Maybe you're reading about it less and less. It doesn't seem to be the lead story on many national news broadcasts anymore. But it's still there, festering away like an untreated wound.
The foreclosure crisis and the morass of other problems surrounding persistently problematic real estate prices, unwise loans made to now-bereft homeowners, and predatory mortgage products and practices isn't going away. But this week, at last, there was some news. Unfortunately, the news by and large is that there is little news.
The New York Daily News just published an Op-Ed noting that 85 days after President Obama announced its formation in an impassioned speech, the new Residential Mortgage-Backed Securities Working Group (RM-BSWG) had done virtually nothing. New York Attorney General Eric Schneiderman, who the Co-chairs the group with Colorado U.S. attorney John Walsh, admitted earlier this month that the RM-BSWG had no office space and no staff. So… No one works there yet. (The piece was written by Arnie Graf, co-director of the Industrial Areas Foundation, and Mike Gecan, an IAF trustee. IAF was founded by Saul Alinsky and works as a coalition of nonprofits, in a model similar to Nader's PIRG network.)
Calls made to the Justice Department a few days ago, where the Working Group is legally housed, were fruitless as departmental operators had no clue as to just what the group is, or where it might be located. Reuters, however, had reported a few days earlier that a Justice Department official claimed that "the co-chairs meet formally every week and talk almost every day to coordinate on a range of investigations," and that "about 50 staff members are working on the effort, and the task force has identified separate office space in Washington and will move some personnel there." The Reuters article also noted that the working group "issued more than a dozen civil subpoenas to top financial institutions… [asking] for documents related to mortgage-backed securities offerings between 2006 and 2008." Really, it's hard to believe these two articles are about the same organization.
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The RM-BSWG includes representatives from the Justice Department, the SEC, the FBI and the Department of Housing and Urban Development, among others. Its mission is to investigate the securitization and marketing of residential mortgages that contributed to the financial crisis. Presumably, this Group is necessary because the much-ballyhooed $26 billion settlement of the lawsuit brought by 49 state attorneys general and the federal government against the five major banks deals only with mortgage and foreclosure process abuses, such as robo-signing.
Under The Settlement, which was finally approved by a federal judge earlier this month, the banks will reduce the principal on loans held by some now-lucky underwater homeowners, refinance certain mortgages at current and very low rates of interest and compensate the winners of the robo-signing lottery, who lost their homes due to improper foreclosure practices, to the tune of approximately $2,000 apiece. That certainly will pay for a 400 square-foot apartment for a family of four for a couple of months. But most importantly, the settlement does not "Release any criminal liability or grant any criminal immunity," nor does it "Release any private claims by individuals or any class action claims."
Bottom line, the Daily News Op-Ed appropriately points out that 12 million homeowners, collectively $700 billion underwater, are in or near foreclosure. Reality check—a $26 billion settlement (only $5 billion of which is in cash) is a relatively insignificant figure given the scope of this disaster. The very existence of the RM-BSWG and the fact that the banks haven't been released from any criminal liability is an acknowledgement of that.
Let's, for the moment, take the Daily News Op-Ed with a grain of salt, and give the RM-BSWG the benefit of the doubt. For the sake of argument, let's assume that they are working hard behind the scenes—actually, let's pray for that. The politicians who set the group up know full well that perception is reality, and after five years of pain, the fact that the new RM-BSWG has yet to find an office, and that there seems to be no institutional awareness of their mission within government, looks very, very bad. And if this working group really is all hat and no cattle, designed to ameliorate the public for a moment in time which has now passed, let's stop playing games. Close up shop and leave the real work to the class action lawyers. You better believe that they are sufficiently motivated.
I, for one, hope the RM-BSWG is the real deal. With that in mind, I make the following plea: this is a mission that must be accomplished NOW so please get your act together, guys. In the face of such stark reality, the mere appearance of reality is both immoral and unacceptable.
Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.