Whereas the United States has experienced a mortgage
crisis since 2004;
Whereas the mortgage crisis resulted from a number of
causes in the housing and credit markets, including an increase in
non-traditional mortgages such as risky subprime loans, substandard
underwriting practices by lenders, and unstable risk-management
practices;
Whereas, since 2006, more than 3,000,000 houses in the
United States have been recaptured through foreclosure;
Whereas the rate of foreclosures has increased an
additional 23 percent since 2008, with approximately 2,900,000 home mortgages
in the United States in foreclosure in 2010;
Whereas homeowners across the Nation have been hit hard by
the mortgage crisis with one in four homeowners underwater
on
their mortgages, meaning that their home is worth less than the outstanding
balance due on the mortgage on the property;
Whereas underwater homeowners nationwide owe, in
aggregate, approximately $750 billion more than their homes are currently
worth;
Whereas the ongoing housing crisis and significant
increase in mortgage delinquencies and foreclosures has contributed to the
current financial crisis;
Whereas the Federal Bureau of Investigation (FBI) has
stated that mortgage fraud is a growing crime threat that is hurting
homeowners, businesses, and the national economy
;
Whereas the FBI has increased its investigative resources
to address the mortgage fraud crisis;
Whereas the FBI experienced an increase in suspicious
activity reports filed by federally insured financial institutions from 6,936
reports in 2003 to 67,190 in 2009;
Whereas investigations by the FBI and other law
enforcement entities, including State attorneys general, have focused on fraud
related to loan origination, mortgage loan securitization, and mortgage
servicing;
Whereas, in the fall of 2010, reports nationwide exposed
fraudulent foreclosure filings, including the practice of signing mortgage
documents without verifying the content of the document, often referred to as
robo-signing
;
Whereas the attorneys general of the 50 States initiated
an official investigation into the robo-signing scandal in October 2010;
Whereas the State attorneys general and the Federal
Government have pursued a settlement with mortgage servicers, including Bank of
America, JPMorgan Chase, Ally Financial, and Wells Fargo, that exceeds the
original goal of addressing the robo-signing scandal;
Whereas financial institutions have faced lawsuits
regarding their role in the subprime mortgage boom and accompanying financial
crisis;
Whereas Bank of America has reached an agreement to pay
$8.5 billion to settle claims over purchases of mortgage-backed securities by
Countrywide Financial, which is owned by Bank of America;
Whereas the $8.5 billion settlement with Bank of America
represents only 2 percent of the $424 billion in mortgages that Countrywide
issued and only 4 percent of the outstanding principal on the loans;
Whereas the Federal Housing Finance Agency has sued a
group of banks, including Bank of America, Citigroup, JPMorgan Chase, and
Barclays, for $200 billion for losses resulting from mortgage-backed
securities;
Whereas the Federal Housing Finance Agency lawsuit
pertains to loans sold to the Federal National Mortgage Association (Fannie
Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) that were
based on incorrect or missing information;
Whereas Fannie Mae and Freddie Mac neared insolvency in
2008 due to subprime mortgage losses, were rescued by United States taxpayers,
and have operated under Federal conservatorship since 2008;
Whereas State pension funds were cheated out of critical
investments due to fraudulent sales of mortgage-backed securities;
Whereas the fraudulent sales of mortgage-backed securities
has resulted in financial losses for State’s worker retirement funds, whose
investors and beneficiaries include teachers, firefighters, and police;
Whereas securities fraud lawsuits have been filed on
behalf of beneficiaries of State pension funds, including a class action
lawsuit against Merrill Lynch, now owned by Bank of America, for providing
misleading documents for $16.5 billion in certificates;
Whereas banks are required to register and pay fees with
county offices in each State for each sale or resale of a mortgage;
Whereas many banks utilized the Mortgage Electronic
Registration Systems (MERS) electronic mortgage registry, which permitted these
financial institutions to repeatedly avoid paying local taxes;
Whereas local communities lost local tax revenue through
the banks’ fraudulent behavior and local counties are now suing to reclaim the
significant amount of lost revenue;
Whereas the proposed settlement between the State
attorneys general, the Federal Government, and mortgage servicers is reported
to be for $20 billion;
Whereas the financial repercussions for the victims of the
mortgage servicers’ fraudulent behavior, including homeowners, State pension
beneficiaries, and local communities, far exceeds $20 billion;
Whereas reports of the proposed settlement describe that
the settlement may halt State investigations and prosecutions into the mortgage
servicers’ fraudulent behavior;
Whereas the prevention of future fraudulent behavior would
be aided by examining the findings of investigations into past such
behavior;
Whereas California Attorney General Kamala Harris has
withdrawn from the proposed settlement due to concerns that the proposed
settlement amount was insufficient; and
Whereas New York Attorney General Eric Schneiderman has
resisted requests to halt New York State investigations into mortgage fraud as
a condition of joining the settlement: Now, therefore be it
That it is the sense of the House of
Representatives that any action taken by the Department of Justice should be
consistent with the following goals:
(1)The mortgage
servicers who engaged in fraudulent behavior should not be granted criminal or
civil immunity for potential wrongdoing related to illegal mortgage and
foreclosure practices.
(2)The Federal
Government and State attorneys general should proceed with full investigations
into claims of fraudulent behavior by mortgage servicers.
(3)Any financial settlement reached with
mortgage servicers should appropriately compensate for, and accurately reflect,
the extent of harm to all victims, including homeowners and State pension
beneficiaries, caused by the mortgage servicers’ fraudulent behavior.