It’s Time for Home Opportunity

Dramatic developments this month have underscored our nation’s progress, as well as our continuing peril, when it comes to Home Opportunity—the deeply held idea that everyone should have access to an affordable home under fair conditions. These developments, both positive and negative, should inform the national choices ahead, including in the presidential race.

On July 11th, California lawmakers enacted the groundbreaking California Homeowner Bill of Rights, halting unfair bank practices that have forced thousands of Californians into foreclosure. Among other protections, it restricts “dual-track” foreclosures, in which lenders preemptively foreclose on homeowners who are in active negotiations to save their homes. Importantly, the law also empowers consumers to hold lenders accountable in court.

Just a day later, the U.S. Justice Department announced a landmark settlement of lending discrimination charges against Wells Fargo. The settlement provides $125 million in compensation for borrowers who the Justice Department says Wells Fargo or its brokers steered into risky and expensive subprime mortgages, or charged higher fees and rates than white borrowers, solely because of their race. The discrimination “resulted in more than 34,000 African-American and Hispanic borrowers paying an increased rate for loans simply due to the color of their skin,” according to Deputy Attorney General James Cole.

The Wells Fargo agreement builds on an earlier Justice Department settlement—the largest ever—against Countrywide Financial Corporation for racial discrimination that included a widespread pattern of discrimination against qualified African-American and Hispanic borrowers in mortgage lending. And on July 20, the Justice Department asked a judge to compel New York’s Westchester County to provide information on local zoning practices that might be racially discriminatory. This was a long-overdue step, since Westchester has consistently flouted the terms of a historic fair housing settlement it agreed to three years ago after decades of fostering neighborhood segregation.

These are important developments that, together, help to address the harm that years of lender misconduct and lax rules and enforcement have done to millions of American homeowners and our larger economy. They are making a difference, with the number of Americans facing foreclosure activity declining 11 percent in the first half of 2012, compared with the same period last year.

But much more is needed. Over one million homes and properties still saw foreclosure filings in the first half of this year. That’s hundreds of thousands of senior citizens losing their economic security, children and families disrupted, neighborhoods blighted with vacant properties, lifetimes of economic security destroyed.

And the financial institutions that wrecked our economy have continued their misconduct in different forms. This week, for example, JPMorgan Chase agreed to pay $100 million to settle a lawsuit filed by its customers accusing the firm of improperly increasing minimum payments on borrowers whom they knew could not afford to pay more, generating ill gotten income from the resulting late fees. This, after JPMorgan gambled and lost its clients’ money to the tune of at least $5.8 billion.

And after the British bank Barclays settled with U.S. and British regulators for $453 million, admitting to manipulating the London interbank offered rate, or Libor (a benchmark that underpins hundreds of trillions of dollars in contracts), over a dozen additional banks are now being investigated for similarly rigging exchange rates on international markets.

It’s time for Home Opportunity—American homeownership, fair lending, fair housing—to return to the national debate. That has begun, with the rise of Home for Good, a national campaign driven by people and organizations throughout the nation concerned about the enduring foreclosure and housing crisis. That effort is equipped with clear, practical solutions, in the form of a Compact for Home Opportunity developed by housing, lending, and consumer protection experts around the country.

With the presidential contest now in full swing, it’s time for the candidates to take a stand on this crucial economic and moral issue. President Obama has taken important steps, yet he’s avoided some of the most bold and effective remedies that are available to him. Governor Romney has been mostly silent on what his Administration would do to restore Home Opportunity. It’s time we demanded clarity and commitment from each of them.

 

 

It’s Time for Home Opportunity

Dramatic developments this month have underscored our nation’s progress, as well as our continuing peril, when it comes to Home Opportunity—the deeply held idea that everyone should have access to an affordable home under fair conditions. These developments, both positive and negative, should inform the national choices ahead, including in the presidential race.

On July 11th, California lawmakers enacted the groundbreaking California Homeowner Bill of Rights, halting unfair bank practices that have forced thousands of Californians into foreclosure. Among other protections, it restricts “dual-track” foreclosures, in which lenders preemptively foreclose on homeowners who are in active negotiations to save their homes. Importantly, the law also empowers consumers to hold lenders accountable in court.

Just a day later, the U.S. Justice Department announced a landmark settlement of lending discrimination charges against Wells Fargo. The settlement provides $125 million in compensation for borrowers who the Justice Department says Wells Fargo or its brokers steered into risky and expensive subprime mortgages, or charged higher fees and rates than white borrowers, solely because of their race. The discrimination “resulted in more than 34,000 African-American and Hispanic borrowers paying an increased rate for loans simply due to the color of their skin,” according to Deputy Attorney General James Cole.

The Wells Fargo agreement builds on an earlier Justice Department settlement—the largest ever—against Countrywide Financial Corporation for racial discrimination that included a widespread pattern of discrimination against qualified African-American and Hispanic borrowers in mortgage lending. And on July 20, the Justice Department asked a judge to compel New York’s Westchester County to provide information on local zoning practices that might be racially discriminatory. This was a long-overdue step, since Westchester has consistently flouted the terms of a historic fair housing settlement it agreed to three years ago after decades of fostering neighborhood segregation.

These are important developments that, together, help to address the harm that years of lender misconduct and lax rules and enforcement have done to millions of American homeowners and our larger economy. They are making a difference, with the number of Americans facing foreclosure activity declining 11 percent in the first half of 2012, compared with the same period last year.

But much more is needed. Over one million homes and properties still saw foreclosure filings in the first half of this year. That’s hundreds of thousands of senior citizens losing their economic security, children and families disrupted, neighborhoods blighted with vacant properties, lifetimes of economic security destroyed.

And the financial institutions that wrecked our economy have continued their misconduct in different forms. This week, for example, JPMorgan Chase agreed to pay $100 million to settle a lawsuit filed by its customers accusing the firm of improperly increasing minimum payments on borrowers whom they knew could not afford to pay more, generating ill gotten income from the resulting late fees. This, after JPMorgan gambled and lost its clients’ money to the tune of at least $5.8 billion.

And after the British bank Barclays settled with U.S. and British regulators for $453 million, admitting to manipulating the London interbank offered rate, or Libor (a benchmark that underpins hundreds of trillions of dollars in contracts), over a dozen additional banks are now being investigated for similarly rigging exchange rates on international markets.

It’s time for Home Opportunity—American homeownership, fair lending, fair housing—to return to the national debate. That has begun, with the rise of Home for Good, a national campaign driven by people and organizations throughout the nation concerned about the enduring foreclosure and housing crisis. That effort is equipped with clear, practical solutions, in the form of a Compact for Home Opportunity developed by housing, lending, and consumer protection experts around the country.

With the presidential contest now in full swing, it’s time for the candidates to take a stand on this crucial economic and moral issue. President Obama has taken important steps, yet he’s avoided some of the most bold and effective remedies that are available to him. Governor Romney has been mostly silent on what his Administration would do to restore Home Opportunity. It’s time we demanded clarity and commitment from each of them.

 

 

It’s Time for Home Opportunity

Dramatic developments this month have underscored our nation’s progress, as well as our continuing peril, when it comes to Home Opportunity—the deeply held idea that everyone should have access to an affordable home under fair conditions. These developments, both positive and negative, should inform the national choices ahead, including in the presidential race.

On July 11th, California lawmakers enacted the groundbreaking California Homeowner Bill of Rights, halting unfair bank practices that have forced thousands of Californians into foreclosure. Among other protections, it restricts “dual-track” foreclosures, in which lenders preemptively foreclose on homeowners who are in active negotiations to save their homes. Importantly, the law also empowers consumers to hold lenders accountable in court.

Just a day later, the U.S. Justice Department announced a landmark settlement of lending discrimination charges against Wells Fargo. The settlement provides $125 million in compensation for borrowers who the Justice Department says Wells Fargo or its brokers steered into risky and expensive subprime mortgages, or charged higher fees and rates than white borrowers, solely because of their race. The discrimination “resulted in more than 34,000 African-American and Hispanic borrowers paying an increased rate for loans simply due to the color of their skin,” according to Deputy Attorney General James Cole.

The Wells Fargo agreement builds on an earlier Justice Department settlement—the largest ever—against Countrywide Financial Corporation for racial discrimination that included a widespread pattern of discrimination against qualified African-American and Hispanic borrowers in mortgage lending. And on July 20, the Justice Department asked a judge to compel New York’s Westchester County to provide information on local zoning practices that might be racially discriminatory. This was a long-overdue step, since Westchester has consistently flouted the terms of a historic fair housing settlement it agreed to three years ago after decades of fostering neighborhood segregation.

These are important developments that, together, help to address the harm that years of lender misconduct and lax rules and enforcement have done to millions of American homeowners and our larger economy. They are making a difference, with the number of Americans facing foreclosure activity declining 11 percent in the first half of 2012, compared with the same period last year.

But much more is needed. Over one million homes and properties still saw foreclosure filings in the first half of this year. That’s hundreds of thousands of senior citizens losing their economic security, children and families disrupted, neighborhoods blighted with vacant properties, lifetimes of economic security destroyed.

And the financial institutions that wrecked our economy have continued their misconduct in different forms. This week, for example, JPMorgan Chase agreed to pay $100 million to settle a lawsuit filed by its customers accusing the firm of improperly increasing minimum payments on borrowers whom they knew could not afford to pay more, generating ill gotten income from the resulting late fees. This, after JPMorgan gambled and lost its clients’ money to the tune of at least $5.8 billion.

And after the British bank Barclays settled with U.S. and British regulators for $453 million, admitting to manipulating the London interbank offered rate, or Libor (a benchmark that underpins hundreds of trillions of dollars in contracts), over a dozen additional banks are now being investigated for similarly rigging exchange rates on international markets.

It’s time for Home Opportunity—American homeownership, fair lending, fair housing—to return to the national debate. That has begun, with the rise of Home for Good, a national campaign driven by people and organizations throughout the nation concerned about the enduring foreclosure and housing crisis. That effort is equipped with clear, practical solutions, in the form of a Compact for Home Opportunity developed by housing, lending, and consumer protection experts around the country.

With the presidential contest now in full swing, it’s time for the candidates to take a stand on this crucial economic and moral issue. President Obama has taken important steps, yet he’s avoided some of the most bold and effective remedies that are available to him. Governor Romney has been mostly silent on what his Administration would do to restore Home Opportunity. It’s time we demanded clarity and commitment from each of them.

 

 

No More Excuses on Relief to American Homeowners

Read also: Home Opportunity Initiative

One by one, the excuses have fallen. Yet Edward DeMarco, acting head of FHFA, the agency that runs Fannie Mae and Freddie Mac, still fails to offer the most effective relief available to American homeowners struggling with mortgages held by those entities. Economists, housing experts, and members of DeMarco’s own staff have concluded that reducing to affordable levels the principal owed on at-risk mortgages is effective in reducing foreclosures and their destructive fallout. But, inexplicably, he’s been unmoved by the mounting evidence.

Two weeks ago, after hinting at a possible change of heart, DeMarco punted on the question, saying it needed more study and stating that such a policy question “should be determined by Congress.” But the evidence is too clear, and the stakes are too high, for further delay. It’s time for Mr. DeMarco to either act in the nation’s interest or get out of the way.

While many parts of our economy have gradually improved over the last several years, foreclosures are on the rise in regions around the country. The foreclosure data company RealtyTrac has predicted that one million American homes may enter foreclosure in 2012. An estimated 12 million Americans currently owe more on their mortgages than their homes are worth, meaning that millions more are at risk.

Fannie, Freddie, and DeMarco’s agency have an oversized role to play in addressing the crisis, since the entities are assumed to own or back roughly 3.3 million underwater mortgages and help set trends in the larger market. By including principal reduction among the tools they use, they could help millions of Americans save their homes while making sustainable payments toward the actual value of their property.

The American people essentially own Fannie and Freddie after a $150 billion bailout. Even before that, the entities were tasked with providing stability and affordability to the nation's mortgage finance market. FHFA’s mission similarly includes supporting housing finance, affordable housing, and a stable and liquid mortgage market, as well as promoting Fannie and Freddie’s safety and soundness.

The calls for principal reduction are growing louder, with evidence increasingly demonstrating that those interests all point toward principal reduction. It results in fewer foreclosures, as compared with alternatives like loan forbearance (delaying loan obligations) that FHFA has authorized. In addition to the obvious benefits to struggling homeowners, reducing foreclosures improves neighborhood home values, prevents abandoned and blighted properties, and saves cash-strapped municipalities the costs of upkeep and enforcement.

Many private lenders have been reducing principal obligations on their own, recognizing it’s often the best way for them to recoup their investment. Moreover, the strategy was a significant part of the Attorneys General settlement over “robo-signing” and related bank misconduct.

Reports have emerged that even FHFA’s own internal analyses show principal reduction is in the interest of both underwater homeowners and Fannie and Freddie. Documents recently obtained by the Congressional Progressive Caucus reportedly show that DeMarco’s agency studied the question in 2009, decided it was worth trying, worked with a major lender to develop a detailed pilot, and then abruptly canceled it in July of 2010 for what the Caucus says were ideological reasons.

To be sure, principal reduction is not a silver bullet. A range of aggressive solutions are necessary to address America’s foreclosure crisis, restore ravaged neighborhoods, and put our national economy back on track. Indeed, a coalition of housing and public interest groups that includes The Opportunity Agenda, National Council of La Raza, and the National Fair Housing Alliance has released a Compact for Home Opportunity highlighting over a dozen actions that government, private industry, and individuals can take to turn things around.

Principal reduction may be only one of those actions. But it’s an important one. With a million American homes at risk of foreclosure, the time for action is now.

Racial Discrimination by Banks Is Worsening the Foreclosure Crisis

Is there a house in your neighborhood that everybody hates to walk past? You know, the one with broken and boarded up windows, trash left to gather on the lawn, and grass so overgrown it’s becoming a habitat for rodents?

If you have a house like that in your community, you know it’s more than just an eyesore. Neglected, vacant houses depress property values throughout the community, and can threaten health and safety. They erode the sense of community and stability that creates vibrant localities, and they hamper economic resiliency. With a national foreclosure crisis still in full swing, such houses are all too common.

You might be surprised to learn, though, that if you have problem properties like that in your neighborhood, there’s a good chance your absentee neighbor is a bank. More shocking still, banks are neglecting houses they own in minority communities even more frequently—much more frequently—than those they hold in white communities.

A detailed undercover investigation unveiled last week by the National Fair Housing Alliance and several regional partners shows not only that banks too frequently fail to maintain foreclosed properties that they own, but that they tend to neglect their properties in communities of color at a much higher rate, with devastating consequences.

A large number of the neglected, bank-owned properties have broken or missing doors and windows, inviting vandalism and trespassers. And many have safety hazards that endanger the public. Those and other defects are significantly more prevalent in bank-owned properties located in communities of color. Another finding is that, on average, the banks are not marketing houses located in communities of color as aggressively to individual homebuyers as they do properties in white neighborhoods. The properties in white neighborhoods are, for example, more likely to have clear and professional “for sale” signs. When banks both poorly maintain and poorly market foreclosed houses, the properties tend to stay vacant longer and to eventually be sold to speculators, rather than to people who would make the houses their home.

The discriminatory differences are stark. In Dayton, Ohio, for example, 60% of bank-owned properties in African-American neighborhoods had broken or unsecured doors, compared to only 18% in white neighborhoods. In Atlanta, properties in African-American neighborhoods were almost five times more likely than homes in white neighborhoods to lack a “for sale” sign. And in Dallas, 73% of the bank-owned homes in predominantly non-white neighborhoods had trash on their properties, while only 37% in white areas did.

Neighbors of all races who live near foreclosed, bank-owned properties, the investigation found, are pulling together to keep them presentable—doing maintenance the banks should be doing, like mowing lawns and removing trash. But in communities of color, neighbors reported seeing home improvement contractors working on those properties at only half the rate seen by neighbors in predominantly white areas.

The bank behavior identified by this investigation is unethical, unlawful, and harmful to our economy. It breaches our basic national values of equal opportunity and the common good. It violates the Fair Housing Act of 1968, signed 44 years ago this week in the wake of Dr. Martin Luther King Jr.’s assassination. And it is holding back our economic recovery by, among other things, depressing home prices and hampering sales.

It’s hard to know all the reasons why banks are discriminating in this way. Bias and unfounded stereotypes about minority communities and homes, however, are a likely root cause. The investigators controlled for 39 race-neutral factors like building structure, water damage, and curb appeal, so the different treatment is indisputably about race, and not class or other home or neighborhood characteristics.

This investigation should be a wake up call for banks, regulators, local governments, and the neighbors of these bank-owned properties. Among the solutions identified by the National Fair Housing Alliance are anti-discrimination investigations by the Consumer Financial Protection Bureau and other enforcement agencies, making information about bank-owned properties more publicly accessible, and prioritizing buyers who will occupy these properties over speculators who may warehouse them.

As Americans struggle together toward a lasting economic recovery, good neighbors are more important than ever. It’s time to remind America’s banks that this includes them.

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