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In State of the Union, Obama Stands Up for Homeowners

Last night, the president announced a new mortgage crisis unit. Will it help homeowners and punish the banks who created the mess? 

George Zornick

January 25, 2012

President Barack Obama delivers his State of the Union address on Capitol Hill in Washington, Tuesday, January 24, 2012. (AP Photo/J. Scott Applewhite)

In his State of the Union address last night, President Obama announced an important initiative to address the housing crisis: one that will help affected homeowners while investigating and punishing those who helped create the problem.

A new mortgage crisis unit, made of up state and federal officials, which will look into wrongdoing by banks in the area of real estate lending. The unit will be headed by Eric Schneiderman, the attorney general of New York and a solid advocate for being tough on the banks for their role in the mortgage crisis.

“This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in his address.

The unit will not supersede efforts by the Justice Department in this area (to the extent there are any) but will operate as part of the Financial Fraud Enforcement Task Force. Justice officials will still be involved, however, according to the Huffington Post, which first obtained details of the effort from the White House. In addition to Schneiderman, the unit will be co-chaired by Lanny Breuer of the Department of Justice; Robert Khuzami, director of enforcement at the SEC; John Walsh, a US attorney in Colorado; and Tony West, also of the Justice Department.

In a statement last night, Schneiderman promised tough investigations.

“The American people deserve a robust and comprehensive investigation into the global financial meltdown to ensure nothing like it ever happens again, and today’s announcement is a major step in the right direction,” he said. “In coordination with our federal partners, our office will continue its steadfast commitment to holding those responsible for the economic crisis accountable, providing meaningful relief for homeowners commensurate with the scale of the misconduct, and getting our economy moving again.”

As far as relief for homeowners, Obama made additional news last night, announcing additional federal efforts to help homeowners—though they must be current on their mortgage. A new federal program will allow those homeowners to refinance their mortgage at lower rates, and a federal fee on banks will help pay for the assistance.

“I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks,” Obama said.

“Let’s never forget: Millions of Americans who work hard and play by the rules every day deserve a Government and a financial system that do the same,” he continued. “It’s time to apply the same rules from top to bottom: No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody.”

Some may bristle at only helping homeowners that are current on their mortgages—and avoiding those in the most trouble. The administration, however, is clearly trying to thread a needle with its “no bailout, no handout” framing. Recall that the Tea Party movement was ostensibly kicked off by a Rick Santelli rant about helping people with their mortgages.

We’ve been reporting this week on a pending settlement with banks over mortgage fraud, and on a progressive push to ensure the settlement provides real assistance to homeowners and actually holds banks accountable.

The same group leading that push praised the creation of the mortgage crisis unit last night. “We applaud the President for siding with American homeowners and taxpayers and sending a message that Wall Street banks are not above the law and will be held accountable for their actions that crashed the economy,” said a statement from The Campaign for a Fair Settlement. “The President faced significant pressure from Wall Street CEOs to let the banks off the hook. By creating the mortgage crisis unit, President Obama showed real leadership—and proved that his top priority is fixing the economy for working Americans.”

How the new initiatives announced last night will impact the settlement, if at all, are impossible to tell for now. But the campaign is not letting the new efforts be an excuse not to have a strong settlement with the banks. “While the creation of this unit is a clear victory, we still have concerns about the servicing deal on the table with States.” 

George ZornickTwitterGeorge Zornick is The Nation's former Washington editor.


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