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.