Dick Blumenthal is forcing some of the country’s biggest lenders to stop foreclosing on people. Linda McMahon says he’s overreacting.
Blumenthal was one of the first state attorneys general in the country to put pressure on several lenders who were discovered to have cut legal corners in processing thousands of foreclosures. They relied on forged signatures on key documents, or had people with no knowledge of cases sign forms claiming that they did. Some relied on so-called “robo signatures” generated by low-level employees of “foreclosure mill” law firms who had no idea what affidavits they were signing or why.
Three major lenders — GMAC/Ally, Bank of America and JP Morgan Chase — suspended foreclosure proceedings as a result until they could sort out the problem. Wednesday Blumenthal announced he’s one of 12 attorneys general leading a broader 50-state inquiry into the practice.
And he joined leading Congressional Democrats like Nancy Pelosi and Harry Reid in calling for a 60-day moratorium on home foreclosures while the mess gets straightened out.
As with any matter involving Dick Blumenthal these days, the foreclosure issue is playing out in two arenas: His day-to-day work as Connecticut’s attorney general and on the campaign trail, where he’s moonlighting as the Democratic candidate for Connecticut’s open U.S. Senate seat. Asked about the issue following his Tuesday night televised debate in New London with Republican candidate Linda McMahon, Blumenthal said he’s proud to “stand in favor of a moratorium as Bank of America has done and other banks should follow.” (Click on the play arrow at the top of the story to watch the full exchange.)
Blumenthal was asked about it when he met with reporters in the press room of New London’s Garde Arts Center following the debate. McMahon never showed up in the press room. The next day, her campaign spokesman, Ed Patru, offered the candidate’s take on Blumenthal’s call for a 60-day moratorium.
“Dick Blumenthal is a politician and as he typically does, he’s pandering on the issue even though a freeze on foreclosures would hurt home sales and devastate the U.S. economy,” Patru said in an email message. “Linda thinks it’s irresponsible of Dick Blumenthal to posture on this issue politically because it would exacerbate an already damaged housing market.”
Interestingly, McMahon’s position mirrors the Obama administration’s position. Treasury Secretary Timothy Geithner, for instance, warned this week of similar unintended consequences: unoccupied homes that need to sell would remain unsold, depressing prices for other homeowners and dragging down neighborhoods.
Blumenthal was asked about the unintended consequences argument Tuesday night.
“This issue is profoundly serious in this country, not only because it represents possibly a fraud on the court, but also because it may kick out of their homes homeowners who shouldn’t be out in the streets. I believe strongly that false and fraudulent documents should not be the basis for foreclosures,” he responded.
He followed up one of his major themes in that evening’s campaign debate: That he fights big corporations that prey on middle-class Americans with the help of the Washington establishment.
“I’m going to do everything I can to keep people in their homes against actions by the very banks who benefited form the bailout,” he said. “They induced people into mortgages. Now they’re kicking them out of their homes using false and fraudulent measures.”
A Wall Street Journal editorial noted that no evidence has surfaced of someone current on his mortgage facing losing a home because of these paperwork errors. The editorial began: “Talk about a financial scandal. A consumer borrows money to buy a house, doesn’t make the mortgage payments, and then loses the house in foreclosure — only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine? The affidavit was supposed to be signed by the nameless, faceless employee in the back office who reviewed the file, not the other nameless, faceless employee who sits in the front.
“The result is the same, but politicians understand the pain that results when the anonymous paper pusher who kicks you out of your home is not the anonymous paper pusher who is supposed to kick you out of your home. Welcome to Washington’s financial crisis of the week.”