Over $25 billion in principal reductions, loan modifications and other forms of homeowner assistance is just part of what Massachusetts Attorney General Martha Coakley is asking for in a new lawsuit set to finally demand restitution from five major banks all accused of deceptive and in some cases illegal foreclosure practices since the beginning of the housing crisis.
According to Huffington Post, Coakley, frustrated by the slow moving Obama administration negotiation for settlement with the nation’s largest banks, has branched out on her own to sue on behalf of the residents of Massachusetts, stating that the economy cannot recover until the financial industry makes things right with the people they defrauded. “The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis. Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners.”
The five banks named in the suit — Bank of America, JPMorgan Chase, Wells Fargo, Citibank, Ally Financial — all have been accused of a myriad of financial negligence, from robo-signing documents and writing loans and modifications they knew their clients could not afford to foreclosing on homes they didn’t even own the mortgages to. Worried that the administration was considering settlements that let banks off with little more than a slap on the wrist, Coakley has broken with the national attorney’s generals’ negotiations, a move that other AGs from other states are also considering.
One former banker from JPMorgan Chase, James Theckston, admits to columnist Nicholas Kristof that banks were well aware that what they were doing was fraud, but assumed that they would never be held responsible for it in the end. “On the application, you don’t put down a job; you don’t show income; you don’t show assets. But you still got a nod. If you had some old bag lady walking down the street and she had a decent credit score, she got a loan…The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas.”
Theckston also confirmed that they often pressured low income and especially minority borrowers into subprime mortgages, knowing that they were more expensive and more likely to default.
Coakley, meanwhile, has said that she will not necessarily keep the state of Massachusetts out of the national settlement if the terms are “favorable” to her residents. But should the national version not be tough enough on banks, she will stick with her own lawsuit instead.
Photo from crystalbat via flickr