During his State of the Union Address, President Obama announced the establishment of a Financial Crimes Unit that will consist of federal prosecutors and leading state attorneys general.
The same day, newly appointed Consumer Financial Protection Bureau Director Richard Cordray addressed Congress for the first time, informing the Republican-controlled sub-committees: “We will not hesitate to use enforcement actions to right a wrong.”
Both agencies – the Financial Crimes Unit and the Consumer Financial Protection Bureau’s – are expected to expand federal investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.
Obama appointed New York Attorney General Eric Schneiderman to co-chair the Crimes Unit task force.
Obama also presented a “Homeowner’s Bill of Rights.” The bill that he will send to Congress calls for fee transparency; simplified forms; allows people with a credit score of 580 and whose mortgage is underwater to apply for refinancing; eliminates red tape; and assures no more run-around by the banks.
Obama stressed that this bill will not help those who have acted irresponsibly and is designed for homeowners who have paid their bills on time but are underwater in their mortgage.
A mortgage is considered underwater when the borrower owes more than the home is worth. Homes in this condition are generally impossible to refinance.
Obama acknowledged the irresponsible and sometimes criminal behavior of banks and stated that those that have preyed on homeowners will be prosecuted.
“I am establishing fair rules that are fairly enforced,” he said. “We will hold banks ºaccountable for creating the crisis in the first place, and we are insisting people have to take responsibility for their actions or lack of action.”
The president is already running into resistance from Senate Republicans who have refused to confirm Cordray as Director of the Consumer Financial Protection Bureau. Republicans have opposed the creation of the agency and call Cordray’s appointment illegal.
Until recently, President Obama has not been serious regarding prosecution of banks, placing pressure for months on Attorneys General Kamala Harris and Eric Schneiderman to accept a multi-state deal that amounted to only $25 billion and no criminal prosecution.
Californians for a Fair Settlement and Refund California, two labor and community organizations that have been working with Attorney General Harris, decry that settlement as totally inadequate.
Spokesman John Eller states that $25 billion would not even make homeowners in California whole, much less the nation.
“It would take $200 billion alone in California to address all the underwater borrowers and borrowers now in foreclosure. We are encouraging AG Harris to stand firm in her demand for cross the board principle reduction as the only solution to turning around our economy,” said Eller.