The Long, Drawn Out Fight Against Foreclosure Fraud

In December 2010, I was part of a national gathering of citizens' groups who met with Iowa Attorney General Tom Miller in Des Moines.  We announced and discussed with him our agenda to push for a just and broad-ranging settlement between the fifty states' Attorneys General, various key federal agencies, and the large banks who had committed fraud in their dealings with homeowners on mortgages and foreclosures.  Miller was the lead AG in the negotiations, and he was talking tough at our gathering.  At that time, we were hopeful for a settlement in the next six months.

During the ensuing months, NC leaders met twice with NC Attorney General and his staff to discuss progress and emphasize the need for justice for homeowners.  We continued to hope there would be a resolution in the near future.

That six months passed.  Then in July 2011, I joined another group of leaders in Chicago at the meeting of the National Association of Attorneys General, where outgoing president of the group, NC AG Roy Cooper, presided.  We had conversations with various AGs and their staff, capping off our visit with a face-to-face meeting with four of the state AGs:  Cooper of NC, Miller of Iowa, Lisa Madigan of Illinois, and George Jepsen of Connecticut.  We came away from the meeting encouraged that our allies were continuing to fight, but discouraged that the final agreement remained elusive.  Hopes for a large fine to create a fund to assist homeowners were diminishing, with the figure $20 billion circulating widely (compared to the $700 billion bailout received by the banks).

Some state AGs threatened to pull out of the negotiations, frustrated over the compromises being forced by other state AGs, who were taking sides with the banks.  These compromises would gut their efforts for justice and leave citizens, municipalities, pension funds, and homeowners high and dry with no recourse.  Soon the California and New York AGs did withdraw from the negotiations.  Miller's reports to the public seemed to predict limited settlements that would let the banks off the hook.  The delays favored the banks, who continued to make large profits, pay out large bonuses, and foreclose on the little people, homeowners and the unemployed, who have no cash reserves to endure a prolonged battle.  News in the fall and winter showed little progress.

The Occupy Wall Street movement and its many sibling Occupy movements raised hopes.  Their agenda, as a mass movement, was less focused than our organizing had been.  However, they had similar concerns about big banks, the failed bailouts, people losing their homes, and an economy that serves only the elite 1%.  "We are the 99%" is a powerful cry of defiance.  I suspect that this movement played a part in building pressure on the state AGs to stand more firmly with the people suffering rather than with the banks stonewalling.

In part because of some organizing around foreclosure fraud in January, President Obama responded in the State of the Union Address that he had directed AG Holder to intensify his efforts on the foreclosure fraud issue, creating an office focused on bringing these negotiations to completion.  He then announced revisions in the HAMP program which would make unspent funds available to a larger range of homeowners.  He further changed the existing programs to bring Fannie Mae and Freddy Mac mortgages into eligibility for assistance.  So the end of January offered portents that change might be coming.

So I rejoiced to read the news this week that there are signs of progress toward a better settlement than had previously been intimated.  The fine paid by the banks will likely be larger than expected, even if still only around $25 billion.  The question of whether banks will be immune to further lawsuits seems to be shifting toward allowing homeowners, mortgage-based security buyers, and other interested parties the right to sue for damages.  This means that city, state, and private pension funds who were enticed into purchasing investments that were hiding toxic assets will have recourse to recover losses.  This could mean good news for so many people whose retirement savings were set back dramatically by the recent crash.

Keep watching for news that this drawn-out battle will end soon.  It's about time for justice.

Attorneys General Must Get Tough on Foreclosure Fraud

NAAG is the National Association of Attorneys General.  AGs from the fifty states and the various other jurisdictions such as territories, districts, etc., gather periodically to cooperate in how to manage common issues and work together on multi-state problems.  Some of the cooperative work they have done includes the Tobacco Settlement and the current Foreclosure Fraud Investigation.

Through North Carolina United Power, I have been participating with a working group of national organizations who are in conversation with the AGs about the Foreclosure Fraud Investigation.  Recently, we took a group to Chicago to meet with some of them about their work to protect homeowners and keep families in their homes.  I was interviewed by the local CBS radio affiliate in the hours before our meeting.

Among the key items of our agenda are:

• broad availability of principal reductions to reset the housing market and remove the risk of more foreclosures;
• remedies for all who have been harmed by fraud other criminal acts, whether they have already suffered foreclosure, are in process, or are facing impending foreclosure;
• the end of dual tracking, with simultaneous loan modification discussions and foreclosure procedures;
• all possible efforts for loan modifications and other non-foreclosure procedures should precede the initiation of foreclosure procedures;
• criminal prosecutions for criminal acts; and
• regulatory regimes to keep this kind of mortgage fraud from being repeated.

We were able to meet with four of the state Attorneys General:  Lisa Madigan of Illinois, Tom Miller of Iowa (the leader of the task force working on the foreclosure fraud investigation), Roy Cooper of North Carolina (President of NAAG who pushed the foreclosure fraud investigation forward), and George Jepsen of Connecticut (newly elected).  Our conversation was formal, perhaps overly so.  We discussed our agenda, they discussed their records, and then we exchanged questions and vague answers.  The time was short:  only 30 minutes.  There was very little new that came out of the meeting, but do not assume that I am saying it was not worthwhile.  Let me clarify why this was such an important meeting.

In organizing, we plan an action to get a reaction.  When we get our reaction, then we evaluate what we have learned and begin to plan future research and actions in light of it.  Our action in Chicago revealed a number of important things about our work on to change the conditions faced by so many families being hit by foreclosures.

This action showed something to our organizing groups, to the four AGs present in our meeting, to the many other AGs at the hotel but not at our meeting, and to the press and their readers.  To us, it showed that we have the power to bring the key law enforcement figures in the foreclosure negotiations to the table, even if we and they know they cannot negotiate publicly with us about potential criminal proceedings against banks.  Not only do they meet with bankers.  They also meet with us.

To the AGs present, we were able to deliver a multiracial, multiethnic, knowledgable, prepared, faith-based and non-faith-based, nationwide constituency to speak intelligently and passionately about this critical work they are doing.  They found us to be what we said, representatives of hundreds of thousands of citizens, thousands of churches and synagogues and mosques, and from states all across the nation.

To the AGs not present, we made it publicly clear that their colleagues who are leading in this foreclosure investigation are willing to meet with us.  Miller, Cooper, Madigan, and Jepsen will meet with us not only in their private chambers back home but in a public forum where they can express, even with the press in the room, their strong agreement with our agenda.  They were very adamant that they would not settle for an agreement that did not fundamentally change the practices of mortgage lending and foreclosure.  They believe the result must benefit homeowners and borrowers, not primarily get lenders off the hook.

To the press and their readers (including bankers) we were able to show that the case for principle reduction remains strong, with a powerful constituency.  Among the key items reported was the commitment to take banks to court if the negotiations do not bring fundamental change.  These AG negotiators  have not given up on a strong settlement and will not accept a weak settlement.  Our action got broad coverage in newspapers and in banking industry news sources.

The investigation and negotiation of a settlement could come very soon.  Or it could drag on through the summer.  Sooner is better, and we are expecting to see a court decree with tools to provide real help to homeowners.