California Attorney General Kamala Harris has appointed UC Irvine Law Professor Katherine Porter as the independent monitor of the state’s share of the recent home mortgage settlement between the nation’s homeowners and the five largest home mortgage lenders, amounting to $18 billion.
The settlement is part of a larger national penalty for the banks for "robo-signing" and other lending and foreclosure practices that led to the housing crisis, resulting in millions of homeowners losing their homes through foreclosure. The overall federal settlement –– amounting to $26 billion –– is pending approval in a federal court in Washington, D.C. Porter’s appointment is independent of the federal settlement and will be focused solely on certifying compliance in the California proceedings.
"Hundreds of thousands of California homeowners will benefit from the commitments of up to $18 billion extracted from mortgage lenders," said Harris. "We must enforce full and timely compliance with these commitments, and the appointment of Professor Porter as our California monitor is central to that enforcement. Professor Porter's wealth of experience and knowledge will protect the interests of homeowners and ensure that the settling banks deliver on their promises."
Porter specializes in consumer and commercial law, including bankruptcy and mortgage foreclosure. She has been a critic of the settlement, saying that it doesn’t go far enough to repair the damage that the lending crisis imposed on homeowners.
“The effectiveness of the settlement is going to turn on its enforcement. What matters is what the banks do –– and what the government makes them do –– not the promises on paper and at press conferences,” Porter said in a February OC Register editorial on the settlement.
She added that the banks skirted the rules for years, and prodding from the federal government has not proven effective in getting the banks to change their practices. “Without transparent data on whether the banks are holding up their end of the deal, the public will not have confidence that this deal is a reliable sign that the housing problems of the past are in the rearview mirror.”
Once the federal settlement is approved, Porter’s role will be to ensure that the lenders meet their obligations in a timely manner. Lender filings, homeowner reports and complaints, and other documents relating to the settlement and banks’ actions will be obtained and made available by the national monitor for the mortgage settlement, which Porter will review to ensure their compliance. Porter will report her findings back to the California Attorney General’s Office.
"I will work hard to make sure banks hold up their promises to change troubling practices, so that families and communities across California see the benefits of the settlement," Porter said following her appointment as the state’s independent monitor. "Part of repairing the damage of the mortgage crisis is restoring public confidence that our largest financial institutions will treat consumers fairly and follow the law."
The appointment of a California independent monitor is part of a series of safeguards to ensure transparency and compliance with the national settlement and the separate California agreement. The banks involved in the agreements –– Bank of America, Wells Fargo, JP Morgan Chase, Citigroup and Ally –– will incur significant financial penalties if they do not meet their guarantees of a minimum of $12 billion in principal reductions and short sales for California homeowners.
The California settlement is part of a national multi-state settlement, which is part of the overall federal mortgage agreement. It focuses on incentives for banks to help struggling homeowners in the state’s hardest-hit counties through principal reductions within the first year of the settlement and stronger enforcement provisions. Harris also insisted that this and other states’ agreements should preserve key ongoing investigations into mortgage lenders’ misconduct.
"The California commitment provides a path for thousands of struggling homeowners in California to retain their homes, while preserving our ability to investigate banker crime and predatory lending," said Harris. "This is one important stride in our ongoing efforts to address the mortgage and foreclosure crisis that has devastated too many California communities."
“Enforcement is also the fuel that could size up the settlement so that its effects are big enough to be felt in the economy,” Porter said in her February op-ed. “The settlement excludes all loans owned by Fannie Mae and Freddie Mac, and helps less than one in 10 of the 14 million homeowners that RealtyTrac reports is in foreclosure, behind on payments, or owes more than their home is worth. On its face, that is not the adrenaline shot to the housing market that our economy needs.”
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