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A realtor sign advertises a bank-owned house for sale in Pasadena, California.
California Attorney General Kamala Harris rejected a proposed nationwide settlement that would allow banks accused of wrongdoing in the foreclosure crisis to free themselves from further liability with a one-time payment to the states. On Friday, Harris called the proposed settlement "inadequate." Instead, she's independently pursuing an investigation on behalf of California, the state with the second-highest foreclosure rate in August.
Harris said it was a "combination of factors" that prompted her decision to commence an independent investigation on behalf of the state. She cited housing numbers from the last six months, showing California's jump from harboring five of the ten hardest hit regions in the nation to eight of the ten regions most impacted by the housing crisis.
Continuing, Harris said that in the last couple of months, there has also been a surge in foreclosures in California, "at a time when we're in good faith discussions with the banks about how we can move forward in a way that would be reflective of justice and adequate relief," she told KPCC's Patt Morrison.
Last week, the Attorney General met in Washington D.C. with representatives from the major banks accused of wrongful foreclosures.
"It just became clear to me that we could not receive a fair deal for California," she said.
All 50 attorneys general (AGs) have been negotiating a settlement over the past year with banks accused of wrongful foreclosures and robo-signing, the practice of lenders signing mortgage documents without sufficient review of borrowers' credit or ability to pay back the loans. Several AGs, such as New York's Eric Schneiderman, have already spoken out against the proposed deal backed by President Obama, and on Friday Harris joined their ranks.
"What are we going to do for those people who have already lost their homes [.] this is a moot discussion for them," she said.
"The federal hammer is very big," Patt pointed out, as she asked Harris what results California can hope to obtain in an independent investigation.
"Now we're at a point of pursuing [.] what I have always maintained we should do, which is 'Let's do a comprehensive investigation.' I've been very reluctant to engage in cutting a deal when I haven't taken a look at all the evidence," Harris said.
Harris plans to rely both on the California Department of Justice and the Mortgage Fraud Strike Force she created within her office last May to investigate the mortgage crisis.
Some feel that banks aren't the only one to blame. A listener, identifying himself as "listener" on the Patt Morrison web page, said people should take some personal responsibility:
"While there are those who were victimized by banks and other mortgage services into bad loans most couldn't afford or understand. There are many who went way above their means trying to live like the Hiltons or the stars on MTV cribs. Face it you could not afford it in the first place and the gravy train is over. You speculated and lost. Time for prices to come down to where the rest of us in the real world are waiting," he commented.
"There's no question that we are looking, and should only be looking, at circumstances where there was wrongdoing by the banks," Harris responded. "This is not about bringing relief to wrongdoers, this about bringing relief to those people who play by the rules, who did what they were told they should do, but instead they are finding that they are out of a home because they were misled."
Harris said she's heard that nationally, by 2012, neighbors of those in the midst of the foreclosure process will lose a combined $1.9 trillion in the value of their homes.
She said that though many will be impacted by the crisis, "the goal of [their investigation] is to bring relief to Californians who, in particular, are in the process of foreclosure and perhaps also modification, Californians who are underwater and who are delinquent in their payments, but who also are the victims of misconduct by the banks. And you know, it's not a monolithic group."
What’s best for the country and the economy? Will this make a difference to Californians hoping to stay in their homes?
Craig Pollack, assistant professor of medicine, Johns Hopkins School of Medicine; co-author of “Foreclosures Are Killing Us,” an op-ed in the New York Times
Kamala Harris, Attorney General of California
Amy Schur, executive director, Alliance of Californians for Community Empowerment (ACCE)
Ken Kelly, homeowner and community leader in Antioch, CA