The real estate market has been dominated by the ugly specter of mortgage fraud from some of the biggest names in the financial industry – companies like Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup. These lenders, according to a coalition of 50 state attorney-generals, were either incompetent or unethical enough to engage in questionable foreclosure practices that resulted in the loss of thousands of homes all across the country without proper procedure being followed.
Now, the latest development in the year-long foreclosure settlement negotiations between the state governments, the federal government, and five of the biggest lenders in the country has raised a burning question for many: Whose side is the federal government on anyway?
In case you haven’t heard, New York’s Attorney General Eric Schneiderman was recently kicked off the committee that is tasked with coming up with some kind of agreeable settlement between the states and the five major lenders (the four above plus Ally Financial) that would resolve the litany of fraudulent and questionable foreclosure practices currently under investigation.
Schneiderman has no love for the banks in this case. He, along with several other state AGs, has repeatedly questioned the banks and launched detailed investigations into how these lenders profited off of years of shady and underhanded processes – like robo-signing, a practice by which banks foreclosed on properties without even reading the documentation in many cases.
He has been such a vocal critic of the ongoing settlement talks that some of his fellow AGs, including Iowa’s Tom Miller, have accused him of “undermining” the talks. Others, including the AGs from Massachusetts, Nevada, and Delaware, beg to differ, agreeing with Schneiderman that the federal government should not allow a settlement that basically grants blanket immunity to the lenders from any subsequent state lawsuits.
This leads us to wonder: Is the federal government attempting to silence a vocal critic of the settlement, whose opposition to moving forward and granting the banks the liability release they desperately want has stalled the negotiations? Or is the government merely attempting to remove a source of discord that is unjustly preventing progress from being made?
To me, it is clear that the federal government wants a settlement at all costs. The Obama administration does want to punish the banks for their irresponsibility, but also wants to quickly arrive at a solution that could help move the real estate market forward. Schneiderman and others who agree with him believe giving into the banks at this juncture is irresponsible in and of itself, and will do little to not only punish the lenders, but ensure that future actions like the inexcusable scandals over the past few years aren’t repeated.
An agreement needs to be reached – the foreclosure process has become hopelessly mired in the muck without one. But to me and others, an agreement should not come at the expense of Americans who need protection from the big banking corporations that have demonstrated a failure to act responsibly, legally, and ethically.
The removal of Schneiderman shows that the federal government is apparently on the side of the banks for now.
