(MintPress) – Ten major banks reached an $8.5 billion settlement with the federal government Monday, the largest single victory for homeowners suffering from mortgage fraud and discriminatory lending policies. Although the settlement will pay 3.8 million victims up to $125,000 depending upon the extent of bank abuse, housing advocates believe that there are few provisions to prevent future foreclosures, a major problem contributing to homelessness in the U.S.
With more than 3.5 million homeless across the U.S., an estimated 1 million foreclosures in 2013 in the country will exacerbate this housing epidemic, unless broad provisions, like moratoriums are put in place to keep families in their homes. Since 2008, 10 million families have gone through foreclosure proceedings.
The settlement
The Office of the Comptroller of the Currency (OCC) and the Federal Reserve will reportedly disburse payments to families in amounts ranging from a few hundred dollars to up to $125,000 depending upon family needs and the severity of the mortgage fraud.
According to the terms of the settlement, Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Wells Fargo & Co, MetLife Bank and five banks will pay $3.3 billion directly to eligible borrowers, and $5.2 billion in loan modifications and forgiveness — the largest settlement and admission of mass financial crimes since the 2008 financial crisis.
Banks admitted to a practice known as “robo-signing,” in which an electronic system automatically signed off on thousands of mortgages without a banker reviewing each case.
Although not part of Monday’s case, banks also issued “liars loans” before 2008, a practice that allowed borrowers to take out mortgages without providing proof of income. From 2003-2006, liars loans grew 500 percent, becoming the most popular loan in the U.S.
Critics believe that the settlement does not do enough to restore justice for families suffering from criminal lending by banks. “It really doesn’t do anything because it isn’t going to stop the foreclosure process, it does nothing to force banks to modify these mortgages, it does nothing to keep people in the houses,” said James Bonfiglio, a foreclosure attorney.
This sentiment is shared by many homeowners continuing to suffer from unjust lending practices by banks. “As a homeowner who has been through foreclosure, the damages that the banks are paying will never come close to repaying the damages that they have done to our communities. They are being absolved of the fraudulent lending,” said Caylin Crawford, an Occupy Homes Minnesota spokesperson, in a recent MintPress News statement.
The Occupy Homes group has led the way nationally in advocating for housing justice. Since 2011, the group of homeowners and allied activists have braved arrest and police intimidation while occupying homes facing foreclosure. Thus far, the group has successfully forced big banks to cancel foreclosure proceedings on six Minneapolis homes.
Additionally, the settlement does not restore the more than $11 billion in personal wealth lost as a result of the financial collapse.
“There was fraud all along the chain, from their origination so banks could grow, to sales on Wall Street, because once you have got liars loans, all the sales after that have to hide their terrible quality or nobody is going to buy them,” said William Black, an expert in white collar crime.
Black played a key role as a senior financial regulator, prosecuting bank executives for fraud during the savings and loan crisis during the 1980s and 1990s. Black believes that in terms of negative economic impact, the 2008 crisis “is roughly 70 times larger” than the savings and loan crisis.
Fighting for foreclosure free zones
Few prosecutions of bank CEOs and top officials have ensued since 2008 and investigations by the Department of Justice (DOJ) have been spotty at best. Although arresting and charging bank officials with crimes cannot replace effective regulation, like the reinstitution of the Glass Steagall and oversight by the Securities and Exchange Commission (SEC), cracking down on the top brass responsible for criminal bank policies will help, in part, to restore justice and turn the page on decades of disastrous bank policies.
For many, the first step toward regulation is the creation of foreclosure free zones, helping to keep banks honest and families in their homes.
“First and foremost, we must turn off the machine that is mincing our communities. We need a moratorium because these fraudulent foreclosures and evictions are still happening. We
must stop all foreclosures immediately so there can be time for an honest conversation about solutions to the economic crisis,” wrote Occupy Homes Minnesota in a press release Tuesday.
As Crawford notes, “The city of Minneapolis established a 3-month moratorium on home foreclosures in 2009. It’s been done before.” Occupy Homes Minnesota, supported by community organizations and activists, is leading the way in calling for a foreclosure free zone in South Minneapolis, a lower-income neighborhood where many homes are in the process of foreclosure.
“Right now we have a coalition of homeowners in South Minneapolis declaring that they are not leaving their homes,” added Crawford. There are currently five families who have committed to staying in their homes and nine to 10 prospective families potentially signing on to the campaign in the coming weeks. The occupation of houses in Minneapolis by residents and activists has created a model of resistance for communities across the U.S. Since 2011, Occupy Homes has successfully staved off foreclosure proceedings for six Minneapolis families.
“It isn’t right that a bank based in New York is allowed to use our public resources to fraudulently foreclose and evict neighbors from their homes,” said Crawford.
Other countries suffering similar foreclosure crises have taken the initiative to declare moratoriums on foreclosures and evictions.
Spanish lawmakers issued an eviction decree in November, preventing foreclosure for many families. Despite this moratorium, 50,000 Spaniards were made homeless because of eviction in 2012 and thousands more will likely be evicted through 2013.
However, in a recent act of defiance against the banks, a dozen locksmiths in Pamplona have said that they will refuse to change the locks on foreclosed homes.
Although police can still remove people from their homes, banks cannot repossess houses unless the locks are changed because former residents could potentially regain entry. The common link of civil resistance, whether in Spain or Minnesota, shows that communities are standing up for housing justice, collectively, in the face of criminal banking policies and lack of proper government regulation.