Prepared Remarks of Secretary Shaun Donovan at the Press Conference on RMBS Investigation Announcement
Department of Justice
Tuesday, October 2, 2012
Thank you. For more than four years, our country has been recovering from the single worst economic crisis since the Great Depression -- a crisis caused by an unprecedented collapse in our housing market.
The road back has been a long and painful one, filled with hardship and uncertainty for so many. But finally, we are beginning to see the light at the end of the tunnel.
Where the month President Obama took office, we lost 800,000 jobs -- over the last 30 months, we’ve created a total of 4.6 million private sector jobs.
Where housing prices had been falling every month for more than two years when we came into office, home price improvements in the first half of this year created $860 billion in home equity.
That has not only helped 1.3 million families get their heads back above water -- it’s also restored a critical source of capital families use to start small businesses, save for retirement or send their kids to college.
And where foreclosures were setting records month after month when we took office, today, foreclosure notices are half what they were in early 2009.
But even as homeowners have reason to look toward the future with some hope and optimism for the first time in 5 or 6 years, we know there is more to be done before we can turn the page on the era of recklessness that caused the crisis.
By now, we all know why the housing bubble burst -- how lenders sold loans to people who couldn’t afford them and packaged those mortgages to make profits that turned out to be nothing more than a mirage.
And we know these actions hurt millions of families -- families who did the right thing but still lost their house or saw their home prices drop.
That is why President Obama announced in his State of the Union that he was creating a task force comprised of representatives from HUD, the Department of Justice and the Securities and Exchange Commission and the State AGs to probe the conduct of financial institutions that packaged and sold residential mortgage-backed securities.
And earlier this year, Attorney General Holder and I joined New York Attorney General Schneiderman to launch that working group. And our charge was clear:
Getting to the bottom of the crisis -- by investigating the conduct of financial institutions that broke the law and contributed to the crash of the housing market, including securities- and origination-related cases.
Indeed, that is what today’s announcement is all about.
And I’m proud of the critical role HUD Inspector General David Montoya and 75 staff across the Agency are playing in this effort as they investigate poor or fraudulent underwriting practices in the origination of FHA mortgages.
Of course, the kind of behavior that created this crisis wasn’t confined to origination and securitization.
Indeed, as our investigations at the Federal Housing Administration found, it continued long after families got the keys to their new homes -- from lost paperwork when people were applying for help, to dropped calls to signing thousands of foreclosure documents that banks never verified or bothered to read.
Allowing some of our largest and most powerful institutions to play by a different set of rules than everybody else—to commit forgery and perjury against ordinary families—is not only wrong.
In many cases, it’s also illegal. And it’s not what this Administration—and this President—believes we stand for as Americans.
With the $25 billion settlement the Administration and 49 state attorneys general struck earlier this year, we ensured the nation’s 5 largest mortgage servicers paid for that behavior -- and not simply by cutting a check but by finally helping homeowners once and for all.
Early reports indicate that the settlement provided nearly $14 billion in relief to about 165,000 families in its first few months -- $76,000 on average.
The settlement also focused on fixing the issues that led to so many of these problems in the first place.
And, indeed, Attorney General Schneiderman’s new investigation won’t be tomorrow’s only milestone, as institutions party to the settlement will be required to have 300 tough new customer standards in place.
These include improvements ranging from developing an online portal where homeowners can securely upload documents and providing homeowners seeking help with a single point-of-contact, to fundamental reforms like preventing a bank from foreclosing on a family at the same time they await a modification that will keep them in their home.
These standards build upon the new protections introduced when the President announced the Homeowner Bill of Rights.
That means, at the same time the Administration’s new Consumer Financial Protection Bureau is putting in place a single, straightforward set of commonsense rules that families can count on when they’re buying a home, the standards in this settlement will give people the confidence that the five largest servicers are already following a comprehensive list of rights should borrowers ever lose a job or have a medical emergency that puts their home at risk.
The days of runaround, lost paperwork and excuses from servicers with no consequences will be over.
One of the most important victories of the servicing settlement was that it preserved the right to conduct the kind of securities and origination efforts we are announcing today.
And I want to thank Attorney General Schneiderman for leading that effort throughout the settlement negotiations.
He recognized, as did so many in this Administration, that we can’t heal our housing market or make homeowners whole unless we hold those responsible for creating this crisis accountable.
Obviously, no effort can undo the pain of a crisis that cost our families and our economy trillions of dollars.
But with these efforts, we are sending an important message to financial institutions:
That no one is above the law.
That everyone plays by the same rules.
That when it comes to meeting our obligations, homeowners should have the same expectation of banks and mortgage servicers as they have of us.
And with that, let me introduce New York State’s Attorney General, Eric Schneiderman.