I mentioned yesterday the importance of Attorney General campaigns across the country in the foreclosure fraud scandal. This can be seen in the fact that when the banks finally decide to negotiate with someone about their liability, they go to the state AGs.
A 50-state task force investigating U.S. foreclosure practices may meet with lenders as early as this week, less than a month after JPMorgan Chase & Co. and Bank of America Corp. suspended some home seizures.
“We’ve had several conference calls with major lenders,” Colorado Attorney General John Suthers said in an interview, declining to specify which ones. “The banks want to sit down with the attorneys general. These meetings are being set up,” said Suthers, whose office is a member of the executive committee of the task force.
It’s very encouraging to see this development, and also the fact that the AGs quoted in the article, Democratic and Republican, say that violating state law with improper foreclosure documents is a crime, and that the states need to force mass loan modifications at a minimum to remedy the situation. Republican Rob McKenna in Washington said “Loan modifications may be a significant part of the solution. If you keep homes out of foreclosure, they don’t depress real estate values,” and he specifically cited the Countrywide settlement, where borrowers got loan modifications, as a model. That’s solid. But McKenna also telegraphed that he doesn’t want to litigate. Bill McCollum, the Republican in Florida, hasn’t sent out the subpoenas to the banks he promised to send, and he said confidently that Bank of America and JP Morgan are “well on their way” to fixing their foreclosure problems.
By contrast, Ohio Attorney General Richard Cordray (D) just filed an amicus brief in a case asking the court to vacate a foreclosure because of fraudulent documents. In Maine, Karen Mills (D) is considering joining a class action lawsuit filed by homeowners against GMAC mortgage alleging fraud, or whether to bring her own suit. There’s a difference between the parties on this, despite the pose of unanimity.
I had the opportunity to speak with Kamala Harris, the San Francisco District Attorney and the nominee for Attorney General in California. She is in a toss-up race with LA District Attorney Steve Cooley, the Republican. Recently, an outside attack group funded by multinational corporations swooped in with a million dollars in ads against Harris in the closing days (a much smaller ad buy has come in on her behalf). Clearly, big business has put a target on her back. “If you look at the facts, there’s a belief that Cooley will be a firewall for tobacco, oil and insurance companies,” Harris said. “And the truth hurts.”
On the day I spoke with her, Harris released a detailed Homeowner Relief and Protection Plan, which would include new anti-predatory lending laws carried into the legislature, including a mandate for foreclosure prevention counseling at the outset for prospective homebuyers. In addition, Harris would create a “strike force” to expand the investigation of fraudulent foreclosures, and appoint a “Foreclosure Oversight Czar” that would force quarterly audits on mortgage lenders to ensure compliance with state consumer protection laws. The oversight official could refer offenders for criminal prosecution. Finally, Harris would implement “homeowner repair assistance” to get credit histories repaired on borrowers who were foreclosed on illegally (this in some cases prevents families from even renting), in addition to financial restitution. Outside of making California a judicial foreclosure state, this is about as tough as you can get with the industry.
Harris has a mortgage fraud office in San Francisco, which won a competitive grant of $1 million dollars from the Justice Department to expand it. She connected strongly on the moral dimensions of the issue. “The victims are these people doing everything they were supposed to do to realize the American dream,” she said. “These are hardworking people who followed the rules, were paying their taxes and bills on time, and then they find themselves out of work, and the predators come in. They stripped these folks of their remaining assets and all of their dignity. And it’s been going without consequence.”
“The damage to families and individuals is profound,” she continued. “It’s well documented that when people lose their home, this is the largest investment that most people make. It represents their future, in many cases their retirement. The roof is collapsing on folks. The issue goes beyond the commission of a crime, but what it does to demoralize a community. It includes the effect on children in school, the effect on marriages. So it’s a very big issue. And it’s something that has to be addressed.”
Harris’ concern for the moral components of mortgage and foreclosure fraud would have an impact on how she views the targeting of the crime and ultimately the solutions. She noted, “the general functions of the (Attorney General’s) office don’t drastically change, but the priorities change. This has been a priority for me and would continue to be.” She was familiar with the 50-state investigation and the issue of improper mortgage assignments confusing the issue of who owns a mortgage note. “You talk to the community folks, this is often the case. It is not clear who owns it.”
Harris has never heard her opponent, Steve Cooley, address this issue. He has been more concerned with public safety matters in his public statements (I reached out to the Cooley campaign for comment and never heard back). Harris said that she created a number of areas of focus on her DA’s office in addition to the basic functions, like the mortgage fraud unit. She believes this is a point of contrast; for instance, Cooley shut down the environmental justice unit in Los Angeles when he came in. Giving priority to these kinds of crimes, she argues, increases reporting because of the expectation that something will be done, it increases compliance, and it gives a sense of emphasis to a community that doesn’t always feel that from their government.
“There are certain components of the work with its own set of skills, its own set of pathologies, it’s own set of symptoms. It sends a signal to those victims of how important they may be to the system. When I go into the community and talk with those potential victims, I say, you matter. What has happened to you matters. It’s very significant, especially with crimes that hit voiceless people. The victim is isolated and now they feel empowered because you’ve reached them, and you’ve said to them you matter and this is the number you call, here’s what you do about it.”