Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement”

[PA Democrat]

8. Senator Sherrod Brown has expressed the same concerns

WASHINGTON, D.C. – As officials near a settlement agreement with the nation’s largest banks following last year’s robo-signing crisis, U.S. Sen. Sherrod Brown (D-OH) urged Administration officials and state attorneys general to hold banks financially accountable for illegal practices and to protect the pensions of Ohio’s workers. The current settlement terms allow mortgage servicers to use mortgage capital to pay penalties—hurting investors, but not the banks that broke the law.

In a letter to Associate Attorney General Thomas Perrelli, Consumer Financial Protection Bureau Director Richard Cordray, U.S. Department of Housing and Urban Development Secretary Shaun Donovan, and Iowa Attorney General Tom Miller, Brown said that mortgage servicers should be required to provide meaningful assistance to Ohio homeowners who lost their homes illegally, but not on the backs of other working Ohioans.

“Instead of taking full responsibility for illegal foreclosures, Wall Street banks are trying to use the assets of middle class Americans to pay the penalty,” Brown said. “Penalties for Wall Street’s illegal practices must ensure meaningful relief for the more than one in five homeowners who owe more on their mortgage than their house is worth. But Wall Street banks must not be allowed to pass the buck to investors. The reported settlement terms would amount to a slap on the wrist, allowing banks to write down the investments of many of my constituents, without sacrificing anything. Teachers, first responders, law enforcement officials, and other pensioners and retirees should not be penalized for wrongdoing by Wall Street.”

The pending agreement would require the largest mortgage servicers to commit to between $17 and $25 billion to help borrowers. The proposed settlement would offer one million borrowers nationwide an average of $20,000 in principal reduction. According to a recent report, Ohio alone has 482,048 homeowners who are nearly $15 billion underwater. The average underwater Ohioan owes $31,000 more than their home is worth. According to CoreLogic, about 22 percent of all U.S. homes have negative equity totaling about $750 billion.

The reported settlement would also permit servicers to pay the proposed penalty by writing down the value of mortgage-backed securities (MBS) owned by investors—including Ohio pensions funds, without requiring servicers to reduce principal on the mortgages and second liens that they own. Ohio’s pension funds, retirement systems, and universities, all heavily invested in MBS, are key stakeholders in any settlement.


More at:

http://brown.senate.gov/newsroom/press_releases/release/?id=d318a589-e27c-4b33-93c8-83d26e2b61ae