Obama proposes new task force to tackle investigation of banks’ mortgage lending practices

The announcement comes amid calls from Democrats to conduct a more thorough investigation into foreclosure practices and delay a proposed settlement of upward of $25 billion with the nation’s five biggest banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial — that was sent to the states for review on Monday. 

The president also said that he will send to Congress a plan that gives responsible homeowners a chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates.  

“No more red tape,” he said. “No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust.”

Housing and Urban Development Secretary Shaun Donovan said last week that a deal is in the works and he spent the past few days talking to state attorneys general to iron out the final details, which could still be weeks away. 

But lawmakers such as Sen. Sherrod Brown (D-Ohio) and Rep. Brad Miller (D-N.C.), along with several other advocates, said on Monday that the settlement between federal and state governments and the mortgage servicers isn’t enough to help homeowners who are underwater on their mortgages. 

“We’re urging the Obama administration to stand with homeowners to fight for meaningful settlement,” Brown said. “No one is above the law.” 

Several state attorneys general are prepared to oppose the deal including New York Attorney General Eric Schneiderman, who has been tapped to head up the new unit that will look into mortgage abuses, according to a news reports. 

The goal of the unit will be to hold any institutions accountable that broke the law, compensate victims and provide relief for homeowners and move forward past the policies of old, according to a White House document. 

Meanwhile, Maryland Democrat Elijah Cummings, ranking member of the House Oversight and Government Reform Committee, is asking Chairman Darrell Issa (R-Calif.) to bring high-ranking executives from the nation’s biggest mortgage banks to Capitol Hill testify about foreclosure abuses. 

Donovan said last week that the settlement with the banks could help about 1 million homeowners reduce their mortgage principal — by about $20,000 — but he didn’t provide specifics of which homeowners would be included. 

He said the proposed deal would be “far and away the largest principal reduction of the crisis” and one that will provide a boost for the economy and the housing market.”

The AFL-CIO also urged the White House to hold banks responsible for any illegal actions. 

“State attorneys general have been investigating bank fraud, and these critical investigations must not be undermined by a premature and inadequate settlement,” said AFL-CIO President Richard Trumka on Monday.

Trumka said it is critical that the Justice Department lead a “comprehensive investigation together with the state attorney generals to prevent banks from engaging in future unlawful and deceptive practices that could exploit homeowners and put the economy further at risk.”