A new era in homeownership

Banks and mortgage servicers expect homeowners to meet their obligations. In an economy built to last, homeowners should expect the same of them.

Too often in the run-up to the housing crisis, that wasn't the case. Banks didn't hold up their end of the bargain. Lenders sold loans to people who couldn't afford them to make profits that turned out to be a mirage. Millions of families who did nothing wrong lost their homes or saw their value drop as a result.

As extensive federal and state investigations found, the abuses continued after homeowners moved in. After reviewing thousands of loans insured by the Federal Housing Administration, the U.S. Department of Housing and Urban Development and its Inspector General's Office uncovered evidence that the country's five largest loan servicers routinely signed foreclosure documents without knowing whether they were accurate. In many cases, they didn't even verify that the foreclosures were legitimate.

Some of the people they hired to handle foreclosures used fake signatures on fake documents to speed up the process. Some didn't bother reading what they were signing, giving people little chance to hold on to their homes.

Allowing some of our largest, most powerful institutions to play by a different set of rules - to commit forgery and perjury against ordinary families - is wrong and contrary to what we stand for as Americans. That's why the Obama administration and a bipartisan coalition of attorneys general from 49 states recently reached a historic mortgage-servicing settlement of at least $25 billion on behalf of American homeowners. The settlement will begin to turn the page on an era of recklessness that left much damage in its wake.

The single largest federal-state civil settlement ever reached, it addresses foreclosure-processing violations by the nation's five largest mortgage servicers. It forces them to reduce the principal on at least a million loans, refinance mortgages for "underwater" borrowers, and pay billions of dollars to states and consumers.

Besides providing substantial, immediate relief to homeowners, the agreement establishes new homeowner protections going forward. It ensures that the banks that service nearly two of every three U.S. mortgages will fix the problems uncovered by investigations. It sets standards in keeping with the Homeowners' Bill of Rights recently announced by President Obama.

While the new Consumer Financial Protection Bureau is establishing a straightforward set of rules families can count on when buying a home, the standards in the settlement should ensure that lenders and servicers recognize homeowners' rights if they lose a job or have a medical emergency that puts the home at risk. No more lost paperwork, runaround, or excuses.

While this agreement won't undo the profound pain or fix all the problems the housing crisis caused, it does help us turn the page. Like the broad-based refinancing plan the president announced last month, it helps the housing market heal and provides a path to stability for the broader economy. And it helps struggling homeowners turn the page by providing relief that allows them to begin rebuilding equity in their homes and their lives.

As the president has said, we work and save for much of our lives to buy our homes. They represent the single biggest financial decision we make. They're where we raise our families and form our memories.

This settlement reminds us that our challenge isn't to prevent every foreclosure, but to create an economy built to last - one that holds powerful institutions accountable, helps our housing market recover, and gives all homeowners the dignity, respect, and fair treatment they deserve.