[1]Speaking at Thursday's House Judiciary Committee [2] hearing entitled "Oversight of the Justice Department’s Mortgage Lending Settlements [3]," some lawmakers criticized the federal government for using little or none of the $36 billion in recent mortgage backed-securities settlements with big banks to help foreclosure victims.
Republicans had called the hearing to address concerns that the funds from the RMBS settlements were not going toward consumer relief, as was intended, but instead going to third-party organizations.
Addressing the House Judiciary Committee on Thursday, U.S. Representative Tom Marino (R-Pennsylvania) cited an article [4] published by the Delaware Online News Journal in late January which stated that out of about 32,000 homeowners foreclosed on in Delaware, only a little more than 1,000 of them have received any money from the settlements. According to the News Journal, when they did receive money, it was often for less than $1,500, and therefore not enough to make a difference – and the remaining foreclosure victims have received no money.
Since the financial crisis began in September 2008, approximately 5.5 million residential homes nationwide have been lost to foreclosure, according to CoreLogic [5]. Since homeownership peaked in 2004, about 7 million homes have been lost to foreclosure, CoreLogic said.
"It is a cruel irony that those who lost the most to the foreclosure crisis seem to be helped the least from the Department of Justice's settlement," Marino said.
JPMorgan Chase settled with the Justice Department for a then-record $13 billion in November 2013, followed by a $7 billion settlement between Citigroup and the DOJ in July 2014. In August 2014, Bank of America and the DOJ entered into a $16.65 billion settlement, breaking the record set by JPMorgan Chase nine months earlier. Those three settlements, all to settle claims of packaging and selling faulty residential mortgage-backed securities in the run-up to the financial crisis, totaled more than $36 billion.
Representatives Bob Goodlatte (R-Virginia), the chairman of the House Judiciary Committee, and Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, wrote a letter [6] to U.S. Attorney General Eric Holder in late November questioning why money from these settlements [6] was being donated to what they called "left-wing activist groups" such as NeighborWorks America and La Raza.
"Directing a defendant to pay money directly to a third-party interest group is simply an end-run around the law," he told the Committee [7]. "All told, the Department of Justice has directed as much as half a billion dollars to activist groups entirely outside the Congressional budget and oversight process. . . For DOJ to funnel money to third-parties through settlements this way may violate the law and is undoubtedly bad policy."
Marino stated that he did not care if an organization receiving the money was "right wing" or "left wing" – he said he believed the money should not be given to a partisan organization.
Geoffrey Graber, Deputy Associate Attorney General and Director of the Residential Mortgage-Backed Securities Working Group of the Financial Fraud Enforcement Task Force with the U.S. Department of Justice, testified at Thursday's hearing to answer the lawmakers' claims that the money from the settlements was not being spent as it should be.
"In all of these settlements, the banks are required to report their consumer relief efforts to independent monitors, who are paid by the banks. The independent monitors are charged with verifying that the banks meet their consumer relief obligations. The monitors also publicly report their findings," Graber said in his testimony [8]. "It is important to bear in mind, however, that the Department does not have control over how the banks choose to complete their consumer relief obligations within the parameters set forth in the settlement agreements. It is up to the banks to choose exactly how they fulfill their obligations."