As Obama administration officials pushed Monday toward finalizing a deal with the nation’s largest banks over widespread foreclosure abuses, they encountered a fresh wave of criticism from a familiar source: Liberal activists and consumer advocates insisting that the president is settling too soon, for too little.
“We’re talking about not much more than a slap on the wrist,” Sen. Sherrod Brown (D-Ohio) said of the multibillion-dollar settlement, which has been under negotiation for more than a year.
“The big Wall Street banks have still never been held accountable,” said Justin Ruben, executive director of MoveOn.org, who urged President Obama to order a full investigation into the banks’ practices before agreeing to any deal.
Those frustrations underscore a tension that has played out repeatedly between Obama and liberal activists who traditionally have supported him. Whether forging deals with Republicans over tax cuts or deciding whom to nominate to head the new consumer watchdog bureau, the president has faced complaints from left-leaning groups that he compromises too much or acts too timidly.
Those complaints surfaced again Monday as U.S. Department of Housing and Urban Development Secretary Shaun Donovan, top Justice Department official Tom Perrelli and Iowa Attorney General Tom Miller gathered in Chicago to brief Democratic state attorneys general on the outlines of the agreement and to shore up support. Protesters showed up. Impassioned news releases filled reporters’ inboxes. A conference call with lawmakers and activists was held, urging more investigation and a bigger settlement.
Federal and state officials have been working on the deal since late 2010, when news of widespread foreclosure problems — from flawed or fraudulent paperwork to questions about improper or incomplete loan transfers — spurred a national uproar and caused many banks to temporarily halt foreclosures.
The settlement, according to people involved, will include up to $25 billion in penalties that potentially could shrink loan balances and lower monthly payments for numerous homeowners, marking the biggest industry settlement since a multistate deal with tobacco companies in 1998. Hundreds of thousands of borrowers who lost their homes to foreclosure since 2008 would be eligible for payouts of about $2,000 each, without surrendering the right to join future lawsuits, sources said. In addition, mortgage servicers would agree to overhaul their business practices and curtail the maddening maze of bureaucracy that troubled borrowers often encounter when trying to get help.
Administration officials and the state attorneys general leading the settlement talks acknowledge that the deal would not solve all the nation’s housing woes, but they insist it would provide immediate and much-needed relief to homeowners and improve the broken mortgage servicing system. They also have said they are trying to craft a narrow legal release, so that investigations into the way loans were bundled and sold to investors and other areas of the mortgage process could go forward.