Washington, DC—(ENEWSPF)—February 9, 2012. Good morning. I’m pleased to join with Secretary Shaun Donovan; Attorney General for the State of Iowa, Tom Miller; Associate Attorney General, Tom Perrelli; HUD Inspector General, David Montoya; and Attorney General for the State of Colorado, John Suthers – to announce our latest step forward in righting the wrongs that led to our nation’s housing-market collapse and economic crisis.
Today, the Departments of Justice and Housing and Urban Development – along with 49 state attorneys general and other federal agencies – have reached a landmark $25 billion agreement with the nation’s five largest mortgage servicers: Bank of America, JPMorgan Chase & Co., Wells Fargo & Company, Citibank, and Ally Financial, which was formerly GMAC.
This agreement reflects our commitment – at both the federal and state levels – to ensure justice, and to recover losses, for victims of reckless and abusive mortgage practices. In addition to addressing many of the most egregious mortgage loan servicing abuses that our investigations have uncovered, this agreement establishes significant new homeowner protections to help prevent future misconduct. It also provides substantial financial assistance to victim borrowers. In fact, it is the largest joint federal-state civil settlement in history.
Although every American can be encouraged by today’s settlement and the progress it achieves, I realize more work must be done. That’s why we have taken steps to ensure that the claims we are releasing through this settlement will not interfere with our ability to move current investigations and prosecutions forward – and to advance the work of the Financial Fraud Enforcement Task Force.
Let me be clear on this. While today’s agreement resolves certain civil claims based on mortgage loan servicing activities, it does not prevent state and federal authorities from pursuing criminal enforcement actions. And it preserves extensive claims related to mortgage securitization activities, including the claims that will be the focus of the new Residential Mortgage-Backed Securities Working Group. Furthermore, the agreement does not prevent any claims by any individual borrowers who wish to bring their own lawsuits.
This agreement underscores a point that many of you heard me make here at the Justice Department, less than two weeks ago, when Secretary Donovan and I announced – and convened the first meeting of – the Financial Fraud Enforcement Task Force’s new Residential Mortgage-Backed Securities Working Group. I noted that, by focusing on collaboration – and by bringing our government’s full enforcement resources to bear – we can improve our ability to identify and prosecute misconduct in our financial markets, recover losses, prevent fraud, and hold those who violate the law accountable.
Today’s settlement proves this – and is a remarkable example of cooperative law enforcement. Multiple federal agencies – including DOJ, HUD’s Office of the Inspector General, the Federal Housing Administration, the Federal Housing Finance Agency, the Board of Governors of the Federal Reserve System, the Federal Trade Commission, and the Special Inspector General for the Trouble Assets Relief Program – played key roles in achieving this settlement. And we partnered with state attorney general offices and state banking regulators from across the country, who brought valuable expertise – and unique, on-the-ground experience with those directly affected by the foreclosure crisis – to this resolution.
In particular, I want to recognize the outstanding work of the Justice Department’s United States Trustees Program, and our United States Attorneys’ Offices.
The U.S. Trustees Program, which serves as the watchdog of all bankruptcy court operations, was one of the first federal agencies to investigate mortgage servicer abuse of homeowners in financial distress. As part of their investigation, Trustees reviewed more than 37,000 documents filed by major mortgage servicers in federal bankruptcy court – and took discovery in more than 175 cases across the country. These efforts were advanced by several United States Attorneys, including U.S. Attorney Loretta Lynch from the Eastern District of New York, who is here with us. During a three-year investigation, her office issued multiple subpoenas, reviewed over two million documents, and interviewed numerous witnesses. They have worked tirelessly to seek justice for homeowners who were treated unfairly and taxpayers who footed the bill. And the information and evidence that these teams compiled – and the expertise they provided – was essential in reaching this historic settlement.
Similar large-scale reviews were also conducted by HUD, FHA, and others. Our investigations revealed disturbing practices. For instance, we saw that – far too often – servicers pushed borrowers into foreclosure, even though federal regulations required the servicers to try other alternatives first. These failures didn’t just hurt borrowers who might have been able to afford modified mortgages. They fueled the downward spiral of our economy – and of communities nationwide. They eroded faith in our financial systems. And they punished American taxpayers, who have had to foot the bill for foreclosures that could have been avoided.
With this settlement, we are recovering precious taxpayer resources. And the state attorneys general will be establishing a fund to facilitate payments to borrowers who, as a result of improper lending practices, lost their homes during the foreclosure crisis. Mortgage servicers also will be required to dedicate substantial resources – approximately $20 billion – to provide relief and assistance to struggling homeowners and neighborhoods. And the agreement includes specific provisions that will enhance protections – and help ensure justice – for U.S. service members and their families.
I also want to note that, with this settlement, we aren’t just holding mortgage servicers accountable for wrongs they committed. We are using this opportunity to fix a broken system, and to lay the groundwork for a better future. Our nation’s leading mortgage servicers will be required to follow a new set of standards, which will be overseen by an independent monitor – and will be enforceable in federal court.
My colleagues will discuss some of the details of today’s settlement more specifically – and I encourage anyone seeking addition information to visit a new website that we’ve established: www.NationalMortgageSettlement.com
I want to thank everyone who contributed to this achievement.