Op-Ed: Bank Of America Deal A Victory For New York Families
Op-ed published on The Huffington Post
By Eric T. Schneiderman
The historic settlement signed yesterday with Bank of America is welcome news for New York families still struggling to recover from the mortgage crisis. B of A, one of the nation’s largest mortgage lenders, will pay a record $16.65 billion for its reckless misconduct – and $800 million of that will go to assist New Yorkers at risk of losing their homes.
This is the largest settlement with a single institution in U.S. history – surpassing the record $13 billion deal with JPMorgan Chase entered into last November. And it is another major victory in the fight to hold accountable the major banks that caused the mortgage crisis and nearly brought down the U.S. economy.
As the state’s chief law enforcement officer – and as co-chair of President Obama’s Residential Mortgage-Backed Securities Working Group – my guiding principle is equal justice under law. There must be one set of rules for everybody, and everybody must play by the same set of rules. What Bank of America did was bend the rules for its own financial gain. Millions of Americans paid the price for that greed.
As Bank of America acknowledged in its own statement of facts, the bank made serious misrepresentations to the public in the packaging, marketing, sale and issuance of residential mortgage-backed securities, both by B of A itself and by Countrywide Financial and Merrill Lynch, which Bank of America acquired in 2008.
B of A, Merrill and Countrywide securitized and sold residential mortgage-backed securities with underlying mortgage loans that they knew were defective, misrepresenting the quality of those loans to investors. That misconduct, and similar misconduct by other major banks, caused the financial crisis.
But when I took office in 2011, the federal government and other state attorneys general were about to sign an agreement releasing the banks – including Bank of America – from much of their liability. I refused to sign, and less than one year later, the President formed the working group and named me co-chair.
Since then, we have continued to investigate those banks and have negotiated deals totaling about $37 billion – roughly $2 billion of which has gone to help struggling New York families. If you include the 2012 National Mortgage Settlement, the total is more than $60 billion – and New York has gotten more than $4 billion.
The $16.65 billion Bank of America deal will funnel $800 million to New York – $300 million in cash and at least $500 million in creditable consumer relief.
That includes, for the first time, principal reductions on mortgages insured by the Federal Housing Administration. About 23 percent of all the distressed home loans in the state are FHA-insured, and these represent the largest portion of Bank of America’s remaining distressed loan portfolio in New York.
Previous settlements excluded families with these types of loans from getting this badly needed relief, which is why I made it a priority to help this neglected segment of New York homeowners. B of A will provide at least $60 million in first lien principal reductions, including for FHA-insured loans.
The bank will also transfer $20 million worth of distressed mortgages and abandoned properties to nonprofits and land banks, which help communities buy derelict homes, rehab them and put them back in the housing market. This includes $20,000 per property to assist with revitalization costs.
And, Bank of America will provide at least $17 million to land banks, housing counseling agencies and legal service providers, so these front-line agencies can expand their vital services.
This settlement sends a strong message that banks that prey on customers and investors will be held accountable. I will continue to investigate financial institutions that bend the rules for their own benefit, and pursue equal justice for all New York families.