A groups of state attorneys general have been attempting to negotiate a settlement with the nation’s biggest banks over the foreclosure fraud scandal that erupted several months ago. Reportedly, the settlement will involve the banks paying billions in penalties, at least some of which will go towards helping troubled homeowners who are underwater on their mortgages through no fault of their own.
However, several Republican AGs have balked at requiring the banks to aid homeowners, with one, Virginia Attorney General Ken Cuccinelli, deriding such help as “welfare.” And now, House Financial Services Chairman Spencer Bachus (R-AL) is piling on:
Federal regulators are trying to prevent future fraud by clamping down on the nation’s largest mortgage servicers that engaged in some shady practices during the housing crisis, but the legal action by the states could yield significant financial penalties of more than $20 billion, according to some reports.
Bachus suggested that the money go toward paying down the national debt instead of forcing companies to reduce the amount some homeowners owe on their mortgages.
Bachus — who is of the opinion that Washington’s role is to “serve the banks” — has opposed the very idea of a foreclosure fraud settlement, so its not surprising that he would oppose using the money to aid troubled homeowners. But at the moment, more than 20 percent of the homes in America are underwater, and housing is proving to be a substantial drag on the economy.
At the current rate, it would take 103 months to “sell off all the foreclosed homes in banks’ possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales.” That’s eight and a half years of backlog. Wall Street is also not maintaining the properties it owns, further dragging down the value of homes. More foreclosures and empty houses will do nothing to help the situation.
This week, President Obama hinted that the administration is planning to pressure banks into implementing additional aid for homeowners. Having the foreclosure fraud settlement provide substantial aid for homeowners would be an excellent development, but Republicans at both the state and federal level seem to be doing their best to prevent such an outcome.