Rep. Maxine Waters, (D-Calif.), defended on CNBC Wednesday her call for a mortgage modification and a moratorium on home mortgages for those Americans who are unable to make their loan payments, as a way of allowing them to keep their homes.
“There are people who were tricked [by mortgage lenders], who ended up with adjustable rate mortgages when they could have afforded 30-year mortgages,” said Waters, who chairs the Housing and Community Opportunity Subcommittee.
Her plan is a way of saying to the bankers, she said, “you guys have got to straighten this out.” Waters added that if bankers don’t act fast enough, then state prosecutors would step in to speed up the process.
Meanwhile, up to 40 state attorneys general are preparing to launch a joint investigation into the mortgage industry over the foreclosure document mess, Reuters reported Wednesday.
On Friday, the Bank of America [BAC 13.446 
-0.074 (-0.55%) 
] extended its foreclosure freeze to all 50 states as it continues internal “assessments” of its foreclosure practices.
Under Water’s plan,federal investigatorswould examine “the illegal and improper actions by mortgage servicers and the servicers themselves review their procedures,” according to a statement on her website. The banks would renegotiate mortgage terms on those underwater loans, meaning that some banks would lose money.
She said legal remedies available to homeowners in distress would pose additional financial hardship for those who are already having trouble paying their bills.
Waters failed to answer the question about whether a moratorium would pose a “moral hazard” or a conflict for those Americans who continue to pay their mortgages or would cause the entire mortgage market to seize.
“This is massive collusion and fraud,” added Waters. “It’s proven by the fact that there are millions of people in foreclosure. Think about it, it’s unprecedented, these exotic products that were put on the market. This is massive fraud.”
Waters is dealing with alleged irregularities of her own. On Monday, this long-time congresswoman will face an ethics panel over her actions involving a bank with ties to her husband that received federal bailout funds.
By: Michelle Lodge
Special to CNBC.com
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