Mortgage task force could crack down on lenders soon

In the near future, a task force comprising several federal agencies could bring legal action against some of the companies that may have been responsible for the housing market's collapse and resulting economic downturn.

The Residential Mortgage-Backed Securities Working Group, an organization comprising many federal and state officials and agencies, could soon take legal action against those it feels is responsible for the economic downturn as a result of the way they packaged and sold risky mortgages, according to a report from Reuters. New York Attorney General Eric Schneiderman, who co-chairs the task force, would not specify whether financial institutions or individuals, or both, would be targeted as part of the legal action. Further, he would not say whether criminal charges would also be filed.

President Barack Obama originally formed the RMBSWG back in January to look into how companies pooled and sold subprime mortgages, the report said. In doing so, Obama said he hoped to hold the people who broke the law in selling these risky mortgage-backed securities responsible for their actions, and to put a lasting stamp on that financial era as a warning to others.

"It's important to convey the sense that no one is above the law," Schneiderman told the newspaper. "There's a set of rules to which all will be held accountable, including big players on Wall Street."

Part of the issue
Schneiderman, it should be noted, was also one of 49 states' attorneys general that worked on a settlement with a number of major mortgage lenders related to foreclosure practices involving consumers' residential mortgages, the report said. However, he actually worked to keep that settlement, which ended up totaling $25 billion.

The reason he did this was so that he could continue to pursue action against some of those agencies with the RMBSWG, the report said. By limiting the extent of the settlement with the states' attorneys general, Schneiderman might have given the task force additional flexibility in pursuing cases.

However, it has not done so yet, and been criticized for it, the report said. The task force, which involves not only Schneiderman, but also the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Department of Housing and Urban Development, and the Internal Revenue Service, has taken a few months to add necessary staff, which has delayed its ability to take action. Schneiderman also believes that it will have access to more resources now that it is up to full speed.

"History will show the working group acted pretty quickly given the circumstances," he told the newspaper. "The important thing is to see results and then continued results … (that) we don't just have one or two cases and then this peters out."

The path forward
Again, Schneiderman is on record as saying he cannot comment on whether the task force's efforts would result in civil or criminal action, or both, but another official said the likelihood of criminal subpoenas being served is relatively low, the report said. However, U.S. Attorney General Eric Holder previously served 11 major financial institutions with civil subpoenas related to the case in January, when the task force was first announced.

Schneiderman believes that in order to restore full confidence to the nation's financial markets, it's necessary for the task force to do all in its power to deal with these "bad actors" in the marketplace, the report said. The hope is that by bringing to account those who helped to spur the nation's financial crisis, that others would believe it was less capable of happening again.

Issues caused by the downturn
Of course, while the average consumer had little to do with the packaging and selling of risky mortgage-backed securities, the effect that practice had on them was profound. For instance, that is what led many to see their mortgages become upside down as values declined sharply following the housing market collapse and loan balances stayed largely the same.

Further, because the downturn had such a profound impact on companies, underemployment and unemployment skyrocketed, leading to more instances of delinquency and default on all kinds of credit products, including not only credit cards, but also mortgages and other types of loans as well. Consequently, millions of Americans saw their credit ratings plummet and were therefore ineligible to obtain new lines of credit.

Fortunately, the economy has been in recovery mode for some time now, and many consumers are beginning to find themselves back on firm financial footing. However, you should still take the time to order and closely monitor your credit report for any unfair markings, which may take a severe toll on your credit score.

Posted in Mortgages
Learn how it works

Questions about credit repair?

Chat with an expert: 1-800-255-0263

Facebook Twitter LinkedIn