Op-Ed: BoA Deal Is Victory For N.Y. Families
By Eric T. Schneiderman
The historic settlement with Bank of America is welcome news for families still struggling to recover from the mortgage crisis. B of A will pay a record $16.65 billion for its reckless misconduct — and $800 million 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 JPMorgan Chase deal — and is another major victory in the fight to hold accountable the major banks that caused the mortgage crisis and nearly crashed the U.S. economy.
As the state's chief law enforcement officer — and as co-chair of President Barack 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 rules. Bank of America bent the rules for its own financial gain, and millions of Americans paid the price.
As acknowledged in the settlement's statement of facts, Bank of America, Countrywide Financial and Merrill Lynch — which B of A acquired in 2008 — 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.
When I took office in 2011, the federal government and other state attorneys general were about to sign an agreement releasing those banks 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 negotiated deals totaling about $37 billion — including roughly $2 billion to help struggling New York families. With the 2012 National Mortgage Settlement, the total tops $60 billion — more than $4 billion of that for New York.
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 Federal Housing Administration-insured mortgages, which make up about 23 percent of New York's distressed home loans. Previous settlements excluded these types of loans, 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.