bjbjLULU RAY SUAREZ: After long months of negotiating, 49 states joined an agreement
today over foreclosure abuses.
U.S. Attorney General Eric Holder announced the deal in Washington.
ATTORNEY GENERAL ERIC HOLDER: It is the largest joint federal-state civil settlement in the
history of this nation.
RAY SUAREZ: The news came even as foreclosed homes still litter the landscape, casualties
of the housing bubble that burst in 2008.
Many people could not make their payments and were forced out.
Many others have struggled to keep up, even as the value of their homes fell far below
what they owe.
But Attorney General Holder said the $25 billion deal is designed to give relief to homeowners
and to hold banks accountable for abusive practices.
ERIC HOLDER: We saw that, far too often, servicers pushed borrowers into foreclosure, even though
federal regulations require 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.
RAY SUAREZ: Bank of America, J.P. Morgan Chase, Wells Fargo, Citigroup and Ally Financial
are the five major mortgage lenders who've agreed to reduce loan amounts for nearly one
million households.
And they ll send $2,000 checks to 750,000 Americans who were improperly foreclosed on.
Under the deal, the lenders are protected from many civil lawsuits tied to the foreclosure
process.
But states can still pursue criminal cases, including those tied to original lending practices.
The settlement was hashed out over the last year-and-a-half between the banks and state
attorneys general.
TOM MILLER, Iowa attorney general: This agreement has more things to help homeowners than anything
that we have seen before and probably ever will see again.
JOHN SUTHERS, Colorado attorney general: The attorney generals realize this settlement
is very, very much in the interest of their state and the citizens of their states.
RAY SUAREZ: Between 2007 and early 2012, roughly four million American families lost their
homes to foreclosure.
And some housing activists say today's deal only scratches the surface.
Gordon Whitman is with PICO National Network, a faith-based group.
GORDON WHITMAN, PICO National Network: So, it's a start, but it's a drop in the bucket
compared to what we need to get to.
And we believe that we will over the next two to three years, one to two years, get
to the point where we have that level of $300 billion in principal reduction.
RAY SUAREZ: President Obama acknowledged today the deal is just one step toward fixing the
housing industry.
PRESIDENT BARACK OBAMA: No action, no matter how meaningful, is going to, by itself, entirely
heal the housing market.
But this settlement is a start.
And we're going to make sure that the banks live up to their end of bargain.
If they don't, we ve set up an independent inspector, a monitor that has the power to
make sure they pay exactly what they agreed to pay, plus a penalty if they fail to act.
RAY SUAREZ: Oklahoma was the only state not to sign onto the deal.
It reached a separate agreement with the banks.
JEFFREY BROWN: We're joined now by two state attorneys general who became key players in
this deal.
Eric Schneiderman of New York is a Democrat, and Tom Horne of Arizona a Republican.
Eric Schneiderman, I will start with you.
We have seen a number of attempts to respond to the housing market crisis.
How important do you think this one is?
ERIC SCHNEIDERMAN, New York attorney general: Oh, I think this is certainly the most significant
step so far.
But as the president said today, and as you just replayed, this is just a step towards
the kind of accountability for the folks who blew up the economy, the kind of meaningful
relief for homeowners and investors that's required, and putting in place of a set of
rules so this never happens again.
We're on a path to restore the housing market, to write down principal for homeowners and
to ensure that there's one set of rules for everyone -- important step, but a step on
a longer path.
JEFFREY BROWN: Well, Tom Horne, let me -- yours has been a very hard-hit state, of course.
Specifically, who do you see this helping and how?
TOM HORNE, Arizona attorney general: Well, the primary beneficiaries will be those who
are in their homes and are current, have paid their payments for at least a year, but who
face difficulty doing that in the future in the full amount, but they can pay less than
the full amount.
And the largest component of the settlement would give money to reduce principal payments
and some also to refinance and reduce interest payments for these people, so they ll be able
to stay in their home.
So that's very important for them.
It's also better for the lenders, because the present value to them of those reduced
payments is going to be a lot more than what they would get if they proceeded to foreclose.
So it's a win for the person who gets to stay in his home or her home.
It's a win for the lender, and it's certainly a win for the economy.
In the case of Arizona, $1.6 billion will come into our economy to prop up a very important
part of our economy, the housing market.
JEFFREY BROWN: Eric Schneiderman, just to help people, again, to try to make this very
concrete, what does someone have to do or what kind of position do they have to be in
to qualify for this help?
ERIC SCHNEIDERMAN: Well, there is a variety, and some of it varies from state to state.
The first relief we're going to see here in New York, where we have a smaller portion
of folks who have underwater mortgages than General Horne does out in Arizona, first relief
they're going to see is that we obtain $136 million that's going to go primarily towards
legal services, housing counseling and programs to prevent people from being foreclosed on.
The second level of relief that's going to take longer to implement is that the banks
are required to reach out to people with underwater mortgages, whose mortgages are more expensive
than the value of the homes right now, which is what General Horne was referring to, and
offer them a chance to either refinance or reduce the principal.
Not everyone is going to get a deal, but there's a requirement that we have put on the banks
that they're going to make those solicitations.
So people should be aware of that.
We ve set up contacts in all the regional offices at the New York state attorney general.
I know some of my counterparts are doing the same thing.
ll be providing the messages to the public.
But the first step is to try and prevent foreclosures where they're not warranted.
The second step is the program of principal reduction and loan modification that's going
to be going into effect.
JEFFREY BROWN: Now, Tom Horne, we heard the housing advocate -- and you're hearing it
all over the place today -- refer to this as a -- quote -- "drop in the bucket."
I wonder, do you think he is wrong?
If you look at $25 billion, quite small, compared to the $700 billion in negative equity out
there, people getting $2,000 compared to the value of the homes that they have lost in
many cases, is that fellow wrong in saying this is just a drop in the bucket?
TOM HORNE: Well, first of all, the $2,000, plus or minus, will go to people who have
already been foreclosed on.
They don't have to give up anything for that.
They still have their rights to bring lawsuits if they were badly treated by the servicers
at the time.
They don't have to give up those rights.
All they have to do is say that they were badly treated by the servicer, and they get
the $2,000.
The other sums, we're talking about $25 billion.
You will remember Everett Dirksen once said, a billion here, a billion there, pretty soon,
it's real money.
This is very significant.
If we had proceeded with the lawsuits, it would have been about four or five years before
we go through the lawsuit and the appeals, and if we had done better, that would have
been good, but we could have done worse, and that would have been a terrible thing, to
have done worse and lost four or five years, when people were thrown out of their homes,
where otherwise they would have been saved with their mortgages.
So I think this was a very prudent agreement.
We in Arizona didn't actually agree until 11:00 last night on an agreement that was
announced at 8:00 this morning because we had some special things we had to work out
with Bank of America.
So we negotiated very hard.
But in the end, I think this is a very prudent agreement as a settlement of what otherwise
would have been lawsuits that might have brought us more, but might have brought us less.
JEFFREY BROWN: Now, Eric Schneiderman, you held out for a long time on this as well.
Explain what your concerns were.
ERIC SCHNEIDERMAN: Well, my concern, really, is reflected in the comment that General Horne
just made.
I was concerned about giving up claims.
And it's very important to understand that homeowners still do have the right to go into
court themselves.
And part of the provision of legal services for people is that people -- individuals that
were wronged still can seek damages.
We have not given up their claims.
And my concern all along was that we not release claims that haven't been investigated and
that the settlement be limited to issues like robo-signing, release of claims for misconduct
and foreclosure proceedings.
When I got involved in the negotiations a year ago, the banks were really pushing for
a release of the broad misconduct, the securities fraud and tax fraud and other conduct that
actually melted down the American economy in 2008.
We have preserved all of those claims.
And President Obama in the State of the Union announced that we are, in fact, going to have
a joint state-federal working group to conduct a full investigation of those claims in a
more comprehensive, coordinated way than we have ever done.
And I'm one of the co-chairs.
So the important thing in evaluating a settlement is partly to look at how much money you get.
And it's true this is a very small portion of the negative equity that's out there.
It's a step, but just a step on the path.
But, in evaluating it, you have to look at what claims you're giving up.
What are you getting for what you're giving up?
And, in this case, I'm confident we held out for and fought to have the claims preserved
that really give us the most leverage to go back to the folks that blew up the American
economy and get more meaningful relief for both homeowners and investors that were hurt
in that debacle.
JEFFREY BROWN: And are you -- just to stay with you, are you confident as well that these
practices, the very kinds of things you were just talking about and that caused the problem
in the first place, are you confident now that those have ended?
ERIC SCHNEIDERMAN: Well, certainly in terms of what's going on in the securities market,
those have ended.
And there was a response to that with Dodd-Frank.
The federal government has passed new rules.
We now have the Consumer Financial Protection Bureau being set up to deal with some of these
problems.
I'm confident that, if we continue to push forward with that, we can put into effect
prudent regulations, so that the overwhelming majority of folks in the financial services
sector who just want to play by the rules and make money for themselves and their clients
can prosper.
But the race to the bottom that took place in 2005, 2006 and 2007, when there were packages
of mortgages that just never should have been made and securities that never should have
been sold, that kind of thing has to be prevented in the future.
We preserved all our claims to go back after the folks who committed any breach of law,
whether it's tax fraud, securities fraud, investment fraud or insurance fraud, during
that era, and our working group is very aggressively pursuing those claims.
JEFFREY BROWN: All right.
All right, and let me . . . TOM HORNE: If I could add to . . . JEFFREY BROWN: Yeah,
go ahead.
TOM HORNE: May I add to that?
JEFFREY BROWN: Yeah.
TOM HORNE: An important part of this settlement, which is dealing with misconduct by people
who are servicing the mortgages, the five biggest banks, is a reform of the methods
used by the servicers.
So, you had abuses such as one person from the bank worked out with the homeowner a modification.
And so he was making reduced payments.
And the homeowner was making the reduced payments, doing everything he was supposed to do, and
then someone else from the bank would foreclose, and he d come home and he d find, even though
he was doing everything he was supposed to do, his house was foreclosed on.
Those practices are being reformed, so that you have one person that you're dealing with,
so that if they deny the modification, you can appeal it, a number of other reforms in
the way these things are implemented.
And that is going to be monitored.
And there are strict penalties for not living up to the new guidelines.
So, in addition to the $25 billion, which I think is very significant and important
for our economy, there are significant reforms in the way the loans are -- services, and
it does away with a lot of abuses with teeth behind that.
JEFFREY BROWN: All right, Attorney Generals Tom Horne of Arizona and Eric Schneiderman
of New York, thank you both very much.
TOM HORNE: Thanks for having us.
ERIC SCHNEIDERMAN: Thanks, Jeff.
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