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.

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.