Quick fix: Recent Mortgage Settlement Still Leaves Latino Homeowners Vulnerable

By Janis Bowdler, Director, Wealth-Building Policy Project, NCLR

Sign Of The Times - Foreclosure
Photo: Jeff Turner.

With all the commotion that surrounded the fiscal cliff debate, it was easy to overlook the recent news of yet another new mortgage settlement that will pay cash to homeowners who experienced fraud or abuses committed through mortgage servicing. The settlement replaces the Independent Foreclosure Review (IFR)—an enforcement action made by the Office of the Comptroller of the Currency (OCC) against servicers under its supervision for violations in the foreclosure process—with $8.5 billion in cash payments. Not only does the amount pale in comparison to the need, the abrupt change in approach also puts the credibility of the entire process in jeopardy.

The Independent Foreclosure Review (IFR) was a terribly flawed enforcement action during which banks hired independent consultants to assess abuses and compensate the homeowner. The project was severely inefficient and used an underwhelming amount of public outreach to inform families that it was there to help them. As a result, participation was low; as of December 13, only 356,000 of the estimated 4.4 million families eligible have filed for assistance. To further muddy the waters, several of the reviewing groups chosen to serve as “objective” entities were not actually disinterested parties. Though the OCC claimed to thoroughly vet such groups, they have since removed some participants due to conflicts of interest.

The good news is that the settlement could reduce the immense cost and bureaucracy required to conduct the reviews, thereby speeding aid to families who have been waiting much too long. However, this is small consolation in light of the potential pitfalls of this approach. The deal—which was negotiated with an alarming level of secrecy—could leave struggling homeowners with another failed program. The deadline to file a request for review was pushed back several times because of inadequate outreach conducted by OCC and the servicers, evidenced by the dismal participation rates. In fact, despite launching in November 2011, the OCC and servicers only implemented a dedicated campaign to reach hard-hit neighborhoods, including communities of color, over the last six weeks. Moreover, we have not seen any data indicating whether or not the outreach was successful.

Poor outreach notwithstanding, news reports suggest the OCC has arbitrarily determined that those who filed for a review will be awarded greater compensation, even though this has nothing to do with a person’s level of harm. It is not fair to determine after the fact that filing for a review entitles you to a higher level of compensation. If families knew about this in advance, they would have been more likely to file before the agreement.

That the sluggish IFR process halted in such an abrupt and nontransparent manner is truly unfortunate, as it will undoubtedly impact millions of Americans and the economy as a whole. Experience shows that quick fixes come up short in delivering relief and justice to families who have been irreparably harmed by wrongful foreclosures and other servicing abuses. If corrective action is not taken, the OCC will miss yet another opportunity to help the most harmed families, reinforce accountability through data collection, and lay tracks to avoid future offenses.

Let’s Give Our Children a More Certain Future This Holiday Season

By Janet Murguía, President and CEO of NCLR, and Bruce Lesley, President of First Focus

The New Year usually symbolizes an opportunity for new beginnings and growth, but American households face a very different reality in 2013. On January 2, the fiscal cliff will leave many families with $2,000 less to put food on the table, or even a roof over their children’s heads, unless Congress comes to a budget agreement this month.

The fiscal cliff’s automatic, across-the-board budget cuts come at a time when children and their families are already struggling. Kids are facing the highest levels of poverty since the Great Depression, and Latino children are faring the worst: about 1-in-3 Hispanic kids live in poverty today. If sequestration goes into effect, federal funding for kids will be cut by an additional $6.4 billion in Fiscal Year 2013.

Children represent the largest constituency of Americans who would be impacted by the fiscal cliff at 30 percent of the U.S. population. And Latino children now make up nearly 1-in-4 children under the age of 18, and are critically important to our nation’s future. An analysis from NCLR (National Council of La Raza) highlights what sequestration means for our kids:

  • 96,000 children will not be served by Head Start, including 34,000 Latino kids
  • 80,000 children will not receive the Child Care Development Block Grant, including 16,000 Hispanic children
  • 1.8 million low-income public school students will not receive extra reading and math help because of cuts to Title I. The 37 percent of Latino kids who attend high-poverty schools could be affected by these cuts.

We saw from the recent presidential election that Latinos, as a voting bloc, highly favor greater investment in all our children. At 10 percent of the electorate and over 12 million voters, the historic turnout of Hispanic voters is a critical factor in urging politicians to take action for kids. A nationwide election eve poll released by Lake Research Partners on behalf of First Focus Campaign for Children (FFCC) shows overwhelming support from Latino voters for a wide range of federal investments in America’s children at levels higher than voters of all demographics and political affiliations.

The damage sequestration would mean to kids is simply unacceptable to Hispanic voters and the public at-large that broadly supports raising revenue and oppose budget cuts that impact kids. Latino children are one of the fastest growing segments of kids in school. Cutting programs that contribute to their development and ensure they are prepared to meet the requisites of a future labor market would not only hurt their personal future success but undercut the strength and competitiveness of the nation’s economy. This is not lost on Hispanic voters who consistently list education and children’s issues at the top of their priority list.

In another poll conducted by Public Opinion Strategies on behalf of FFCC, the majority of American voters disapprove of Congress making budget cuts to an array of children’s programs, including: education (75-24%), the Children’s Health Insurance Program (74-17%), Medicaid (73-27%), child abuse and neglect (66-33%), the Child Tax Credit and Earned Income Tax Credit (63-34%), student loans and financial aid for college students (59-40%), Head Start (59-40%), and child care (54-44%).

Despite the popularity of investing in America’s next generation, discretionary spending on children has declined by about $2 billion since 2010. Children have borne a disproportionate share of the spending reduction to combat the federal deficit. In fact, the share of federal spending going to kids fell six percent in the past year.

The budget and impending sequestration clearly do not align with our children’s needs, and what voters want. Kids and their families deserve better. Let’s hold our lawmakers accountable. Contact your representative and tell them to keep kids off the table.

As Fiscal Cliff Draws Nearer, There Is No Time For a Plan B

By Janis Bowdler, Director, Wealth-Building Policy Project

This New Year’s, many Americans across the country will have quite a bit weighing on their minds at a time when they are supposed to be clinking champagne glasses and making their resolutions for 2013.  In less than two weeks, our country will go over the fiscal cliff, resulting in a tax hike for millions of Americans and severe funding cuts to education, health care, and housing programs, to name a few.  That is unless Congress and the Obama administration can reach a deal on the federal budget.

For a brief moment earlier this week, it appeared that both sides were willing to compromise.

But that glimmer of hope was fleeting, and it seems negotiations are at a standstill.  Republican leadership is now pushing “Plan B,” which the House will vote on tonight at 6:00 p.m.

Simply put, “Plan B” is bad for Hispanic families.  It fails to meet NCLR’s principles for a fairer federal budget.  The plan further reduces tax liability for those at the top while pushing working families toward poverty.

The wealthiest would be the big winners should this plan pass.  Under “Plan B,” millionaires would get an estimated $50,000 tax cut, while 25 million middle class families making less than $250,000 a year would see their income taxes increase by an average of $1,000 apiece.  And,millions would lose access to the Child Tax Credit, as well as the Earned Income Tax Credit, which are valuable tools that help prevent many Latinos from falling below the poverty line.

All of this while also allowing the sequester to move forward, gutting critical investments in education, jobs, and housing.  For example, in many poor districts, where federal funding covers a substantial portion of their budgets, for every $1 million that a school district receives in federal funding, sequestration will take away $82,000.  For districts with disproportionately large Hispanic and Black populations, that loss could have devastating effects.

“Plan B” is not a viable option for Latinos or this country.  Thankfully, President Obama has already issued a veto threat.  However, that does not mean both sides should stop trying to reach an agreement.  We strongly urge House Speaker Boehner and President Obama to put America’s working and middle-class families ahead of politics.  We need a fair approach to deficit reduction where everyone pays their share.

We must end this stalemate.  Far too much is at stake for the American people.  Nobody wins if we go over the fiscal cliff, and the clock is almost up.

The Federal Housing Administration: Unsung Hero of the Housing Market

By Jose A. Garcia, Policy Fellow, Wealth-Building Policy Project

The Federal Housing Agency (FHA) is one of the unsung heroes of the housing market.  Despite helping to save the housing market following the mortgage crisis in 2007, the FHA is continuously attacked, erroneously, for its commitment to provide mortgage liquidity in times of need and encourage lending to low income households.

American Enterprise Institute (AEI) recently released a report on the riskiness of the Federal Housing Administration’s (FHA) lending practices.  The report conflates and confounds data to reach misleading conclusions and recommends unnecessary changes.  FHA’s current financial challenges are overwhelming due to loans insured between 2007 and early 2010 as well as a single loan product:  seller-financed mortgages.  However, its losses are not due to creditworthy borrowers with lower credit scores and lower down payments, and AEI would do well to remember that correlation is not causation.  Furthermore, FHA no longer insures seller-financed loans.

If that is not enough for you, let’s look into this further.  For decades, lenders have been able to successfully provide reliable and sustainable mortgage products to low income communities across the country that are profitable for the markets and fair to vulnerable borrowers. A decade long study conducted by UNC Center for Community Capital of 46,000 low-income homeowners found that of those who received traditional 30-year, fixed-rate mortgages with a small down payment, 95% of homeowners were paying their mortgages. UNC’s study shows that correctly structured home loans to low-income households perform quite well, leading to sustainable homeownership and sound business opportunities for lenders.

For many low- and middle-income American households and communities of color, the FHA is a critical part of the mortgage lending repertoire to access homeownership.  By insuring loans made by private lenders—even during severe economic downturns—the FHA provides stability to the housing market and access to credit.  This was never truer than after the recent housing crisis, when credit became difficult to access and many lenders turned to the FHA.  Now the 78-year-old agency may need help to continue its good work, and if it does, American taxpayers should lend a hand.  Doing so benefits not only families looking to purchase their first home but the economy at large.

The FHA helped hold down the fort as the housing market reeled from the aftermath of bad loans and Wall Street greed.  Based on an analysis by Moody’s analytics, the agency’s actions in 2011 alone helped prevent housing prices from decreasing an additional 25% and from a 40% decrease in the sales of new and existing homes, saving three million jobs and half a trillion dollars in economic output.  By stepping in, the FHA rescued tens of thousands of middle-class families from losing their home equity and, in many instances, their homes.  The agency did this by backing a larger share of mortgage originations as private investors fled the housing market.  At the peak of the housing bubble,  FHA insured one-third of loans made in 2009, compared to 5% before the alarms rang in 2006.

Despite the important role that the FHA played in keeping the housing market from total economic collapse, Edward Pinto from AEI stated that, “This paper reports on a comprehensive study that shows the FHA is engaging in practices resulting in a high proportion of low- and moderate-income families losing their homes.”  Fiscal projections point to a shortfall between what the FHA needs to cover all its claims over the next 30 years and how much it has on hand.  FHA’s possible shortfall was not caused by lending to low- and middle-income households but rather due to maintaining liquidity in the housing market.  The shortfall does not mean a definitive need for taxpayer monies to cover it—it will be months before we know that for sure.

The FHA has already addressed unsustainable programs that contributed to its trouble.  Its seller-financed down payment assistance program, which called for the originator to cover the down payment, often resulted in originators inflating the purchase price of a home in order to do so.  This in turn led to financially unstable loans, especially during the recession, that resulted from the subprime debacle.  Congress banned the program from FHA insurance in 2008, after FHA had tried to eliminate the program for years.

While the seller-financed down payment program did not work, most FHA products do.  Low- and middle-income borrowers and communities of color have benefited from sustainable and profitable mortgage loans insured by the FHA.  The FHA provides a necessary service that the conventional market does not provide.  However, by pointing fingers at the FHA, critics are undermining the ability of an agency that has been critical in keeping the mortgage market accessible and affordable, providing sustainable pathways to homeownership for millions of Americans.

Housing on the Precipice

By Jose Garcia, Policy Fellow, Wealth-Building Policy Project, NCLR

Home for GoodAs 2013 approaches, the clock most people are watching is not in Times Square but in Washington, DC, where the countdown to the fiscal cliff has begun.  Lawmakers face a self-imposed deadline of December 31 to figure out how to deal with tax hikes and spending cuts.  If an agreement is not reached, the Congressional Budget Office projects that it could cost the U.S. two million jobs next year.  This drastic job loss could hamper the housing recovery, and the timing could not be worse.

The U.S. is still reeling from a recession that drained more than $17 trillion in wealth from American families, disproportionately affecting low- and middle-income families and communities of color.  Hispanic families lost an alarming 66% of their household wealth.  Their ability to save and invest in their families, their communities, and our nation’s economy has been severely limited by high rates of unemployment, stagnant wages, and an increased cost of living.  Yet on the cusp of a new year, the U.S. is trying to balance the budget by putting the confidence of consumers and our few, hard-earned economic inroads at risk.  For Latino families, the fiscal cliff could mean a return to double-digit unemployment, affecting their ability to keep a roof over their heads.

If an agreement is not reached, the U.S. Department of Housing and Urban Development will suffer 8.2% in cuts to a number of programs, including $1.5 billion to tenant-based rental assistance and $4 million to its Housing Counseling Program.  For homeowners, fewer jobs could lead to a new wave of foreclosures as newly unemployed workers struggle to make mortgage payments.  Decreases to funding for housing counseling could further erode Latino home equity, as there will be less assistance available to help families save their homes.

Cuts to housing subsidies put at risk the housing of millions of families who rely on these subsidies to make ends meet.  For these renters, this assistance provides a way to cover the cost of basic living expenses and survive economic shocks from unplanned emergencies like car repairs.

The fiscal cliff also threatens to slow the momentum in the housing market, as nervous consumers may be less likely to purchase a new home.  Uncertain about tax hikes or job losses, prospective buyers may hold off on purchasing a home until they feel more secure about their economic prospects.  Fewer homebuyers could stall growth of the housing market, and from there the fiscal cliff could lead to an economic slump that may result in greater reliance on economic assistance.

As was evident during the last election, the issues that are important to Latinos can no longer be ignored.  Hispanic voters have rejected a strategy that would focus only on spending cuts.  Instead, Latinos want to see a balanced approach that raises revenue by requiring everyone to pay their fair share of taxes.  Like all Americans who are still recovering from a deep recession, Latinos are most concerned with rebuilding our nation’s economy.  Recent polls show that Latino voters overwhelmingly support strategic investments in education and infrastructure over cutting taxes as the best way to spur economic growth.  The fiscal cliff provides the U.S. with an opportunity to work toward a better future for all by helping our workforce acquire the skills needed in today’s market, and by taking care of the elderly who worked tirelessly to make the U.S. one of the most prosperous nations in the world.  This can all be accomplished while still balancing the budget and avoiding sequestrations.  We need to be smart about the budget challenges that our nation faces.  We cannot afford to put the housing of working families at risk just to keep giving tax breaks to rich individuals and corporations.

Latinos Are Watching How Elected Officials Respond to the Fiscal Cliff

By Janis Bowdler, Director, Wealth-Building Policy Project

NCLR hosted a national call today for leaders from the NCLR Affiliate Network, the NCLR Action Network, members of the press, and others engaged with the Hispanic community for a discussion on how to address the country’s budget challenges with a balanced approach that protects vulnerable families.  We were joined by Rep. Xavier Becerra (D–CA); Jason Furman, Assistant to the President for Economic Policy and Principal Deputy Director of the National Economic Council; and Julie Rodriguez, Associate Director of Latino Affairs and Immigration for the White House Office of Public Engagement.  In case you missed it, the call was recorded and is available at www.nclr.org/federalbudget.

According to the exit polls, more than 12 million Latinos cast their vote last month.  Like all Americans, Latino voters went to the polls with the economy on their minds.  The Hispanic community has spoken, and they overwhelmingly favor a fair, balanced, and shared approach to deficit reduction.  More than 700 people signed up for today’s call, which shows that our community’s deep civic participation is continuing.  Hispanic voters are watching carefully to see how federal policymakers address the so-called fiscal cliff in ongoing debates on the federal budget.

NCLR Affiliates on the call wanted to know if lawmakers and the Obama administration will raise taxes on working families or gut critical investments in students and workers.  For example, Dixon Slingerland, Executive Director of the Youth Policy Institute in Los Angeles, raised the issue of unemployment among Latino youth, which is over 20 percent nationwide.  He stressed the importance of providing services for Latino disconnected youth who are interested in returning to school or finding work.  Dixon made a strong case for policymakers to shift their focus to a major jobs package to address the persistent unemployment crisis.

Cynthia F. Figueroa, President and CEO of Congreso de Latinos Unidos, based in Philadelphia, pointed out that poverty and inequality have risen greatly over the last four years in our nation’s urban centers.  Parents are working multiple part-time jobs or low-paying full-time jobs to make ends meet.  In this economy, the Child Tax Credit and Earned Income Tax Credit have been lifelines to Latino families and children.  She pressed the White House to stand firm and not sacrifice these potent antipoverty tools.  Figueroa also highlighted the importance of investing in kids and maintaining important funding for education programs that our youth need.

Olivia Mendoza, Executive Director of the Colorado Latino Leadership, Advocacy & Research Organization in Denver, shared that one in four Latinos in Colorado and two-fifths of children statewide rely on Medicaid for vital health coverage.  It is no secret that Medicaid is a prime target for cuts.  She asked how the White House would protect the gains won through the Affordable Care Act.

Finally, Stephen Torsell, Executive Director of Homes on the Hill in Columbus, Ohio, called attention to the ongoing fight against foreclosures and vacant and abandoned properties in his state.  He asked how the administration aims to preserve funding for vital housing and financial coaching services such as the Department of Housing and Urban Development’s Housing Counseling Program, which has been to be one of the most effective ways of preventing unnecessary foreclosures.

NCLR appreciates the time that the White House staff took to respond to these questions and others by leaders serving Hispanic families.  We hope the administration and Congress take notice of the issues put on the table by those closest to the community.

Latinos sent President Obama back to the White House because of his commitment to fighting for working families.  The fiscal cliff is his first opportunity to act on those campaign promises.  We all agree that something must be done to lower the federal deficit.  However, it is wrong to ask working families to sacrifice education, health care, and their children’s well-being to give tax breaks to people and corporations that do not need them.  Smart investments in education, jobs, and housing will help hardworking families move up the economic ladder—and that will benefit us all.  This is our vision of a fair economy where prosperity is shared by everyone and the most vulnerable among us are protected.

Changes to CFPB Guidelines on Remittances Keep Responsible Providers in the Game

By Janis Bowdler, Director, Wealth-Building Policy Project, NCLR

One of the first moves by the newly minted Consumer Financial Protection Bureau (CFPB) was to issue a rule implementing new protections for money sent to loved ones abroad, known as remittances.  Americans wire billions of dollars annually.  Much of this business is done by immigrants, who are prey for hidden fees that drain hard-earned cash from those who can afford it least.  Consequently, one goal of the new rule is to spur new technology and infrastructure that will make remittances safer and cheaper to send.  Change is never easy, so I was not surprised when the new rule was met with deep opposition by some industry players.  Still, no one wants to see promising and responsible providers leave the market.

As we approach the deadline for implementation (currently set for February 2013), it has become clear that modest refinements could make it easier for responsible companies to comply with the rule and compete in the market without sacrificing critical protections for the consumer.  CFPB announced yesterday that it will issue draft adjustments for public comment next month.  Richard Cordray, Director of the CFPB, deserves credit for standing firm on safeguarding remittances while also ensuring a workable and responsible marketplace.

Before this provision became law in the Dodd-Frank Act, it was nearly impossible to compare costs between remittance providers.  The new law requires providers to disclose the exchange rate, fees, and the amount of funds that recipients can expect in their home currencies.  It’s this last figure that is the critical innovation.  Let me give you an example:  If you attempt to send $100 to Mexico, one provider may state that your family will receive $1,200 pesos while another may state that your family will receive $1,100 pesos.  For once, your choice has become obvious.  It may be difficult to evaluate the tradeoffs between fees and exchange rates, but knowing the final amount that your loved ones will receive allows for classic comparison shopping.

Other anticipated adjustments include:

  • Financial institutions, or senders, will not be held liable if a consumer provides a wrong account number.  Senders can only match numbers, not names, and therefore have no way to verify the identity of receivers.  They will still have to demonstrate that it is consumer error and will retain responsibility for investigating and recovering funds.
  • Senders will be responsible for published fees, and when such fees are unknowable, they will have to overestimate so that the consumer has the advantage.
  • Senders will have to account for the country federal tax, but not city or county taxes.  There are very few local taxes, and those that exist are extremely modest.

NCLR firmly stands behind the CFPB’s original proposed regulations as well as recent amendments that will encourage greater openness and accountability in the remittance market.  These rules will ensure that banks and other senders can continue to offer this very important product to Latinos.

Congress. Listen to Latinos: Raise Revenue and Reject Cuts to the Poor

By Janis Bowdler, Director, Wealth-Building Policy Project, NCLR

The 2012 presidential election debate centered on how best to jumpstart our economy and spur job creation.  The candidates campaigned on their opposing plans, drawing stark contrasts on fundamental economic issues such as taxes, health care, and the national debt.  Hispanic voters went to the polls in record numbers and with a clear message:  Grow the economy in a way that we all prosper.  In fact, more than half of Hispanic voters said the economy weighed heaviest on their mind as they cast their vote for President.

So we’re pleased to see the President kick off the debate on the so-called fiscal cliff by standing by his campaign pledge to reduce the deficit in a balanced way, including asking the wealthy to pay a little more so we can invest in the next generation.  In an election eve poll Hispanic voters expressed their overwhelming support for this approach.  When asked how we should go about reducing the deficit, 35 percent support raising taxes on the wealthy and 42 percent support a combination of revenue generation and spending cuts—and not on the backs of the poor.  Notably support remains high for revenue plus cuts across party lines.


Click to enlarge
Source: ImpreMedia/Latino Decisions 2012 Latino Election Eve Poll

Latinos have a lot at stake in how Congress opts to fix our budget woes.  Our community stands to be among the most affected by cuts to safety net programs and investments that would grow the economy, such as education and job training.  By 2020, three out of four workers joining the labor force will be Hispanic.  Our economy—and our retirees—will benefit from a productive, educated workforce.  Moreover, our community is younger than others, which means it will be Latino children stuck with debt from overspending today.

As they return to work next Tuesday, Congress would do well to listen to Hispanic voters and raise revenue and reject cuts that would put millions back in poverty.

With Dream of Homeownership Threatened, Candidates’ Silence on Housing Issues Elicits Frustration

By Janis Bowdler, Director, Wealth-Building Policy Project

How do you convince somebody to fix a problem when they are seemingly blind to the overwhelming evidence that the problem even exists? Today, 11 million Americans owe more on their mortgage than their home is worth. Analysts predict that we will see an estimated two million foreclosure filings this year with millions more at risk of losing their homes. As a result, hundreds of thousands of senior citizens are losing their economic security, children and families are being uprooted, and neighborhoods are blighted with vacant properties.

The nation’s housing market is in a precarious position, and despite millions of homeowners across the nation bearing the brunt of the housing crisis, too few of the decision-makers on Capitol Hill are championing the necessary solutions to protect the American Dream of homeownership. And in the midst of a presidential election, the onus falls on the two candidates to carve out serious proposals to navigate homeowners out of this colossal mess. But when political strategy dictates that its best for both candidates to avoid the issue altogether, it becomes incredibly challenging to push for the type of national conversation we need.

Recently the Home for Good campaign—a collaboration of more than 70 civil rights, community, and public interest groups—reached out to homeowners across the country for help. In the end, nearly 40,000 people signed on to our call, asking the presidential candidates to offer real solutions to:

  • Stop needless foreclosures
  • Expand affordable rental housing
  • Revive a sustainable path to homeownership

Along with signatures of tens of thousands of concerned voters and advocates, we have offered a blueprint for restoring home opportunity called the Compact for Home Opportunity. We have made it especially easy for them. The Presidential candidates have our signatures and a plan, now the ball is in their court.

It’s important for both candidates to remember that while they may choose to skirt the issue until Election Day, there will be no hiding from the housing crisis over the next four years. Housing has traditionally led previous recession rebounds, so it is no wonder that our economic recovery has dragged alongside a weak housing market. We must address the crushing mortgage debt overhang, keep families in their homes, and bring new homeowners into the market.

Important housing policy questions are looming. Will the candidates lean on Fannie Mae and Freddie Mac to stop dual tracking, a practice that moves families through foreclosure before they know if they could qualify for a loan modification? Will they give away resources for housing counseling and low-income renters in the pending “Grand Bargain?” It’s these kinds of details that have been completely absent from both candidates’ platforms.

The financial crisis has decimated neighborhoods, wiped out family wealth, and ruined financial futures, but it has not changed the central role the home plays in our lives. We continue to seek shelter with a few basic amenities—safe streets, good schools, and access to quality jobs. It is time that candidates speak frankly with voters and explain what they plan to do to ensure that families who dream of owning a home can make that dream a reality.