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

[ProSense]

27. Hmmm?

"I realize that the reputation of Yves Smith must be destroyed, but please address what Sherrod Brown has said. Are you saying he is uninformed? He does serve on the Senate Banking Committee. Do YOU have more knowledge than he does on the topic?"

What's your opinion of Smith attempting to destroy Warren's reputation? I mean, here she is using Warren to criticize the administration when she already smeared her, including on her credentials as a consumer advocate.

As for Senator Brown, I can accept his concerns about the reports and wait for more details.

Brown to Feds: Don't Let Wall Street Banks Use the Assets of Middle Class Ohioans to Pay the Penalty for Breaking the Law

As Big Banks Prepare to Settle Case on Mortgage and Foreclosure Fraud, Brown Urges Involved Parties to Reject Wall Street Plan to Allow Banks to Use the Assets of Hardworking Americans to Pay the Penalty for Illegal Foreclosure Practices

January 19, 2012

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.

Brown has led the fight against wrongful foreclosures and unfair practices by Wall Street. Brown is the sponsor of the Foreclosure Fraud and Homeowner Abuse Prevention Act of 2011. This legislation would expand access to foreclosure prevention services, while increasing protections for homeowners and investors in mortgage-backed securities. Last July, in the wake of reports that banks and mortgage processors have continued forging signatures and submitting false affidavits, Brown wrote to federal regulators urging them to better protect consumers by publicly releasing information related to their settlements with 14 mortgage servicers in order to prevent further illegal practices.

Brown also encouraged federal regulators to freeze foreclosures after the discovery last year that many servicers were wrongfully foreclosing on homeowners and not following existing foreclosure procedures and laws. Both the Associated Press and Reuters reported that despite regulators’ assurances to the contrary, illegal robo-signing allegedly remains rampant in both foreclosure and non-foreclosure cases. The reports also suggest that some regulators are aware of these violations.

Below is full text of the letter.

- more -

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

He has a detailed solution, but it will require Congressional action.

Foreclosure Fraud and Homeowner Abuse Prevention Act of 2011
http://brown.senate.gov/imo/media/doc/FFHAPA%20Explanation1.pdf