President Obama could mention in the State of the Union address Tuesday new developments in the negotiation between mortgage servicers and government officials, according to two members of Congress.
“There seems to be evidence that he may do something,” said Sen. Sherrod Brown, D-Ohio, in a conference call with reporters Monday, “and we hope ‘the something’ is launching a wider investigation.”
Rep. Brad Miller, D-N.C., said rumors were floating around Washington that the president may even announce the settlement, though he couldn’t confirm that. The White House did not immediately comment. However, a spokesman for Iowa AG Tom Miller, said not to expect a full announcement this week.
In October 2010, evidence surfaced of mortgage servicers, processors and attorneys signing foreclosure affidavits en masse and without a proper review of the loan file as required by law in judicial states. Since those robo-signing allegations surfaced, negotiations to settle the case have labored between the banks, the remaining state attorneys general, the Justice Department and the Department of Housing and Urban Development.
Bank officials have said few if any foreclosures wrongfully took place as a result of the documentation issues. Ally Financial (GJM) CEO Michael Carpenter has been the most vocal, even saying in a recent call with investors that he was willing to fight the government in court if the terms did not match what he believed the violations to be.
The president may be feeling the pressure from his base to make this the wide-scale crackdown on Wall Street that Americans have been calling for since the financial crisis struck in 2007.
Justin Ruben, executive director of the progressive group MoveOn.org, said Monday in a recent survey of previous Obama supporters, 60% said they would be unlikely to help him this November should the settlement become a “sweetheart deal for servicers.”
A meeting is taking place in Chicago Monday between both sides to possibly finalize a deal. HUD Secretary Shaun Donovan said last week that a settlement was imminent.
According to the latest proposal, the deal would involve the five largest servicers, though officials have begun reaching out to smaller firms. It would total nearly $20 billion used for principal reduction and refinancing programs for borrowers in danger of foreclosure with another $5 billion reportedly going to those directly affected by the violations.
Iowa AG Tom Miller’s office has repeatedly said that signing the agreement would not prevent any AG from pursuing criminal actions or even other civil suits such as those involving securities fraud.
But Brown and Miller raised concerns Monday that a proper investigation hasn’t taken place yet and sent a letter to HUD, the DOJ and the White House last week asking for more effective terms. The AGs for New York and California have already split from the negotiations to pursue their own investigations, and the congressmen want to make sure the federal government be just as thorough.
“Has there been a thorough investigation?” Miller asked. “My impression is that there has not been a rigorous investigation.”
Brown said such an investigation should include the Consumer Financial Protection Bureau and its newly appointed director Richard Cordray. As the Ohio AG before 2010, Cordray investigated and brought several lawsuits against servicers.
Concerns also arose over which loans the modifications and principal reductions would apply to. According to recent reports, banks would be given credit for altering loans securitized and sold to investors, which the lawmakers said would hardly penalize the banks. They want the settlement to apply directly to loans held on the bank’s balance sheets.
“This is not vengeance against the banks,” Brown said, “it’s incenting better behavior in the future.”
Write to Jon Prior.
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