Citigroup Settlement Penalties Are the Largest in History

Gavel and Law BooksThe U.S. Department of Justice recently announced a $7 billion settlement with Citigroup Inc. over the bank’s faulty mortgage securities and egregious practices. The settlement includes the largest civil fraud penalty ever levied by the Justice Department under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) and is more than twice what many analysts expected.

The government’s description of Citi’s wrongdoing closely mirrors conduct outlined in the Justice Department’s settlement with J.P. Morgan Chase. In both cases, the banks, or entities that they acquired, acknowledged repeatedly giving investors misleading information about mortgages underlying the securities. In many cases, those mortgages didn’t meet internal underwriting guidelines—which ensure that safe and secure loans are issued and help set the terms of the loan—but were included in packages and sold to investors.

Since the housing crisis hit in 2008, NCLR supported the efforts of state attorneys general in pursuing financial institutions whose predatory lending practices decimated the household wealth of millions of families, which was particularly devastating to Latinos and other communities of color. Working alongside advocates, housing counselors, and champions within the administration and the attorney general coalition, a national settlement was reached that made key changes to the mortgage servicing industry.

In California, NCLR worked closely with Attorney General Kamala D. Harris in the state’s successful passage of the Homeowner Bill of Rights, the first legislation of its kind that gives homeowners protections against abusive foreclosure practices by banks, and put an end to dual tracking.

This settlement is a reminder of the main causes of the financial collapse: poor practices in subprime mortgage lending, lack of transparency in the complex securitization process, and lax regulatory enforcement and oversight. Regulatory reforms are now in place that, we hope, will substantially improve the financial system.

The agreement also appears to improve on prior settlements by including affordable housing financing and counseling funds as permissible activities, a strong monitor, and it references relief to reach hard-hit areas.

That said, it will be important to assess how well the settlement is administered. Citi can make amends by working in good faith to ensure that hard-hit areas receive the relief and attention they deserve. In addition, the bank can significantly improve the financial system by collecting and reporting impact data by race and ethnicity, adding a substantial measure of transparency and accountability to the process. In doing so, the bank can ensure that those most harmed by their wrongdoing receive the help they need.

It is important for banks and mortgage lenders to settle accounts with the public for the 2008 crisis once and for all, and to provide as much relief and help as possible to those damaged by it. In doing so, they will help to build a better and stronger financial market in the future.

Family in front of houseLatinos are expected to comprise 40 percent of new households over the next two decades, and 50 percent of homebuyers will be Latino. Even with the recent foreclosure crisis, the desire for Latinos to be homeowners has not abated. According to a poll conducted by Latino Decisions and NCLR, the majority of Latino voters still believe that a key component of the American Dream is owning a home. Overall, 53 percent of Latino voters and 58 percent of immigrants agree that homeownership is a principle of the American Dream.

Latinos can contribute to the recovery of the nation’s housing market, but the widespread availability of safe and affordable mortgages depends on whether financial reforms can create a housing finance system that is accessible, transparent, and accountable for all Americans.

On HAMP’s Fifth Anniversary, Don’t Push Struggling Homeowners Over the Edge

Photo: Jeffrey Turner

Photo: Jeffrey Turner

For five years now, the U.S. Department of the Treasury and U.S. Department of Housing and Urban Development have successfully administered the Home Affordable Modification Program (HAMP) for struggling homeowners. Through this program, working homeowners secured lower and more affordable mortgage rates, enabling families hit hard by the financial crisis to stay in their homes and avoid foreclosure.

This year, the program is set to begin winding down and expire entirely in 2015. That means the nearly 800,000 homeowners with HAMP mortgage adjustments will see their monthly payments rise as soon as this year. While the rate increases can vary widely from state to state, the national average increase will be $200 a month. In states with more HAMP mortgages, such as California and Hawaii, rates will jump by $300 and $356 per month, respectively. While this might not sound burdensome to some, for working families on the brink it is potentially catastrophic.

To keep 800,000 struggling American families in their homes during our weak economic climate, HAMP’s low mortgage rates should be extended or made permanent for all participants.

When HAMP was first drawn up in 2008, the idea was to temporarily stop the bleeding from the foreclosure crisis and ease the lowered mortgage rates back to their original market levels once the economy improved after two years. In 2008, that seemed like plenty of time for homeowners to get back on their feet.

Unfortunately, this is not the reality in 2014. Incomes are stagnant for all but the richest Americans, and the economy has not sufficiently recovered. Unemployment remains stubbornly high, with Latinos especially affected. The Latino community lost vast amounts of generational wealth during the recession, and millions of families are barely scraping by.

Recognizing that the Great Recession was much deeper and the recovery slower than thought in 2008, HAMP has already been extended twice.

To raise the rates on 800,000 families now would only further damage the economy by pushing an unconscionable number of working Latino families into default. During a weak recovery, the solution cannot be to force families out of their homes.

For the sake of nearly one million American families and our entire economy, affordable HAMP mortgage rates must be preserved through an extension or made permanently available.

NCLR Looks Forward to Working with the JPMorgan Chase Foundation

NCLR is pleased to announce a significant grant from the JPMorgan Chase Foundation this month that will enable us to advance our core mission of improving opportunities for Hispanic Americans.

With this new investment, NCLR and the JPMorgan Chase Foundation are building on a long history of shared growth and success.  This year’s grant will support critical NCLR programs that are helping low- and moderate-income Latino families recover from the recession and regain their financial footing.  Essential to this effort is the NCLR Homeownership Network (NHN), which provides first-time homebuyer and foreclosure prevention counseling and trains NCLR Affiliates who are working on the front lines in Latino communities across the country. Continue reading

Will the Housing Market Be a Casualty of the Government Shutdown?

Photo: Jeffrey Turner

Photo: Jeffrey Turner

What’s one way to sabotage the already struggling housing market recovery that millions of Americans desperately need?  Why, a government shutdown, of course.

As we head into the second week of the government shutdown, little progress has been made beyond pointless offers to fund specific programs with piecemeal bills. Realistically, this strategy amounts to political posturing and saving face for a group of lawmakers that continue to obstruct progress—with it, we are no closer to finding a solution.  Continue reading

Budget Cuts Cost Denver Families the Chance at Buying Their First Homes

Guest blog post by Rosa Madrigal, Manager, Homeownership Services, Del Norte Neighborhood Development Corporation, NCLR Affiliate

Sold Home For Sale Sign in Front of New HouseOwning a home remains the central pillar of the American Dream.  At Del Norte Neighborhood Development Corporation (NDC) here in Denver, we help several Coloradans reach their dream every year.  Our mission is to ensure that everybody has access to quality and affordable housing.  For more than 30 years, we have addressed the severe housing needs for low- and moderate-income families in the Denver area, the vast majority of whom are Latino.  But crippling budget cuts brought about by sequestration pose a very real threat to our ability to provide those families with the critical housing services they need to purchase a home.  Continue reading