by Charing Ball
California Democratic Rep. Barbara Lee has penned an op-ed piece urging the Obama administration to issue a national moratorium on housing foreclosure. According to her piece, Lee is frustrated with the apparent rubber-stamping of foreclosure documents by mortgage lending and the alleged predatory practices happening with the government’s modifications program. Moreover, because there have been reports of widespread fraud, Lee feels that it is morally right for the administration to stop the foreclosures, while both federal and state investigations can be done.
Rep. Lee is not alone in her calls for a national moratorium. Folks like Rep. Elijah Cummings (D-Maryland), Sen. Harry Reid (D-Nevada.), and Congressman John Conyers (D-Mich.), join a litany of numerous political leaders demanding a stop to foreclosures in their states.
Just yesterday, the Obama administration’s Financial Fraud Enforcement Task Force confirmed reports that it is investigating whether banks and other companies, which submitted flawed paperwork in state foreclosure proceedings, may have misled federal housing agencies that they were acting in good faith with troubled homeowners. This announcement follows last week’s reports about attorneys general in about 40 states, including the District of Columbia, who will begin a joint investigation into foreclosures at the largest banks and mortgage firms.
For months, troubled homeowners have accused some of the nation’s biggest banks and mortgage servicers of routinely failing to respond in a timely manner to loan modification requests, and, in some instances, engaged in fraudulent practices. There have been reports that some employees of Florida’s largest “foreclosure mill” were given jewelry, cars and houses from the firm, in exchange for allegedly altering and forging key documents used to obtain foreclosures. The company has been credited with signing off on over 1000 foreclosure documents a day without overview.
And other reports that Bank of America is the subject of several class-action lawsuits from across the country alleging that it had strung out, delayed and in some cases hindered the modification process, despite being required under terms through its billion dollar bailout from the United States government.
Despite the growing cause for concern, The Obama Administration is opposing calls for a nationwide foreclosure freeze, citing concerns that a nationwide moratorium could slow recovery and further destabilize neighborhoods already roiled by record home seizures. According to the logic of some economic experts, delays tied to these pending investigations may cost U.S. lenders $2 billion for every month that these trouble properties are not pushed through the foreclosure pipeline.
As a community organizer in mostly low to moderate-income minority (Black, Hispanics and Asian) communities, I have some insight to the type of damage that a foreclosure has on a neighborhood. And while I can’t speak for the numbers, as the economic experts have, I can say that I don’t quite see how forcing people out of homes, only for these same properties to sit in the community abandoned and unused, makes economical sense neither. I can tell you that the HAMP program can work but only if there is time to review the cases to see if the only course of action for these troubled homeowners is foreclosure.
Back in 2008, right in the midst of the housing crisis, Philadelphia’s city council issued a temporary halt to all foreclosures in the city for about a month. Shortly thereafter, the city’s Court of Common Pleas, responding to reports of rampant predatory lending within the city, created the Philadelphia Residential Mortgage Foreclosure Diversion, which allowed housing advocates, low-income attorneys and community organizers, such as myself, to go into our communities and assist residents who were facing foreclosure. Those in danger were referred to non-profit housing counseling agencies, who could work on their behalf with the mortgage company.
Because of the success of this intervention program, some troubled homeowners have seen their monthly mortgage payments reduced to levels that they can afford. Moreover, a study had revealed that at the end of 2008, 78% of the people who had their mortgages modified through this program remained in their homes.
I can’t speak for anywhere else around the country but the people I run across through Philadelphia’s Foreclosure Diversion Program are not in this position because, as some rhetoric would suggest, they bought too much home. No, many of these troubled homeowners are the recently downsized and unemployed, the grandmother, who got sucked into a predatory homes scheme, which saddled her with high loan payments and robbed her of equity in her property and finally the renter, who had no idea that their scrupulous landlords hadn’t been paying his mortgage until the paperwork started coming in the mail.
In many of these instances, these troubled homeowners, who received direct intervention, were able to have an expert review their paperwork for signs of fraud, were directed to job employment opportunities, [renters] were given options to refinance properties and were told about other funding options, which enabled them to save their housing.
So should the Obama Administration consider a foreclosures moratorium? Well according to many observers, if a stoppage does happen, it will more than likely be short-lived – a few weeks or a few months at best. Yet a freeze, albeit temporary, would not only give struggling homeowners time to get their financial affairs in order but also give the Administration’s housing modification program time to engage in the outreach and intervention needed to review the cases and ensure that properties are not unnecessarily and fraudulently being pushed through the foreclosure pipeline.