While big bank and regulator negotiations continue, government officials have assembled a comprehensive mortgage meltdown task force.
On Friday, U.S. Attorney General Eric Holder and Department of Housing and Urban Development Secretary Shaun Donovan announced the formation of the "Residential Mortgage-Backed Securities Working Group" aimed at developing new mortgages for those who are still struggling and buying and selling mortgages to distribute the risk.
The group, comprised of more then 50 investigators and lawyers have already taken action as Holder said that subpoenas are being sent to 11 financial firms with regard to the buying and selling of mortgages.
"This working group can set a template for not just accountability but for real relief for homeowners," Holder said.
"I have no doubt that we will improve our ability to recover losses, to prevent fraud, to bring abuses to light and to hold those who violate the law accountable," he adds.
The working group has also shared documents and jurisdictions with New York State Attorney General Eric Schneiderman, which will allow the team to take advantage of New York State’s tougher Wall Street fraud laws, he adds.
"I am confident that this new effort will improve our ability to ensure justice for victims," Holder said.
Critics Weigh In On New Group
Although Holder and Donovan stressed that the new group will do a better job of investigating mortgage fraud and finding solutions, a former special inspector general believes the efforts are only smoke and mirrors.
"This certainly looks like political rebranding of the existing efforts," said Neil Barofsky, who was involved in investigating big bank bailouts.
However, Holder said on Friday that despite critics’ disbelief that the government hasn’t made headway, real work is being done. "It is not as if we haven't been doing anything,'' Holder said. "We have been doing a great deal. … We are bound and determined to hold people accountable."
Barofsky is also critical some of the player choices Holder and Donovan have made, as many of the agencies and state attorneys general have been collaborating about mortgage fraud since 2009 . He adds that if the group is really serious about cleaning up securities fraud, the U.S. Attorney for the Southern District of New York should be involved.
Barofsky says that this U.S. Attorney office has the most experience working with security fraud cases. "You're putting someone in charge of it who doesn't have experience with securities fraud," he said. "Why don't you have your most skilled A-team contributing to this?"
Despite criticism Holder and Donovan said that the group will focus on specifics that led directly to crisis. "If you think about the actions that really led to the devastating effects on homeowners, it really was the origination and the securitization of these products," Donovan said.
The team will also omit focusing on mortgage servicing issues, which are currently being negotiated between Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial and regulators and states attorneys general.
Iowa Attorney General Tom Miller believes that big bank/regulator negotiations and the new securities group tackles several, but different areas of the meltdown. Geoff Greenwood, spokesman for the Iowa attorney general explains that the mortgage crisis has "many pieces of a puzzle," and the new working group allow officials to "address those other pieces."
Big Bank Negotiations In Trouble?
Although Miller’s camp may express optimism, others believe negotiations may be in trouble. During a CNBC interview, JP Morgan Chase CEO Jamie Dimon said that he believes that the new working group could threaten negotiations and a possible settlement.
However, Citigroup CEO Vikram Pandit is still optimistic, "If people have done something wrong, they ought to be held accountable for it, there's no question about that," Pandit told CNNMoney's Poppy Harlow. "That's how the business world should work."
The current deal on the table is a settlement ranging from $20 and $25 billion, which could deliver $20,000 in mortgage relief for underwater households. According to the latest proposed deal, the final settlement would provide big bank immunity from future lawsuits.
Undisclosed sources close to negotiations say that big players like California State Attorney General Kamala Harris and New York State Attorney General Eric Schneiderman are reportedly cool to the deal.
According to Shrum Preston, spokesman for the California Justice Department says that Harris feels as though that the offer isn’t good enough for California. During Friday’s press conference Schneiderman would not comment on whether this involvement with the new working group would provide a stamp of approval on any future settlement.
States are expected to decide on the settlement at the end of this week.