By Lorraine Woellert and David McLaughlin Bloomberg News
WASHINGTON - President Barack Obama said he will create a mortgage crisis unit that includes federal and state officials to investigate wrongdoing by banks related to real estate lending.
The president announced the unit in his State of the Union speech Tuesday after protests by the Campaign for a Fair Settlement, a coalition of labor unions, consumer advocates and political activists including MoveOn.org. The group is calling for a full investigation into bank home lending and the creation and sale of mortgage-backed securities.
“This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in the speech.
New York Attorney General Eric Schneiderman will co-chair the unit along with officials from the Department of Justice, Securities and Exchange Commission and Internal Revenue Service.
For months, state and federal officials have been negotiating with the five largest mortgage servicers -- Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc. -- to settle claims they used so- called robo-signing and faulty documentation to justify foreclosures.
The deal with the banks could be worth as much $25 billion in loan forgiveness, interest rate reductions and other aid for homeowners, said a person familiar with negotiations who declined to be identified because the terms weren’t public.
Representatives of Democratic attorney general offices met at a Chicago hotel Jan. 23 to discuss the negotiated terms and ask questions, said Iowa Attorney General Tom Miller. Miller, who is helping to lead talks, said an agreement with the banks is getting closer.
Schneiderman and California Attorney General Kamala Harris have said any settlement shouldn’t protect banks from claims that haven’t been fully investigated, such as claims stemming from the packaging of mortgages into securities sold to investors.
Obama’s announcement to form a mortgage investigation unit is a “major step in the right direction” in guaranteeing a comprehensive probe of the financial crisis, Schneiderman said in a statement yesterday.
Schneiderman has been participating in the nationwide probe of foreclosure practices. His office also has been conducting a broader investigation into the mortgage operations of major banks.
“In coordination with our federal partners, our office will continue its steadfast commitment to holding those responsible for the economic crisis accountable, providing meaningful relief for homeowners commensurate with the scale of the misconduct, and getting our economy moving again,” Schneiderman said in his statement.
In a statement, the Campaign for a Fair Settlement said a full investigation into banks’ role in the financial crisis will protect taxpayers “by making it much harder for Wall Street CEOs to again act lawlessly in pursuit of profits at the expense of regular Americans.”
State of the Union,
real estate lending,
Securities and Exchange Commission,
Internal Revenue Service