Ask yourself why foreclosure rates are so high

The high mortgage foreclosure rates the country is seeing recently have caught everyone's attention - but have you asked yourself why it's happening? Why were there 1.2 million foreclosure filings in 2006? And why is the number continuing to rise?

The answer? The mortage lending industry spent nearly $210 million on Washington lobbying and campaign contributions over the past seven years, all in order to stop Congress from taking action to restrict lending abuses. They were generous...and they were successful.

As consumer and housing advocates won successes in states around the country for more regulation of mortgage lenders, the industry went to work in Congress. Their goal was to block strict regulatory legislation and pass federal legislation pre-empting state restrictions - their tool was money. Below are some eye-opening numbers on lobby expenditures and PAC donations from the largest subprime mortgage lenders, their trade associations, and corporate parents.

Note: All numbers in the tables come from a new report from Common Cause titled Ask Yourself Why...Mortgage Foreclosure Rates Are So High. The report, with more detailed figures, can be found here.

Federal Lobby Expenditures:

$187,446,230! Over a seven-year period, that will buy you a lot of influence. But let's break it down a little further:

PAC Donations, 1999-2006:

But who are these donations going to? For starters, how about a name we all know well? Then-Rep. Bob Ney (R-OH) had introduced a bill replacing strict state regulation with looser federal "restrictions." In 2005, he reintroduced the bill with Rep. Paul Kanjorski (D-PA) as a co-sponsor. Since 1996, Ney received more than $173,000 from the mortgage lending industry; Kanjorski received $140,500. The bill was strongly bipartisan, with 18 Democrats and 22 Republicans co-sponsoring - if Ney's Abramoff-related issues hadn't derailed the process, it probably would have long since passed.

But the fact that it hasn't doesn't mean the danger is over. Industry lobbyists continue to push for weak legislation, with PAC contributions leading the fight. Since 1999, the chairmen and ranking minority members of the House and Senate committees dealing with the legislation received almost $500,000 in PAC donations:

PAC Donations to Current Charimen and Ranking Minority Members of the House Financial Services Committee and the Senate Banking, Housing and Urban Affairs Committee:

There are signs that some in Congress are tiring of the unending news about foreclosure rates. But if they want to do something to stop the trend, they need to act fast. In 2006, foreclosure filings were 42% higher than in 2005 - for a total of 1.2 million homes, or roughly one in every 92. Unfortunately, 2007 doesn't look like it's going to be any better unless something is done; March 2007 foreclosure filings were 47% higher than in 2006.

And those are just the national rates - when you look at some individual states, the numbers are heartbreaking. In Georgia, 2006 foreclosure rates increased 67% over 2005 rates - that's one in every 41 households. Colorado's 2006 rates were 85% percent higher than 2005's, for a rate of one in every 33 households. And in Nevada, it's hard to believe anyone still has a roof over their head - 2006 saw a 300% increase in foreclosures over 2005! And lest the industry shrug these numbers off as just the rural and poor states, consider this: Texas, California, and Florida together accounted for 34% of national totals of 2006 foreclosures. (numbers from PR Newswire, 01/25/07)

So what can we do to make sure Congress is held accountable to the public - the people who can't pay their mortgages and are losing their homes - and passes real regulatory reform? In Ask Yourself Why...Mortgage Foreclosure Rates Are So High, the solution is clear. As long as the subprime lending industry is spending over $187 million lobbying Congress, and making $22 million in PAC contributions, the average joe, the ordinary American can't compete. What we need is full public financing of Congressional campaigns. Once the big corporate special interests are disarmed, our representatives will be forced to listen to their constituents and make public policy decisions to benefit all Americans, not just those who can write big checks.

Tags: Common Cause, foreclosures, mortgages, public financing, subprime lending (all tags)



Re: Ask yourself why foreclosure rates are so high

This is why we need to pass the Fair Elections Now Act, sponsored by Sens. Durbin and Specter, for public financing.  On this topic, it's horrible what people filing for foreclosure often go through.  And more broadly, it's sickening that the issue got ignored for so long, largely on the basis of heavy campaign spending and lobbying by one private industry.

by jzaharoff 2007-05-09 09:19AM | 0 recs
Re: Ask yourself why foreclosure rates are so high

Great example. This kind of influence and access has been for sale forever. The simple truth is that this effects virtually all public policy issues before our elected officials. We'll never get the reforms we need in healthcare, the environment, education, or anything else until we have full Public Financing of Campaigns like that called for in the bi-partisan "Fair Elections Now Act" introduced by Republican Arlen Specter and Democrat Dick Durbin.

There are also movements afoot in major states like California whose Assembly is considering AB 583 for full public financing of their state level elections. To help, call Assembly Speaker Fabian Nunez and urge his support of AB 583 (his number is 916-319-2046). (For additional non-partisan info see or or Call Speaker Nunez now!

by cmrced 2007-05-09 10:49AM | 0 recs
Re: Ask yourself why foreclosure rates are so high
You're absolutely right that almost all of the public policy fights at the forefront of today's politics come down to money. Beyond predatory lending, there's global warming, health care, gas prices...I could go on and on. The Fair Elections Now Act would put ordinary Americans on a more equal footing with corporations and industries.
by DCreformer 2007-05-09 11:02AM | 0 recs
Re: Ask yourself why foreclosure rates are so high

Great piece, and I could not agree more. To add to the discourse one should look a little deeper into how the risks of subprime mortgages are spread across the financial industry. To spread the risk,the actual mortgage company splices and sells your mortgage(based on risk profiles) to a banker who then goes further to sell it to investors. In this process the actual risks becomes muddle as the mortgages are packaged, repackaged, and so on. Basically, risky mortgages have been turned into extremely risky securities for investors. This practice is common, and not all together bad;however, the defaults in subprime mortgages will most likely spread through the whole economy by this mechanism. That said, this process of spreading the risk could have dire effects on the whole US economy. Many of these people should not have been sold mortgages, and the lobbying by the mortgage companies to lossen regulations has ultimately created their own bane.

by Forward with Feingold 2007-05-09 04:34PM | 0 recs
Re: Ask yourself why foreclosure rates are so high
That's an interesting - and scary - aspect of subprime lending to consider. It's just one more indication of the selfish nature of industry. If not Congressional action, what is it going to take before they're held accountable for their practices?
by DCreformer 2007-05-10 05:04AM | 0 recs
Re: Ask yourself why foreclosure rates are so high

It is indeed scary to think that these lenders could potentially sink the whole economy. Furthermore, one must wonder why they wanted to target such risky borrowers(ones who have terrible credit, and in my view, should not have been given mortgages or at least ones that were so dubious). With the flux of cheap capital and the eased restrictions, it was easy to do, and you can bet a lot of people profited from these risky mortgages(lenders, larger banks, investors, and so on).

There time to profit is over; many subprime lenders have closed their doors and are looking for a bail out or they will soon go bankrupt. So, it looks as though we may be forced to bail many of them out, but more importantly will we help the actual people who are losing their homes?

by Forward with Feingold 2007-05-10 07:43AM | 0 recs


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