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Congresswoman Waters Calls for More Class Action Lawsuits to Prevent Foreclosures
Congresswoman Maxine Waters Congresswoman Maxine Waters (CA-35), Chairwoman of the Financial Services Subcommittee on Housing and Community Opportunity, recognizing the impact foreclosures are having on the country, called on the attorneys general from the nation's 50 states to bring suit against lenders in order to force more loan modifications.
"We need aggressive action to force lenders to modify the predatory loans that they made. State attorneys general and civil rights groups are taking the lead in preventing foreclosures by filing lawsuits against the originators of these predatory loans, and I commend them for their action," Chairwoman Waters said.
Last year, Congress passed the Housing and Economic Recovery Act of 2008, which created Hope for Homeowners-a mortgage principal reduction program-and the Neighborhood Stabilization Program, which addresses abandoned and foreclosed properties. Earlier this year, Congress passed the Helping Families Save Their Homes Act of 2009, which included provisions to facilitate more loan modifications. In March, President Obama established the Making Home Affordable program, which provides monetary incentives for mortgage servicers that modify loans.
"Despite all of our efforts in Congress, foreclosure rates are still increasing and show no signs of slowing down," Chairwoman Waters said. "Struggling homeowners need permanent loan modifications to prevent foreclosure. While the Making Home Affordable program has produced 500,000 trial modifications, very few permanent modifications have been provided." Making Home Affordable, which is a voluntary program, allows for a trial modification period of 5 months, during which the homeowner must make timely payments; however, modifications do not always become permanent.
Servicers participating in Making Home Affordable have been slow to modify the eligible loans in their loan portfolios. For example, according to the most recent data from the Treasury Department, Bank of America has only modified 11 percent of its eligible loans. Wells Fargo and JP Morgan Chase have modified 20 percent and 27 percent of their eligible loans, respectively. "This is unacceptable," Chairwoman Waters said.
Â According to Realty Trac-an online foreclosure tracking service-foreclosure filings reached a record high in the third quarter of this year, with over 937,000 foreclosure filings during that period.
Several settlements in suits filed by the states have demonstrated the impact of litigation in keeping homeowners in their homes. California Attorney General Jerry Brown led the way with a landmark $8.7 billion settlement with Countrywide last year. "Countrywide was the leading architect of the subprime bubble," Chairwoman Waters said. "Attorney General Brown successfully argued that loan originators are responsible for these predatory loans and that they must be held accountable for their actions."
In June of this year, Massachusetts Attorney General Martha Coakley reached a settlement with Fremont Investment and Loan and its parent company, Fremont General Corporation. The $10 million settlement will provide much needed funding to address foreclosures and predatory lending and provide assistance to borrowers in the state.
Cities have also filed suits. The City of Baltimore is suing Wells Fargo for targeting subprime loans to African-American individuals, families and communities, and the City of Cleveland is suing 21 lenders for making predatory loans.
"The cities that have brought suit are dealing with the effects of these foreclosures and the resulting blight, property value decline, and reduced tax base associated with them," Chairwoman Waters said.
The National Association for the Advancement of Colored People (NAACP) has also filed suit against most of the country's major mortgage lenders, including Wells Fargo, Chase, Citi Mortgage, GMAC Mortgage, HSBC, SunTrust Mortgage, and others.
"I urge the state attorneys general to band together - much as they did when they sued the tobacco companies - and bring a national class action lawsuit against lenders and mortgage servicers," Chairwoman Waters said.
Chairwoman Waters has introduced legislation to require mortgage servicers to work with borrowers who default on their loans. "Congress and the Administration have done a lot to address this crisis, but it's not good enough, so I am continuing to search for ways to keep families in their homes," she said. "In the meantime, we need more of these kinds of suits because that is what lenders will respond to."