TOLEDO, OH – U.S. Sen. Sherrod Brown (D-OH) revealed how Ohioans will be affected by this month’s deal requiring banks to pay $8.5 billion to homeowners who were hurt by the mortgage crisis. Brown was joined at Advocates for Basic Legal Equality, Inc. (ABLE) by Belinda Brooks, a Northwest Ohio homeowner whose home was in foreclosure because of errors made by her mortgage servicer. Kathy Broka, president and CEO of the Fair Housing Center, a Toledo homeowner advocacy and counseling organization, also attended today’s event.
Yesterday, Brown sent a letter to the federal banking regulators and the U.S. Department of Justice urging them to prevent financial companies from taking tax deductions as part of their legal settlements. Under current law, companies are able to take advantage of tax rules to deduct from their federal taxes the full value of any settlement payouts.
“While the settlement reached can in no way make up for reckless actions taken by mortgage servicers that harmed families and our economic recovery, it is one step forward,” Brown said. “But it’s simply unacceptable that these Wall Street banks can write off these mortgage settlements, shifting the cost to taxpayers. Banks that take a family’s home because of errors or fraud should not get a tax deduction and a slap on the wrist. Breaking the law should not be a business expense.”
Foreclosures—which drag down housing prices and hurt borrowers, even ones who are current on their mortgages—have been responsible for the slow housing market recovery. Last week, federal regulators and 10 lenders reached an agreement to address the large number of unlawful foreclosures that occurred when banks used illegal practices—such as “robo-signing”—to initiate foreclosure proceedings or failed to offer mortgage modifications or other measures that could keep Americans in their homes. Nearly 96,000 Ohioans, including nearly 5,000 people in Lucas County, are eligible for payments and loan modifications averaging $2,125 per homeowner under the deal.
Earlier this week, Brown sent a letter to the Office of the Comptroller of the Currency (OCC) and the Federal Reserve calling on the regulators to ensure that adequate relief is provided to all homeowners who suffered abuses in the foreclosure process, particularly low-income and minority homeowners who may not have filed a claim in the initial Independent Foreclosure Review (IFR) process. Brown also asked the OCC and Federal Reserve to continue their work to address abuses in the foreclosure process.
Brown is working to prevent the housing crisis from undermining economic recovery efforts. Brown will call for passage of the Foreclosure Fraud and Homeowner Abuse Prevention Act. This legislation would expand access to foreclosure prevention services, while increasing protections for homeowners and investors in mortgage-backed securities.
Below is full text of the letter.
January 17, 2013
The Honorable Benjamin Bernanke
Board of Governors of the Federal Reserve
Washington, D.C. 20551
Mr. Thomas Curry
Comptroller of the Currency
Administrator of National Banks
Washington, D.C. 20219
Dear Chairman Bernanke and Comptroller Curry:
In the wake of the global financial crisis, the United States government has brought numerous civil, criminal, and enforcement actions against the largest financial institutions. These actions have included securities fraud, fair lending violations, consumer abuses, and market manipulation. The most recent example is last week’s $8.5 billion settlement between the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FRB), and the nation’s 10 largest mortgage servicers for widespread fraud in the foreclosure practices of these servicers.
The acts of these institutions are doubly harmful to ordinary Americans. They suffer first as homeowners, consumers, and investors, but they suffer again as taxpayers because companies can deduct the cost of penalties from their federal tax bills. It is simply unfair for taxpayers to foot the bill for Wall Street’s wrongdoing. I urge you, the Justice Department, and the other financial regulators to adopt the practice employed by the Securities and Exchange Commission (SEC), which prohibits companies from deducting settlement costs as a business expense. This rule should apply to this settlement as well as any future settlements with financial institutions. For too long, too many have treated breaking the law as a cost of doing business. It is not. Breaking the law should not be a business expense.
Thank you for your attention to this important matter.
United States Senator
Cc: The Honorable Martin Gruenberg, Chairman, Federal Deposit Insurance Corporation
The Honorable Eric Holder, Attorney General, U.S. Department of Justice
The Honorable Gary Gensler, Chairman, Commodity Futures Trading Commission
The Honorable Shaun Donovan, Secretary, U.S. Department of Housing and Urban Development