Government needs to take it slow in mortgage case

By:  Editorial Board
Source: The Olympian

The Department of Justice must not rush to settle with financial institutions that engaged in alleged illegal mortgage foreclosures. 

Ongoing settlement talks between state attorneys general, the White House, banks and mortgage companies, and federal fraud regulators have reportedly led to a proposed  $20 billion settlement that would absolve the financial institutions of further civil and criminal liability stemming from alleged fraudulent foreclosure practices.

U.S. Sen. Maria Cantwell, D-Wash., sent a letter to U.S. Attorney General Eric Holder last week, urging him to proceed cautiously with the settlement and conduct a full investigation into the alleged foreclosure fraud.

Cantwell raises legitimate concerns that the settlement may not provide adequate compensation for the millions of American taxpayers, homeowners and investors who lost trillions of dollars during the housing bubble scheme.

She noted an ongoing Treasury Department probe into whether 10 major banks may have illegally foreclosed on some 4,500 active-duty servicemen and women.

“The largest financial institutions... pumped up profits and home prices while dumping any potential losses on homeowners, taxpayers and investors,” she wrote in her letter to Holder. “As a result of the pump-and dump-scheme ... an estimated 14 million Americans are underwater, owing $700 billion more on their homes than their homes are worth.”

Through the first half of 2011, Washington state had the 15th-highest foreclosure rate in the country with nearly 29,500 properties in foreclosure, Cantwell noted from a RealtyTrac report.

An argument can be made that the proposed $20 billion settlement is far from adequate, especially if the fraudulent mortgage practices prove to be endemic to the banking and mortgage industries.