Thirty-one of the thirty-four House Democrats in California, including Speaker Nancy Pelosi, have released a letter to Eric Holder, Ben Bernanke and John Dugan of the Office of the Comptroller of the Currency, calling for investigations for “violations of law or regulations” by the nation’s top financial institutions, with respect to the mortgage and foreclosure crisis. California has one of the nation’s hardest-hit housing markets.
Crucially, the letter links the violations by lenders in dealing with mortgage modifications and foreclosures, painting a picture of an industry unwilling to take a smaller profit on their homes and unable to operate in a scrupulous way in foreclosing on homes, resorting to document forgery and outright fraud. And the California Democrats aren’t just armed with a letter, but a series of case studies from their constituents, showing problems with untimely and inconsistent communication from lenders to borrowers, misrepresentation of trial modifications and other bad faith dealings by the banks. The 20-page document is a treasure trove of stories not unlike my portrait of HAMP failure, showing the banks screwing with their customers repeatedly. I’ll just reprint one, but I urge you to peruse the whole thing, because it gives the proper impression of a systemic failure:
After losing their son in lraq, constituents were faced with the possible foreclosure of their home. They reached out to NACA to assist them in modiffing their loan with Bank of America. NACA informed them that BOA stated they could not assist the borrowers because the borrowers were current on their payments. BOA then began to threaten the constituents with foreclosure if the bank did not receive 4 months of payments it claimed were not paid. Constituents have proof that they sent the payments and stated they were making their payments in full and on time. Constituents said BOA was holding onto the payments and not depositing them until the end of the month. Freddie Mac, which owned the loan, spoke with the homeowners in an attempt to resolve the problems.
It just goes on like that for 20 pages. This is some amazing work by the California House Dems.
As I mentioned, the entire delegation signed on to this letter, organized by Zoe Lofgren, except for three: Dennis Cardoza, Brad Sherman and Susan Davis. Cardoza has his own legislation and has done a tremendous amount of work on the foreclosure crisis, so perhaps he just wanted to keep separate. I have no idea on Sherman and Davis. But the entire rest of the delegation climbed aboard, and that includes the House Speaker, Chairs of the Energy and Commerce, Education and Labor, Foreign Affairs and Veterans Committees; co-chair of the Congressional Progressive Caucus and the head of the Congressional Black Caucus, along with at least five Blue Dog Democrats and several New Democrats. A broad cross-section of House Democrats, in terms of influence and ideology, in other words, want to see criminal investigations into the mortgage industry.
The only thing I take issue with here is that Congress blames this entirely on the banks and not the design of the foreclosure mitigation system from the Treasury Department. It’s true that Congress had little say over that design, however, and their reams of documentation on the struggles of their constituents should make it painfully clear that a better way is needed here.
UPDATE: I should add that California is not a state which requires judicial sign-off for foreclosures, and as a result the evictions are expected to continue unabated. All the more reason why it’s important for the California House Dems to speak out like this.
The letter is on the flip.
Dear Attorney General Holder, Chairman Bernanke and Comptroller Dugan,
As members of the California Democratic Congressional Delegation, we urge you and your respective agencies to investigate possible violations of law or regulations by financial institutions in their handling of delinquent mortgages, mortgage modifications, an foreclosures.
Over the last few years, thousands of our constituents have reported that many financial institutions, despite good faith efforts on the part of most homeowners to work out reasonable loan modifications or simply seek forbearance of foreclosute, routinely fail to respond in a timely manner, misplace requested documents, and send mixed signals about the requirements that need to be met to avoid foreclosures. We are particularly perplexed by this apparent pattern in light of the many incentives Congress and the Obama Administration have offered to servicers and lenders to avoid foreclosures where financially viable, including subsidies and loan guarantees from taxpayers. Avoidable foreclosures end up being unnecessarily costly for homeowners, lenders and servicers, and our housing market, whose health is essential to our economic recovery.
The apparent pattern reported by our constituents leads us to conclude that their problems are not just personal anecdotes anymore. Recent reports that Ally Financial (formerly GMAC), JPMorgan, and Bank of America may have approved thousands of unwarranted foreclosures only amplify our concerns that $tstemic problems exist in the ways many financial institutions have dealt with homeowners who are seeking to avoid foreclosures.
We are now in the third year of the worst housing crisis we have seen in decades. Far too many families in California, and across the country, continue to lose their homes. While Congress and the Obama Administration have taken steps to help mitigate the housing problem, this devastation has persisted and, infact,worsened as the country’s unemployment rate increased.
We have heard numerous stories of financial institutions being uncooperative at best or misleading and acting in bad faith at worst. These heartbreaking stories are commonplace, persisting across the state and across lenders and servicers. As you can see from the attached document, which highlights examples of casework throughout California, it appears that banks have repeatedly misled and obstructed homeowners from receiving the help Congress and the Administration have sought to provide.
The excuses we have heard from financial institutions are simply not credible three years into this crisis. People in our districts are hurting. We have tried to help them in the face of the many challenges they have faced in their dealings with financial institutions. It is time that banks are held accountable for their practices that have left too many homeowners without real help.