“Recently reported settlement proposals will effectively absolve these financial institutions of substantial civil and criminal liability in one of the largest alleged fraud schemes during the financial crisis,” Cantwell wrote in the letter to Attorney General Holder. “Continued reports of wrongful foreclosures, forged documents, and an inability of servicers and banks to prove chain of title…raises the alarming possibility that these defects were endemic to the mortgage servicing industry across the country. The sheer magnitude of the potential fallout…demands that we undertake a full investigation.”
In the letter Cantwell wrote that a $20 billion settlement is not enough for victims of foreclosure fraud or the millions of Americans who face foreclosure.
“The largest financial institutions … pump[ed] up profits and home prices, while dumping any potential losses on homeowners, taxpayers, and investors,” Cantwell wrote. “As a result of the pump-and-dump scheme … an estimated 14 million Americans are underwater, owing $700 billion more on their homes than those homes are worth. A $20 billion settlement is woefully inadequate to compensate the wrongfully evicted or homeowners struggling to stay in their homes.”
Cantwell also raised the concerns that not enough reforms are in place to effectively prevent another crisis and that victims of fraudulent mortgage schemes are not adequately compensated. Cantwell encouraged Holder to require reforms to ensure mortgage servicers don’t abuse the system again.
She also called for the Mortgage Electronic Registration System to be shut down, to put the responsibility on financial institutions themselves to prove that they have the legal right to foreclose on a property. "Confidence must be restored that proper transference of notes and mortgages was followed and clear chains of titles are available for all mortgages," she writes. "Until then, the burden of proof must be on financial institutions to prove that they have the legal authority to foreclose. The Mortgage Electronic Registration System should be dissolved and shut down, and the shortcut that allowed banks to avoid hundreds of millions, if not billions, in local fees to local registrars of deeds be closed off."