government to not only hold fraudulent corporations accountable, but to also require that they meaningfully help the millions of consumers they harmed.
Today’s hearing concerns settlement agreements between the Justice Department and JPMorgan, Citigroup, and Bank of America—companies that each admitted to fraudulently packaging, marketing, and selling residential-mortgage back securities, even where the banks knew the loans were defective.
These settlements amply demonstrate the fraud that pervaded every level of the securities industry, fraud that substantially contributed to the mortgage-foreclosure crisis and recession.
In addition to significant civil penalties, each of these agreements contains consumer-relief provisions designed to provide much-needed relief to millions of Americans affected by the fraudulent sale of toxic securities. These provisions of the agreement require the banks to provide billions in first-lien principal forgiveness to help families who are underwater on a mortgage to stay in their homes.
When homeowners fall behind in their mortgage payments, it is often a major task to bring them current. For that reason alone, mortgage modifications—such as those under the settlement agreements—are a standard tool to bring homeowners in good standing with their home loan and stop the foreclosure process.
Educating and assisting consumers is also a critical tool in foreclosure prevention. The Department of Housing and Urban Development (HUD) has documented that if a consumer works with a HUD-approved housing counseling agency, the odds of a favorable outcome are almost two-times greater.
Two of the Justice Department’s settlements also require the settling banks to donate funds toward neighborhood reinvestment activities, which include donations to HUD-approved Housing Counseling Agencies, state-based Interest on Lawyer Trust Accounts organizations, and Community Development Financial Institutions.
Housing counseling agencies offer a critical education component to helping consumers avoid default and foreclosure by identifying the documents the mortgage company needs from the homeowner and contacting the mortgage company on the homeowner’s behalf.
As we search for ways to avoid another mortgage crisis while repairing the incalculable damage that has already occurred, it is essential that we use every tool to keep families in their homes.
Although I wish that the Justice Department’s settlements had required more of the banks that contributed directly to the plight of so many, I am confident that these agreements will do much to help millions of consumers across the country.
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