State Attorneys General to the Rescue

October 6th, 2008 by Phil Mattera

Jerry Brown, once derided as Governor Moonbeam because of his unorthodox ideas while serving as the chief executive of California, today showed that he is much more in touch with reality than the U.S. Congress and the Bush Administration. Brown, currently California’s attorney general, announced a settlement under which one of the worst predatory lenders will be compelled to spend more than $8 billion to assist borrowers who are confronting foreclosure.

Congress, at the behest of the Administration, approved a misguided bill that bails out major banks to the tune of $700 billion and provides little direct assistance for struggling homeowners—and still may not solve the credit crunch. Brown (photo)  and the attorneys general of ten other states went to the real heart of the problem. Earlier this year, they sued subprime lender Countrywide Financial (now owned by Bank of America) and have now gotten the company to disgorge some of its ill-gotten gains tied to the subprime mortgages it was peddling.

Today’s settlement with Countrywide – which Brown’s office played a central role in bringing about – is by far the largest recovery from a predatory lender. Bank of America, downplaying the disgrace of its subsidiary, put out a press release announcing “the creation of a proactive home retention program that will systematically modify troubled mortgages” for nearly 400,000 Countrywide customers. The release manages to avoid any use of the terms “predatory,” “lawsuit” or “litigation” – as if B of A just came up with the idea in informal discussions with the attorneys general.

What’s more important than the spin is the substance of the settlement, which includes options such as interest rate and principal reductions as well as complete Federal Housing Administration refinancing under the HOPE for Homeowners Program. There is also financial assistance for those whose homes have already been foreclosed.

This settlement by itself seems to do more to help homeowners than the whole ballyhooed federal bailout. Bravo to the AGs, who should continue using the power of crusading litigation to go after all the culprits in the crisis.

And what was it conservatives were saying about curbing “frivolous” lawsuits?

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