Several big banks have negotiated large settlements with the Department of Justice for their role in the housing bubble and subsequent economic collapse.
While the historic settlements sound promising on the surface, a study by Denbeaux & Denbeaux law firm exposes why struggling homeowners shouldn’t hold their breath waiting for relief.
The report, “Mortgage Fraud” finds that:
New Jersey homeowners subject to the first Agreement made by the Attorneys General were not apprised or made aware by Wells Fargo that they already had the protections and the right to the promised modifications that were contained in the California Class Action Settlement. Instead, these homeowners were sent the “new” settlement agreement which contained promises and protections they already had (not explained) and a check in the amount of $178.04 in exchange for all their rights and defenses.
The report also claims that Wells Fargo has perpetrated a seemingly endless cycle of misleading, deceptive and exploitative practices in response to its misleading, deceptive and exploitative practices. Not only did Wells Fargo and its predecessors:
- issue the predatory and misleading loans;
- settle with multiple States’ Attorneys’ General without requiring homeowners to waive any rights to entice the Attorneys’ General to drop their actions;
- subsequently enter into the California Class Action Agreement which offered no further modification benefits to the class members but violated the original agreements by enforcing a waiver of all legal rights by class members;
- move aggressively forward with foreclosures and insist that class members could not defend against these suits because any right to defend their homes had been waived; but now Wells Fargo has been found to have:
- violated the California Class Action Agreement
“It’s all about enforcement by the states, and truthfully, New Jersey’s Attorney-General hasn’t made homeowners a priority,” said Josh Denbeaux, a partner in the firm. “Wells Fargo was allowed to revoke the terms of the original settlement for homeowners in New Jersey by brokering another deal where homeowners surrendered their rights to legal action in exchange for $178.04.”
Anti-foreclosure and housing advocates rightly point out that out of court settlements protect banks from exposing their predatory lending practices through evidence discovery in courts, which is why NJ Communities United is issuing a series of policy recommendations that the State of New Jersey should consider to provide relief for homeowners victimized by predatory lending and questionable foreclosure practices.
"The result of the legal acrobatics and out-of-court settlements has essentially let Wells Fargo and other big banks off the hook for their predatory lending practices in low-income communities of color,” said Trina Scordo, executive director of NJ Communities United. “Wells Fargo preyed on these communities then negotiated away the rights of homeowners to take legal action. Homeowners deserve their day in court – or at the very least, enforcement from the Office of the New Jersey Attorney General.”
The crisis is not lost on leaders in hard-hit Newark.
“As Newark’s Chief Executive, tackling the mortgage crisis is one of the highest priorities of my administration,” said Mayor Ras Baraka of Newark. “Not only is this problem creating undue hardships on too many Newark families, but abandoned homes due to foreclosure are decimating our neighborhoods and draining critical resources from the City’s budget. At the end of the day, the Wells Fargo settlements have not provided any real relief for struggling homeowners in New Jersey. In fact, it appears that the settlements – and lack of enforcement by the New Jersey Attorney General – have only paved an unimpeded path towards foreclosure for thousands of New Jersey homeowners.”
“I’m not hopeful that future bank settlements will provide any relief to homeowners,” said Trina Scordo. “This Wells Fargo case study exposes the legal maneuvering by banks to keep their crimes hidden while continuing to strip communities of their wealth. This is why we’re issuing policy recommendations to the Governor’s Office, the NJ Attorney General and the NJ State Legislature."