Not everyone is cheering the foreclosure abuse settlement reached today with five of the nation's biggest banks. Activists say the suit does too little to stem the continued financial hemorrhage of the housing market and leaves most affected homeowners behind.
“For millions of Americans who lost their homes to foreclosure, for those who had to fight foreclosure actions and lost, and for those who are still struggling to pay their mortgage thanks to the illegal and immoral behavior of mortgage servicers, this settlement is only the first step toward holding the wrong-doers accountable,” said Rep. Dennis Kucinich in a statement released Thursday. “$26 billion is lot of money, but sadly it is not enough to compensate those millions of Americans for what they have endured. And for banks who regularly report profits in the billions, this penalty is just a cost of doing business.”
Under the $26 billion final settlement, five servicers – Bank of America, JP Morgan Chase, Citigroup, Ally Financial and Wells Fargo – will pay up for mortgage relief to one million homeowners and refinance borrowers into loans with lower interest rates.
The decision came after California and New York held out for a harsher settlement, but it has nonetheless been celebrated as a success.
“Today with the help of Democratic and Republican attorney generals from nearly every state in the country, we are about to take a major step of our own. We have reached a landmark settlement with the nation's largest banks that will speed relief to the hardest hit homeowners and some of the most abusive practices of the mortgage industry, and begin to turn the page on an era of recklessness that has left so much damage in its wake,” said President Barack Obama in a public statement.
So, where did it go wrong in the eyes of advocates?
Firstly, said Gordon Whitman, policy director at the Pacific Institute for Community Organizing (PICO) National Network and organizer with The Bottom Line, it will only help a handful of homeowners. Of the estimated four million Americans that have been foreclosed on since 2007 only one or two million will qualify for monetary reimbursement, which will be between $1,800 to $2,000.
Whitman and the PICO National Network, along with National People's Action, are part of The New Bottom Line, a coalition of community groups that have come out to say that the settlement reached Tuesday is not adequate.
“The payments to families who have lost their homes will be perceived by many people as a slap in the face,” said Whitman.
Secondly, of the $26 billion, only $1.5 will be put toward the cash penalties for homeowners.
“We've now set a price for forgeries and fabricating documents. It's $2000 per loan,” writes Yves Smith in Naked Capitalism.
“If you look at the … dollars in principal reduction, it's just a drop in the bucket,” said Whitman, of the $17 billion put toward reductions. “This is not enough money and it is not big enough.”
In addition, Smith predicts that most of the principal loan reductions “almost assuredly will come largely from mortgages owned by investors,” again bypassing individual homeowners.
And, then, there are the housing market issues upon which that the settlement does not touch,
The enforcement of the settlement “is a joke,” writes Smith, as “the first layer of supervision is the banks reporting on themselves.” It also fails to consider servicer errors in bankruptcy-related filings, servicer driver foreclosures and inflated charges, he notes.
Despite the disappointments, says Whitman, the settlement would have been even weaker had it not been for attorneys general pushing for a more thorough suit and the work of public pressure on the ground.
“It's really the first round of this fight. It's a significant breakthrough that four years into this crisis, for the first time, we are talking about principal reduction and getting debt off the shoulders of American families,” said Whitman. “From our perspective, that is the main thing. It took a lot of grassroots pressure and the work of attorney generals like Kamala Harris to even demand that principal reduction be central in any settlement.”
“The way forward is much more pressure and investigation and pressure on the big banks,” he continued, which “opens the pathway to get upwards of $300 billion in debt relief for American taxpayers. Wall Street wants to make this problem go away, but it won't go away.”
Until then, writes Smith, there is a lesson to be taken away from the settlement: “This settlement is yet another raw demonstration of who wields power in America, and it isn't you and me. It's bad enough to see these negotiations come to their predictable, sorry outcome. It adds insult to injury to see some try to depict it as a win for long suffering, still abused homeowners.”
Truthout Is Preparing to Meet Trump’s Agenda With Resistance at Every Turn
Dear Truthout Community,
If you feel rage, despondency, confusion and deep fear today, you are not alone. We’re feeling it too. We are heartsick. Facing down Trump’s fascist agenda, we are desperately worried about the most vulnerable people among us, including our loved ones and everyone in the Truthout community, and our minds are racing a million miles a minute to try to map out all that needs to be done.
We must give ourselves space to grieve and feel our fear, feel our rage, and keep in the forefront of our mind the stark truth that millions of real human lives are on the line. And simultaneously, we’ve got to get to work, take stock of our resources, and prepare to throw ourselves full force into the movement.
Journalism is a linchpin of that movement. Even as we are reeling, we’re summoning up all the energy we can to face down what’s coming, because we know that one of the sharpest weapons against fascism is publishing the truth.
There are many terrifying planks to the Trump agenda, and we plan to devote ourselves to reporting thoroughly on each one and, crucially, covering the movements resisting them. We also recognize that Trump is a dire threat to journalism itself, and that we must take this seriously from the outset.
Last week, the four of us sat down to have some hard but necessary conversations about Truthout under a Trump presidency. How would we defend our publication from an avalanche of far right lawsuits that seek to bankrupt us? How would we keep our reporters safe if they need to cover outbreaks of political violence, or if they are targeted by authorities? How will we urgently produce the practical analysis, tools and movement coverage that you need right now — breaking through our normal routines to meet a terrifying moment in ways that best serve you?
It will be a tough, scary four years to produce social justice-driven journalism. We need to deliver news, strategy, liberatory ideas, tools and movement-sparking solutions with a force that we never have had to before. And at the same time, we desperately need to protect our ability to do so.
We know this is such a painful moment and donations may understandably be the last thing on your mind. But we must ask for your support, which is needed in a new and urgent way.
We promise we will kick into an even higher gear to give you truthful news that cuts against the disinformation and vitriol and hate and violence. We promise to publish analyses that will serve the needs of the movements we all rely on to survive the next four years, and even build for the future. We promise to be responsive, to recognize you as members of our community with a vital stake and voice in this work.
Please dig deep if you can, but a donation of any amount will be a truly meaningful and tangible action in this cataclysmic historical moment.
We’re with you. Let’s do all we can to move forward together.
With love, rage, and solidarity,
Maya, Negin, Saima, and Ziggy