Critics of the fraud committed by the nation’s largest banks in the so-called “robo-signing” scandal are calling Thursday’s settlement deal just the first step in achieving justice for wronged U.S. homeowners.
State and federal officials announced the $26 billion settlement over the banks’ fraudulent foreclosure practices which led to wrongful foreclosures nationwide.
U.S. Attorney General Eric Holder led the announcement at a Washington news conference and says the settlement will be a step in “righting the wrongs that led to our nation’s housing-market collapse and economic crisis.”
About 1 million families will see some reduction in their mortgages, while another 750,000 homeowners who were wrongly foreclosed on will receive $2,000 checks, according to the terms of the settlement.
Critics, however, contend the deal lets banks off too easy.
The New Bottom Line, a grassroots organization which is distinct from but shares many of the goals of the nationwide Occupy movement, released a statement which calls the settlement “a tiny drop in a big bucket.”
“It does not do justice for the millions of homeowners who lost their homes or hold the banks fully accountable for their crimes,” the group says. “For homeowners who were defrauded and lost their homes, $2,000 is too little, too late. It is a paltry down payment toward full relief for homeowners.”
Robert Borosage, co-director of the Campaign for America’s Future, a progressive Washington policy shop, agrees.
“The bank settlement of $25 billion over three years from five major banks for robo-signing forgeries is being hailed in Washington and scoured by leading bank critics.
“I’m reminded of Groucho Marx who said upon being invited to join a country club: ‘I wouldn’t want to belong to any club that would have me.’ Similarly, it is hard not to be suspicious of any deal that the banks would sign,” he says. “But the deal should be seen for what it is –- a relatively small ante by the banks handed out before the real cards are seen.
“What’s clear is that the banks trampled the law in their wilding while blowing up the housing bubble. They abused homeowners, committed routine forgery and perjury before the courts, and defrauded investors. The housing market then collapsed, leaving homeowners about $700 billion below water (owing that much more on their mortgages than their houses are worth),” Borosage adds.
There also is agreement that the the fight is not over.
“The Obama Administration needs to make sure that its task force goes the distance and delivers at least $336 billion in principal reduction on underwater mortgages and $50 billion in restitution for affected homeowners,” The New Bottom Line says. “What happens next is critical. This is the President’s chance to show he is a champion for the 99%.”
A number of state attorneys general declined to sign on to Thursday’s settlement, preferring to press for a wider investigation of the banks’ wrongdoing, in which banks had employees, contractors and others not only process large volumes of paperwork, but also complete affidavits without fully verifying the information they were claiming to have knowledge of.
The Obama administration must now be pushed to do more, according to Borosage.
“The deal has been cut before the investigation so it is suspect on its face, but limited in its scope. Whether it will be enforced adequately remains to be seen. How homeowners benefit will differ from state to state,” Borosage says.
“The real question isn’t this ante. The real question is whether the federal investigation will finally turn over all the cards so we know just how bad a hand the banks are holding. Only then is there a possibility for real accountability –- and real relief for homeowners,” he adds. “So this settlement must be the beginning, not the end. We have to sustain pressure on the administration for an aggressive investigation. State criminal and civil suits, individual and investor relief have to continue. We are a far remove from achieving the justice and accountability that are due.”
Scott Nance is the editor and publisher of the news site The Washington Current. He has covered Congress and the federal government for more than a decade.