Monday, September 24, 2012

Will Your State Be Punished for Taking Foreclosures to Court?

In the near future, nearly half of the United States could experience increased mortgage fees.  Ed DeMarco, acting director of the Federal Housing Finance Agency (FHFA), announced a proposal to change its standard practice of treating all states equally by creating a new mortgage fee structure that varies by state.  The way it works is that you will be charged increased mortgage fees when purchasing a home if you live somewhere that uses the judicial system to process its foreclosures.

DeMarco’s reasoning for the proposal is that foreclosures settled in court cost the FHFA more time and money than foreclosures that are settled outside of court.  By padding mortgage costs up front, he claims he’s reducing FHFA’s risk.  Unfortunately, this complex fee structure misses the target.  It will not save time or money or serve as a deterrent to servicers who pass the cost on to homeowners.  Rather, it acts as a penalty for states that provide a judicial outlet for grievances between homeowners and lenders.  An analysis by HousingWire found that the judiciary process does not equate to a drawn-out foreclosure.  In fact, the states with the slowest processing of delinquencies—Washington, Alabama, and Mississippi—do not use the judicial process for foreclosures, while some of the states with the fastest foreclosure processing—Iowa, New Mexico, and Minnesota—do use the judicial process. 

This proposed policy ignores the reality that servicers have monetary incentives to drag out foreclosure proceedings.  To truly address the issue of prolonged foreclosures, the FHFA should focus on the way mortgages are serviced.  DeMarco’s proposal will do little to change the realities of the mortgage servicing sector.  Rather, the proposal will likely increase the cost of credit, leaving communities of color and low- and middle-income communities with fewer credit options.

A plan to increase fees for states that provide judicial recourse for delinquent homeowners fails to take into account the complexities of the foreclosure crisis.  If implemented, it will affect the 21 states that are judicial, meaning that a substantial number of future homeowners could be affected.  There is no need to punish a state for the protections it has put in place to safeguard homeowners from wrongful foreclosures. 

This pattern of thinking underscores the urgent need to hear from both presidential candidates on the matter of housing.  How do they feel about raising mortgage fees for specific states?  Advocates and counselors in the trenches are speaking out and have initiated a drumbeat for effective and proven approaches to processing foreclosures smoothly and repairing the housing market.  They have long recognized that troubled homeowners do not want to live in limbo, and that delays in the foreclosure process range widely based on the random inefficiencies of servicers’ bookkeeping.  With this recent proposal, the FHFA has left us stunned yet again.  This proposal signals a dismantling of the judicial process and the protections it affords both homeowners and lenders.  Rather than assist a true economic recovery with a positive and lasting change, this proposal will further erode the ability of many homeowners to get back on their feet. 

One ray of hope is that the FHFA will soon open up this proposal for comment.  We strongly recommend that homeowners, advocates, and stakeholders follow this comment period very closely and be sure to submit their thoughts on where the FHFA should actually devote its energy—that is, toward making aggressive changes in servicing standards.

Thursday, September 13, 2012

Where Are the Candidates on the Foreclosure Crisis?

For the last two weeks, one politico after another has railed about our damaged economy and declared their intention to solve the problem. Without question, unemployment remains a serious issue that must be dealt with head-on. However, one issue that has been conspicuously missing from all this talk about our economy is the ongoing Home Opportunity crisis. There have been two million foreclosure filings this year alone and over 15 million homeowners are underwater, meaning that their home is worth less than they owe on their mortgage. That’s millions of senior citizens losing their economic security, children and families uprooted, neighborhoods blighted with vacant properties, and a continued drag on our economy. Given the level of attention it’s received at the conventions, though, you wouldn’t know that.

Enter Kamala Harris. The California Attorney General has been a relentless champion of homeowners in her state and has worked tirelessly to find viable solutions to ending wrongful foreclosures. Harris knows that we will not see full economic recovery without addressing the state of our housing market, and she drove that point home in her remarks before the Democratic National Convention. To date, she’s been one of the only public officials to address this crisis.

Harris understands that we didn’t get here by accident. Our housing turmoil is rooted in wrongdoing by lenders and Wall Street and inadequate rules and enforcement. That’s why she led the fight against the big banks and lobbyists intent on maintaining the status quo and continuing to line their pocketbooks. As she said at the convention:

“I’ve seen all that happens when you roll back those rules. What happens are rows of foreclosure signs…mountains of family debt…a middle class that’s hurting. That’s what we’ve seen in towns across California and across this country.”

Harris is a partisan Democrat, of course, and her remarks were aimed at GOP candidate Mitt Romney. But, the truth is that neither party has said much about how they propose to get us out of this foreclosure crisis and back on track toward prosperity. If they’re looking for ideas, both candidates just need to look at what Harris has done in her post as Attorney General.

The housing crisis was preventable, but politicians and regulators were asleep at the wheel. We cannot afford to make the same mistake again. We have it in our power as a nation to put housing, homeownership, and our economy back on track. We have practical solutions that will promote successful homeownership, help Americans repair their finances and communities, and build a more fair and prosperous economy.

Indeed, thousands have already come together to urge the candidates to present their path forward. Why are they shying away from putting forth a concrete plan to stop wrongful foreclosures and ensure that we have affordable homes to rent and real access to homeownership? The Home for Good Campaign has been asking these very questions but has yet to get an answer. There are no easy answers, but ignoring the problem won’t make it go away.

Friday, September 7, 2012

Housing Crisis Remains a Backburner Issue at DNC

Capping off the Democratic National Convention and officially ushering in the election season, President Barack Obama took to the podium last night to lay out his vision for America’s future.  And while there are points in his speech, as there were in his challenger’s, that paint an encouraging picture for Latinos of the next four years under his leadership, there is yet again one prominent omission—what about housing?

At last week’s Republican National Convention, there was hardly a whisper about how Gov. Mitt Romney planned to solve the housing crisis.  Since the housing bubble burst, home values have plummeted, leaving millions of Americans paying off mortgages that are worth more than the actual houses they own.  Couple that with the millions of families all across the country who have either already lost or face the very frightening possibility of losing their homes to foreclosure, and you have a very real problem that needs to be dealt with now.  And while Gov. Romney and President Obama lay out their cases for how they plan to guide this country through the economic crisis to recovery, they seem comfortable leaving families in the dark about how they plan to stem the bleeding in the housing market.

To be fair, Democrats did turn the mic over to California Attorney General Kamala Harris, who highlighted one of the administration’s crowning housing achievements—the historic $25 billion Department of Justice settlement between five of the nation’s largest mortgage servicers and 49 state attorneys general.  Perhaps we can take this as an indication that the incumbent plans to run on his record.  Certainly, Obama has had victories worth mentioning—the historic Countrywide settlement as well as the opening of the Consumer Financial Protection Bureau both show that this administration is attempting to hold banks accountable for unfair lending practices and is working to prevent consumers from once again becoming victims of fraud.

Still, these are just a few of the building blocks necessary to create a stronger, safer housing market, and quite frankly, these blocks alone will not do the job.  President Obama needs to lay out a plan for American homeowners explaining how he is going to turn this housing crisis around.  Is housing counseling for struggling homeowners going to be funded or will it succumb to budget cuts?  How does principal reduction factor into housing policy and is it even on the table?  American homeowners don’t know because the two candidates running for office won’t talk about it.

Last night, the President acknowledged the uphill challenge of healing the economy:  “When the house of cards collapsed in the Great Recession, millions of innocent Americans lost their jobs, their homes, their life savings, a tragedy from which we’re still fighting to recover.”  But the eerie silence from both President Obama and Mitt Romney inspires more concern than confidence over their ability to muster enough political will to grapple with solutions.  And what homeowners need more than anything is the confidence that the leader of this country is in their corner.

We need a commitment from both candidates that they will work to make homeownership viable for all Americans.  We need a plan from both candidates for how they are going to stem foreclosures and protect American consumers from fraud.  And most importantly, we need an acknowledgement that this problem exists and is worth talking about during this election.  

Friday, August 31, 2012

The Missing Piece of the GOP’s American Dream

This week, Republican presidential nominee Mitt Romney and members of his party hammered home the point that this country needs leaders who will do what is essential to preserve the “American Dream” not only for ourselves, but for future generations.  Last night, Governor Romney said that he was running for president “to help create a better future, a future where everyone who wants a job can find a job, where no senior fears for the security of their retirement.”  We at NCLR have no argument there.  The problem, however, seems to be that this candidate either doesn’t remember all that encompasses the “American Dream” or, more troubling, doesn’t have a plan to fix one of its basic elements—homeownership.

In the run-up to the election, the economy has, rightfully, taken center stage.  There’s no doubt that this will be the key issue for both parties, as both Governor Romney and President Obama spar over how to get Americans, including many Latinos, back to work.  A job is only one part of the “American Dream,” though. Indeed, everybody should have the opportunity to earn a better living for themselves through hard work.  However, as old as apple pie is the promise for those workers to have a chance at affordable homeownership. A home is key to building a better life and finding a safe place to settle down and raise a family.

Americans have been inundated with the candidates’ overtures about how to solve the economic crisis, yet nobody appears to be willing to tackle the housing crisis that is simultaneously consuming our nation.  Of course, both problems are deeply connected.  In a time when we needed recovery, the collapse of the housing market severely crippled the economy, depleting the value of millions of Americans homes.  And without jobs, how are homeowners supposed to pay off their mortgages and avoid foreclosure?

Still, the proposed solutions from the campaign trail have conspicuously excluded the housing market from economic recovery.  Housing is an entirely different beast that requires its own fixes.  It is worrisome that throughout the three days of the Republican National Convention, there was nearly no mention of one of the biggest problems that this country is suffering through.  And from the Republican presidential contender, the silence is deafening.  Where in Mitt Romney’s platform is housing reform?

Millions of people have lost their homes or are at risk of losing their homes to foreclosure.  The Latino community for one has seen its wealth completely decimated by the housing crisis.  We do not need a silver bullet but we do need to hear from the potential leader of this country how he is going to repair our mortgage market and preserve what’s left of our neighborhoods.  Americans cannot afford to ignore the troubled housing system.

Heading into next week, the Democrats will have their opportunity to address this issue at the DNC.  Unfortunately, housing is conspicuously absent from President Obama’s platform as well.  It is clear we need solutions to end this crisis.  NCLR and its Home for Good partners have proposed detailed solutions and successful models that can be taken to scale.  And there are many.  All we need now is a leader to take up the cause.

Thursday, August 23, 2012

Gabby, Ryan, and Home Opportunity for All

Not even Olympians are immune from America’s homeownership crisis. The Associated Press reported that the parents of U.S. Olympic swimmer Ryan Lochte are facing foreclosure in Florida, while the mother of gold medal gymnast Gabby Douglas filed for bankruptcy in Virginia last year, she said, “to protect my home.”

I don’t know the circumstances behind these families’ financial challenges.  But the fact that families who had the discipline, commitment, and drive to raise Olympic gold medalists did not have the systems or information needed to remain successful homeowners reaffirms that the promise of American opportunity is at grave risk.

Roughly four million American families lost their homes to foreclosure between the beginning of 2007 and early 2012.  Some 11 million are struggling with “underwater” mortgages, meaning that they owe more than their home is worth.  That’s just under a quarter of all U.S. homes with a mortgage.  For most, a perfect storm of financial industry misconduct, inadequate consumer protections, falling home prices, and record unemployment are at the core of the problem.

The Lochte and Douglas families are fortunate.  Their kids are now stars who will soon be paid millions in endorsement proceeds—Gabby’s already on the cover of a Corn Flakes box.

But for most Americans, the solutions require broader action. An alliance of consumer protection, fair lending, and housing experts have developed a Compact for Home Opportunity, with over two dozen practical, tested solutions for preventing needless foreclosures, restoring neighborhoods, and rebuilding the American dream.  The Compact is powered by Home for Good, a national campaign driven by people concerned about the enduring foreclosure and housing crisis.

The Compact’s solutions range from increased access to housing counseling, to reducing loan principal to fair market value, to increased fair housing and lending protections.  Some states, notably California, have adopted important elements of the Compact.  But a more robust, national approach is needed.

Home for Good is pushing housing issues back into the presidential contest, and onto the national agenda, demanding that candidates and policymakers take a stand on the causes and solutions to the crisis.  With foreclosures and bankruptcy intruding even into the Olympic games, their call is increasingly hard to ignore.

Previously posted on Rooflines by Alan Jenkins on August 9, 2012.

Thursday, August 2, 2012

Geithner Steps Up in Defense of Principal Reduction

Yesterday, Treasury Secretary Timothy Geithner took a bold step toward guarding families’ homes from unnecessary foreclosure. He wrote an open letter in defense of principal reductions—a vital option that reduces the original amount of a home loan for struggling homeowners. Last summer, partners of the Home for Good campaign called on Secretary Geithner to make lasting improvements to the mortgage market.  More than 10,000 concerned individuals sent postcards, and during a four-day call-to-action, nearly 400 people called the Treasury to urge a simple message:  stop needless foreclosures; support affordable rental housing; and revive a sustainable path to homeownership.  With his open letter, Secretary Geithner made a strong move in the right direction.
In an environment where the blame game is often the operative strategy for elected officials and housing stakeholders, there appears to be little that economists, advocates, big banks, and investors agree on.  However, principal reduction is a solution that has cut across ideology and is considered by many to be a win-win solution. At minimum, it is anevidence-based tool for reducing foreclosures that continues to be underused, even while so many other approaches come up short. Smart servicers and lenders are on board.  They use a calculation known as Net Present Value (NPV) to compare the costs associated with foreclosure to the costs of reducing principal.  As analysis released by the Treasury Department shows, there is a targeted group of loans on which investors can save money in the long run by cutting a troubled homeowner’s mortgage balance to a manageable level.
Unfortunately, Federal Housing Finance Agency (FHFA) Acting Director Ed DeMarco has time and again stood in the way of implementing principal reductions as a solution.  DeMarco is in charge of regulating Fannie Mae and Freddie Mac, where most of the nation’s home loans are held—and until he concedes, many families will continue to fall into needless foreclosure.  In his open letter, Geithner points out that a recent study by DeMarco’s own agency shows that principal reduction decreases the chances of redefault and actually saves money, rather than increasing risk and cost, as DeMarco claims.  Making the situation all the more frustrating, we—the taxpayers—are the investors in the case of loans serviced by Fannie Mae and Freddie Mac.  DeMarco does us all a disservice by rejecting a key tool that could reduce foreclosures while also saving money for taxpayers.
Geithner’s public statement in support of principal reduction is cause for celebration, but DeMarco has further entrenched himself as the major obstacle to taking principal reduction to scale.  The enduring housing crisis requires bold steps and true solutions.  We cannot afford to be impeded by purely ideological differences—five years of that experiment have cost millions of families their homes and neighborhoods.  Principal reduction is a proven and refreshing strategy for repairing the system, and DeMarco must no longer stand in the way.
Ready to see real solutions to our nation’s housing woes? Join the Home for Good campaign and tell the presidential candidates that you want their commitment to housing opportunities!
Photo by Medill DC, CC BY

Friday, July 6, 2012

Don’t Quit the Dream: A Vision for Homeownership Beyond 2012

After years marked by stalemate and indecision, 2012 has delivered a glimmer of hope for families and the housing market.  The Department of Justice kicked off the year with a historic settlement with Bank of America regarding predatory loans made by Countrywide before the Bank acquired the company in 2008.  Not to be outdone, 49 state Attorneys General delivered the largest settlement made thus far on behalf of families who experienced wrongful foreclosure.  And just last week, California’s state legislature approved a bill to end the practice known as dual track—where a homeowner’s loan modification and foreclosure are processed at the same time.  Now servicers will have to suspend foreclosure while a family is being evaluated for a home-saving solution.  Our community’s skepticism is warranted as we’ve heard the promises before, only to be disappointed with one failed program after another.  But there is one reason to think that these latest efforts may be the precursor to true relief:  elected officials finally seem to have gotten the message that voters care about housing. 

In polls, voters often identify the troubled state of the economy as their top concern.  Most economists agree that housing remains the biggest drag on our recovery.  Eleven million homeowners owe more than their home is worth.  That’s 11 million people who are keeping themselves out of the consumer economy.  Some of this is a good thing; people are paying down their debt and padding their savings.  But for most, that negative equity looms large over the family finances.  Not only is household consumption down, but families are delaying purchases of major goods that drive our economy, such as cars and houses.
On Monday, July 9, HUD Secretary Shaun Donovan and CFPB Director Richard Cordray will speak before hundreds of Hispanic leaders at the 2012 NCLR Annual Conference in Las Vegas at 6:00 p.m. ET/3:00 p.m. PT.  If you’re in town, you can join us at the Mandalay Bay (it’s free and open to the public).  If you can’t be there in person, you can watch it live here.  Our message is clear:  Don’t quit the dream.  The settlements secured earlier this year are a critical step forward, but their ultimate impact will only be realized if implemented well.  This town hall is part of the Home for Good Campaign—a venue for local voters to challenge our presidential candidates on their solutions to the persistent housing slump.

For as much consensus as there is around solutions, the lack of movement from Washington is shocking.  Principal reduction is widely recognized as the best way to head off an unnecessary foreclosure, thereby sparing the neighborhood one more abandoned property and keeping local taxes flowing to municipalities.  Analysis of the various methods servicers use to stave off foreclosure shows that homeowners are most successful when the principal balance is written down to a value closer to what the home is actually worth.  Perhaps the best evidence is that the banks and servicers are putting this strategy to work on the loans they hold on their books.

Republican candidate Mitt Romney’s solution is to let the housing market bottom out, and he and President Obama both support refinancing as way to help the market rebound.  These strategies have not worked so well for Latino families in hot foreclosure states like Florida, Nevada, California, and Arizona, where home values may be as little as 50% of what they were a few years ago.  During another session at the NCLR Annual Conference, we will share data that shows that Latinos accounted for only 4.2% of all refinancing loans originated in 2010 compared to 87% for White homeowners.  Meanwhile Fannie Mae and Freddie Mac overseer Ed DeMarco continues to be the major obstacle preventing implementation of the best tool for restoring housing stability—principal reduction. 

The hope is that with robust implementation of the 49-state AG settlement, the evidence for principal reduction will grow.  Most of us are not content to wait that long.  Voters in California showed they can persevere—the bill had failed three times before—when they stand up and let their elected officials know what they want.  Now it’s time to deliver that kind of success to other states.  Here is what you can do:  Tell the presidential candidates you want to see better solutions now.  Join us at the Don’t Quit the Dream town hall or follow us on Twitter at #NCLR12 to get your side of the story on the public record.  Together we can make 2012 the year to turn around the housing market.