Housing, labor, and civil rights advocates and elected officials are generally giving a thumbs up to the accord reached last week between 49 state attorneys general and banks involved in the mortgage crisis. The agreement was announced by President Obama and Attorney General Holder.
The $26 billion settlement is seen as a modest step forward.
We agree. Some progress in settling accounts with the tens of millions of homeowners who lost property and wealth as a result of the mortgage ripoff is better than none at all.
The percentage of those who will be actually helped and the initial payouts, however, are quite small: approximately $2,000 each to those who lost their homes, and some $20,000 to owners whose mortgages are “under water,” meaning they owe more than their homes are worth. The average owed for underwater homes is $60,000.
Clearly these paltry amounts will not address the huge losses sustained by working class homeowners from predatory lending. Nor will it help pull the country out of the ongoing economic crisis, much of which is due to the slump in the housing market.
Another downside is that the agreement does not include mortgages held by Fannie Mae and Freddie Mac.
The payments’ real value is more political than monetary. Consider it a small precedent -setting down payment on what is sure to be a long and protracted struggle against the banks.
In this sense, it is more than what many feared would be a mere slap on finance capital’s wrists.
The agreement came after the President’s State of the Union speech in which he announced the creation of a federal task force, headed by New York Attorney General Eric Schneiderman, which will investigate and prosecute bank mortgage fraud.
Schneiderman recently pointed out that the settlement involves banks’ activities after the 2007 crisis and not actions that led up to the crisis, leaving wide room for ongoing investigatory efforts. “The multistate talks all relate to post-crash conduct. These are abuses in the foreclosure process,” he said. “Our working group is focusing on the conduct related to the pooling and creation of mortgage-backed securities … the conduct that created the crash, not the abuses that happened after the fact.”
Prior to last week’s deal, Schneiderman, along with California Attorney General Kamala D. Harris, had held the pending agreement at arm’s length. The new task force clearly influenced their decision to accept the terms.
In addition, the agreement importantly does not prevent both states and individuals from pursuing claims. AFL-CIO leader Richard Trumka said, ” 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.”
Rebuild the Dream’s Van Jones said, “Because this settlement limits legal immunity for banks, this deal does not automatically let the banks off the hook for all of their wrong-doing. Except for a few issues like robo-signing, state attorneys general can still fight for more compensation and relief for the banks’ victims.”
The NAACP concurred, giving the deal its seal of approval. The organization’s head, Ben Jealous, said, “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.”
Given that a large percentage of the state attorneys general are from GOP-led states, and that the agreement was reached at the beginning of the election season, it is significant that any deal was reached at all.
Clearly, widespread public disgust and anger organized in ongoing petition drives, campaigns, sit-ins, and the Occupy Wall Street movement is what forced an agreement.
These protests must continue. Black and Latino homeowners experienced the largest wealth loss in our country’s history. Senior citizens were unfairly targeted. Hundreds of billions are still owed and the balance must be paid. The struggle continues.
Photo: President Obama speaks about a mortgage settlement in Washington on Feb. 9. Susan Walsh/AP