washington
CNN
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Vice President Kamala Harris frequently touts how she took on “big banks” as California’s attorney general to provide mortgage relief to homeowners hit by the 2008 foreclosure crisis. There is. This story is central to how Harris presents herself to voters.
It has been mentioned in TV ads and many campaigns. She also talked about this in her speech at the Democratic National Convention in August.
“As California’s attorney general, I took on big banks, delivered $20 billion to middle-class families facing foreclosure, and helped pass the nation’s first Homeowners Bill of Rights.” she said.
The oft-repeated story is how Harris helped negotiate multi-state mortgage settlements with five of the nation’s largest banks that provided financial relief to homeowners and set standards for lenders. is mentioned. Mr. Harris also entered into separate agreements with three banks that guarantee certain relief to California homeowners. Both contracts were signed in 2012.
Harris has repeated this story throughout her political career. A chapter of her 2019 book, The Truths We Hold, describes her role in settlement negotiations. And it came up when Harris talked about her relationship with President Joe Biden’s late son, Beau Biden, who was then the attorney general of Delaware and also signed the national mortgage settlement. .
When Harris became California’s attorney general in 2011, many states and some federal agencies were already using technology such as robot signatures, in which banks routinely sign foreclosure-related documents without knowing whether the facts were correct. was investigating fraudulent lending activities.
At the time, the U.S. housing market was in turmoil, with Americans defaulting on their mortgages and facing foreclosures at sky-high interest rates.
In the fall of 2011, Harris withdrew from negotiations, claiming the settlement was “inappropriate for California homeowners.”
In her book, Harris details how she decided to speak directly to JPMorgan Chase CEO Jamie Dimon over the phone about the negotiations, and the conversation was heated. This national agreement was finalized just a few weeks later.
This episode was a career-defining moment for Harris. Before she left negotiations, California was set to receive only $4 billion from the national settlement, according to a press release from her office at the time.
“I think she persevered and I think she improved the settlement for homeowners in California,” said Ira Rheingold, executive director of the National Association of Consumer Advocates.
As a result of the national settlement, mortgage relief was provided to homeowners in a variety of forms, including principal reductions, interest rate reductions, other types of loan modifications, and short sales. In some cases, payments were sent directly to people who wrongly lost their homes to foreclosure, according to the National Mortgage Settlement website.
Harris appointed Katie Porter, then a law professor at the University of California, Irvine and now a member of the U.S. House of Representatives, to oversee the bank’s compliance with the terms.
The California agreement will provide more than 84,000 homeowners with approximately $9.2 billion in principal reductions on their first or second mortgages, according to Porter’s 2013 report. did.
Another $9.2 billion was spent on short sales. A short sale does not allow a family to continue living in the home, but allows the homeowner to sell for less than the property is worth. If your lender approves your short sale, they agree to waive the difference.
As a result, many families were able to stay in their homes, but in retrospect it wasn’t perfect.
“The principal reduction that took place here was less than it should have been, and that has a lot to do with the way this (agreement) is structured,” Rheingold said.
New standards for mortgage lenders
The settlement also established new repayment standards for mortgage lenders that did not exist on a national level at the time.
“From my perspective, the real value of this settlement is that it introduces broad service standards for major banks and lenders for the first time,” said Lisa Sitkin, principal attorney at the National Housing Law Project. .
Sitkin said the early days felt like the “Wild West” because there were no rules to protect borrowers during foreclosures.
For example, the settlement places limits on a practice known as “dual tracking,” in which mortgage servicers continue to process foreclosures while distressed borrowers apply for loan modifications.
The new guidelines were a precursor to federal regulations later created by the Consumer Financial Protection Bureau.
The standards also helped pave the way for the California Legislature to pass the Homeowner Bill of Rights, providing greater protections for homeowners.
“The only time we were able to pass a Homeowners Bill of Rights here in California was through the efforts of then-State General Secretary Harris, who led the way with his office,” he said, along with other advocates. said Sitkin, who has spent years promoting it. .
