Key Dem accuses banks of ‘fraud’ in home foreclosures

A key Democrat accused banks of “fraud” in the emerging controversy over whether foreclosures have been properly administered.

Rep. Maxine Waters (D-Calif.), a senior member of the House Financial Services Committee, suggested the recent epidemic of foreclosures are a result of collusion in the banking industry.

“This is massive collusion and fraud,” she said during an appearance on CNBC.

“It’s proven by the fact that you have millions of people in foreclosure who should have never been in foreclosure,” she added. “This just didn’t happen because there were a lot of irresponsible people. Think about it, this is unprecedented that this many people, all of a sudden, would be in foreclosure.”

Waters is pushing for a national moratorium on foreclosures as Congress and state attorneys’ general look into whether banks have been sufficiently diligent in deciding how to lend and when to foreclose on mortgages.

Some banks have voluntarily suspended foreclosures while an investigation into their practices plays out. The Obama administration has made clear in the meanwhile, however, that they do not favor the national moratorium that some congressional Democrats have demanded.

“I think it’s important to recognize that a national moratorium would be very damaging to exactly the kind of people we’re trying to protect,” Treasury Secretary Tim Geithner said last night on “Charlie Rose,” reasoning that a moratorium would depress already-low housing prices. “That would be very damaging.”

Waters justified her demand on the grounding that consumers were “tricked” by banks that offered mortgages that seemed cheap at the time.

“These exotic products that were put on the market tricked them into mortgages they could not afford,” she said.