Photo by Casey Serin on Flickr, via Creative Commons
Despite the announcement at the State of the Union of a task force to investigate predatory lending and other sketchy bank practices, the settlement between the state Attorneys General and the five biggest banks is still on the table. Yes, we were successful in stalling the settlement, but that doesn’t discount the fact a deal is still being worked out, and that a draft has been submitted to the states AG’s for approval.
The deal calls for only $25 billion in assistance, which as we’ve said is a great deal of money until you compare it with U.S. homeowners $700 billion in negative equity. Despite the fanfare, that amount would only help a small percentage of affected homeowners – many Working America members among them.
We don’t think that’s enough. And now, we’re not alone:
Calif. Atty. Gen. Kamala D. Harris’ office has called a proposed $25-billion settlement with the nation’s mortgage industry “inadequate.”
“We’ve reviewed the details of the latest settlement proposal from the banks, and we believe it is inadequate for California,” Shum Preston, a spokesman for Harris, said in a statement. “Our state has been clear about what any multistate settlement must contain: transparency, relief going to the most distressed homeowners and meaningful enforcement that ensures accountability. At this point, this deal does not suffice for California.”
Kamala Harris, along with Attorneys General Schneiderman (New York), Coakley (Massachusetts), Biden (Delaware), and Cortez Masto (Nevada), have been leading the charge against a weak settlement for months. Harris’ statement is a big deal because California, in addition to being a big state with a great deal of resources, has one of the highest foreclosure rates in the country. We agree with Harris – agreeing to this pittance of a settlement would be an abdication of her duties as California’s chief law enforcer.
If you want a great example of abdicating your duty as law enforcer, take a gander at Florida’s Republican Attorney General Pam Bondi. Bondi, a frequent Fox News guest and ally of the exceedingly unpopular Rick Scott, is also skeptical of a settlement, but not for the same reasons we are. She’s worried about the Big Banks being treated unfairly:
[With] a settlement taking shape last year, Bondi broke ranks with her counterparts and rejected it. That’s because the settlement would have mandated principal reduction—a measure that could help keep more homeowners out of foreclosure, but that would force banks and lenders to take a bigger hit on their balance sheets. “It seems like she’s balancing the interest of businesses with the interest of Floridians when it comes to principal reduction,” state Rep. Darren Soto (D-Orlando) told the Sentinel. “When you’re the AG, you have one interest: Floridians. You’re supposed to be the consumer advocate, first and foremost.”
When you follow the money, you can see one possible reason why Bondi is interested in a slap-on-the-wrist settlement: she’s received campaign contributions from executives and employees of ProVest and Lender Processing Services – two big foreclosure mills.
We’re cheering this move by Kamala Harris, as well as the efforts of her fellow “Justice Democrats” Eric Schneiderman, Martha Coakley, Beau Biden, and Catherine Cortez Masto. Our members have acutely felt the pains of mass foreclosures in their neighborhoods, communities, and families. These AG’s shouldn’t stop fighting until we get a full investigation of foreclosure fraud; something with a strong budget, adequate staff, and the authority to go after the people accountable for kicking millions of Americans out of their home.
As for Pam Bondi, whether her inaction on the foreclosure crisis really is the result of her campaign contributions or mere negligence, it’s just a reminder of why people are so cynical. Owning a home used to be part of the American promise – this is an area where government needs to help, regardless of party.
Tags: California, Florida, foreclosure, foreclosure crisis, foreclosures, Kamala Harris
The following is a guest post from Working America Member Alissa Kowal from Pittsburgh, Pennsylvania
I am so happy to see that in just 10 days, over47,000 people participated in Working America’s campaign to hold big banks accountable for their unethical foreclosure practices.
I am a Working America member, a Pittsburgh native, a single mother of three, and a Duquesne University graduate. I have worked in an array of fields, including interior design, real estate, and architectural sales.
A few years ago, one of the companies I worked for went bankrupt due the housing and construction crisis in America. As challenging as that experience was, it is not the worst encounter I have had with unethical bank practices.
In the spring of 2009, just after the federal program to assist homeowners was established by the Obama Administration, my mortgage company sent me a notice saying that I may qualify for home mortgage remodification. I called my bank, and it took them just ten minutes over the phone before they let me know that I qualified for a modification, and they gave me a lower payment.
After following the modification payment plan, to my surprise I received a foreclosure notice in the mail. The bank informed me that my modified payments did not actually apply to my mortgage. I was then “re-modified” several times, each time at a different amount. I again maintained my payment agreements, yet still continued to receive foreclosure notices. None of the payments that I made went to the balance of my mortgage or the interest that I owed, they were applied to “fees” that the bank added to my account for late and missed payments and my tax escrow account.
After receiving my third foreclosure notice I contacted my State Representative who sent me to Community Action Southwest. They assisted me in dealing with the bank to ensure they followed the remodification guidelines they had been ignoring. I was finally refinanced, with no credit check or financial documents.
I am now stuck with a mortgage that is fifteen years longer than it originally was. The bank took all the modification payments I made and, after applying them to escrow, kept the rest as profit. They decided those months were “missed payments” and added that sum to the original mortgage, increasing it by $25,000. My equity is completely gone and my credit is destroyed.
Per Community Action Southwest, I am one of hundreds of homeowners in my area who have been misled by banks like Wells Fargo and Bank of America. I feel lucky that I have experience in business and real estate, because I knew something ethically was wrong. How many other people went through this and simply had no idea what to do in such a complicated financial situation?
Right now, the Obama administration, the Department of Justice, and the banks are discussing what consequences the banks will have to face because of their exploitation of the American taxpayer, the American homeowner, and the federal modification program. Last night, the President has also announced the creation of a special unit to investigate financial crimes.
We need to ensure that any final agreement includes a thorough investigation into bank practices, and sufficient financial assistance to homeowners struggling due to unfair practices.
Tags: foreclosure crisis, foreclosures, Pennsylvania, Pittsburgh
Photo by scad_lo on Flickr, via Creative Commons.
The following is a statement from AFL-CIO President Richard Trumka on the Possible Bank Mortgage and Foreclosure Fraud Settlement.
We need to hold banks accountable for the fraudulent practices that brought about the worst economic crisis since the Depression. State Attorneys General have been investigating bank fraud, and these critical investigations must not be undermined by a premature and inadequate settlement. We call on the administration to reject any deal that insulates banks from full responsibility.
It is critical that the Department of Justice lead a comprehensive investigation together with the state Attorneys General to prevent banks from engaging in future unlawful and deceptive practices that could exploit homeowners and put the economy further at risk.
We commend state Attorneys General like New York’s Eric Schneiderman and Delaware’s Beau Biden for their leadership and courage in calling for a real investigation and relief on a scale that helps the millions of homeowners who face a new wave of foreclosures.
The economy is currently weighed down by $750 billion in negative home equity, so relief on a massive scale is needed to lift home values and stimulate the economy by increasing consumer demand. A comprehensive settlement must force banks to write down underwater mortgages. A sum significantly larger than the rumored $25 billion is needed for the economy to grow and create jobs.
Specifically, the administration must stand strong against the big banks and insist on:
1) A full and thorough investigation into problems tied to the residential mortgage-backed securities (RMBS) market, and
2) A guaranteed minimum amount of money set aside for reducing the mortgage principal of “underwater” homeowners in key states impacted by the foreclosure crisis.
This is an opportunity for the administration to demonstrate leadership and show that it has the political will to do what’s right for homeowners and right for our economy.
Tags: foreclosure, foreclosure crisis, foreclosures, Richard Trumka
A draft settlement between five big financial institutions and the U.S. states was distributed earlier this morning. It calls for the banks – Bank of America, Wells Fargo, Citigroup, J.P. Morgan Chase, and Ally Financial – to settle with homeowners to the tune of $25 billion dollars.
The Associated Press estimates this will translate into 750,000 Americans getting checks for $1,800. That’s about half the number of Americans eligible for assistance under the deal.
$25 billion sounds like a lot of money. It is, don’t get us wrong. It’s the biggest settlement with a single industry since the 1998 multistate tobacco deal. But when there’s $700 billion worth of money owed on underwater mortgages, and when these Big Banks are handing out enormous sums in bonuses to their executives, you realize how much of a slap on the wrist this really is for them.
Not only is that a tiny amount in the eyes of a Bank of America or a Wells Fargo – settling also potentially avoids a full-scale investigation into the nastiness they’ve been pulling on the American homeowner for decades.
We know about robo-signing, which we’ve written about. We’ve also received letters from our members describing absolutely despicable treatment at the hands of these banks. It’s common knowledge that these five banks make it their mission to extract money from American workers, not get them into homes. It would be an incredible travesty of justice for them to get immunity from further investigation while paying a mere pittance to the homeowners whose lives they ruined.
This is not change we can believe in. The White House needs to know we’re watching.
Use our tool to call the White House now – tell them they can’t rush into a settlement. An investigation of the deceptive mortgage practices that caused millions of Americans to lose their homes needs to be part of any agreement with the banks.
Tags: foreclosures
We’ve written a lot about questionable, even fraudulent foreclosure practices in recent months, practices like robo-signing. Today Laura wrote about how courts in Cuyahoga County, Ohio are dealing with questionable documentation.
It seems that dubious practices aren’t confined to foreclosures. From MoJo:
But now the seamy debt-collection industry has one-upped the foreclosure industry’s robo-signing disaster. One of America’s largest debt collectors, Portfolio Recovery Associates, used court filings that were signed by a woman who’d died nearly a decade earlier.
Martha Kunkle died in 1995. Yet her name and hand-written signature appeared on debt-collection filings submitted by Portfolio Recovery Associates as late as 2006 and 2007, according to the Wall Street Journal. Facing a fraud lawsuit, Portfolio announced that documents with Kunkle’s name were “defects” and couldn’t be used in court. That was in early 2008, the Journal reports, more than a decade after Kunkle’s death. But even then, Portfolio tried to use a Kunkle-signed document in July 2009 to collect on $2,892.10 of credit card debt.
Using the name and signature of a dead woman is a new high in lows. But the worst part of all of this is the contempt these companies have for the rest of us:
What is clear, though, is how little regard certain mortgage companies and debt collectors have for the American legal system. Because, at the end of the day, that’s what the robo-signing scandals tell us: that these financial heavyweights cared so little about the integrity of our judicial system that they saw nothing wrong with employing robo-signers to mass-produce faulty foreclosure documents, or with using a dead woman’s name and signature to collect on old debts.
Contempt for consumers, contempt for ethics, and contempt for our legal system. If there is any good news here at all, it’s that debt collection will fall into the purview of the new Consumer Protection Agency being put together by Elizabeth Warren, special advisor to President Obama.
The new agency is due to officially start on July 21. From USA Today:
“This new agency did not come into being because special interests demanded it or lobbyists spent hundreds of millions of dollars to make it happen,” Warren said in an interview. “But ordinary Americans pushed hard for this agency. They said loud and clear that they wanted an agency in Washington to level the playing field with big banks.”
Warren has long been a voice for the consumer. But she had little power when, as a professor, she opposed what she saw as costly bank fees and predatory lending in testimony before Congress and her writings on the subjects. She now spends her time and energy starting an agency that she says has been born of optimism.
We desperately need an agency that will be on the side of consumers. I fear the new Congress may have different ideas.
Tags: foreclosures
By now it’s been amply documented that one of the big ways the banks have engaged in dubious (if not outright fraudulent) foreclosures is presenting “robosigned” papers in court—paperwork that no one has looked at to determine if the facts are in order, if the bank holds the note on the mortgage, if the homeowner has actually not been paying. And then if that paperwork is challenged, the bank gets the judge to give it a couple days to come up with new paperwork.
Well, no more of that in Ohio’s Cuyahoga county.
Thanks to an obscure ruling from the Cuyahoga County Court of Common Pleas, mortgage lenders in the Cleveland, Ohio area trying to substitute new documents for ones found to be faulty will have 30 days to explain why the cases should not be summarily dismissed. In additions, the signer of any affidavits or documents seeking foreclosure will need the original promissory note in order to prove foreclosure.
Mortgage lenders have sought to merely replace “robo-signed” documents with new substitute documents, in order to keep the foreclosure train rolling.
-snip-
In addition to this ruling, the guidance in Cuyahoga County follows some other rulings by state Supreme Courts in New York and New Jersey. It forces counsel for the foreclosing party to attest personally to reviewing the foreclosure file, and that the signer of the affidavit has as well. Failure to provide proper documentation and affidavits to this effect would result in the signer or an officer of the party seeking foreclosure having to come to court to testify about his or her personal knowledge. Sanctions for perjury or contempt of court could spring from that.
What’s more, if no affidavit is signed attesting to the validity of the documents, and a affiant or officer of the party foreclosing has to come to court, they have to walk in with the original note in their possession.
We should have better than this patchwork system, in which judges in New York and Ohio protect the rights of homeowners and force banks to actually prove that they have reasons and the right to foreclose while judges in Florida place an immeasurably higher burden of proof on homeowners and extend every possible chance to banks. But for now this is the system we have, and every judge who rules that banks can’t use fraudulent paperwork to take people’s homes represents a concrete victory for families struggling to keep their homes.
Tags: foreclosures
Man’s house wrongly sold in a foreclosure mistake. From the Sun Sentinel:
When Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.
Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender. “I feel like I’m hanging in the wind and I’m scared to death,” said Grodensky. “How did some attorney put through a foreclosure illegally?”
This is shocking – and must be an isolated incident, right?
Apparently not:
In Florida courts, which have been swamped with foreclosure cases for several years, mistakes “happen all the time,” said foreclosure defense attorney Matt Weidner in St. Petersburg. “It’s just not getting reported.”
And the legal efforts required to resolve a foreclosure mistake are complicated. “Unwrapping it is like unwrapping Fort Knox,” said Carol Asbury, a Fort Lauderdale foreclosure attorney. “It’s very difficult.”
It seems the foreclosure system is a disaster. From WaPo:
The nation’s overburdened foreclosure system is riddled with faked documents, forged signatures and lenders who take shortcuts reviewing borrower’s files, according to court documents and interviews with attorneys, housing advocates and company officials.
The problems, which are so widespread that some judges approving the foreclosures ignore them, are coming to light after Ally Financial, the country’s fourth-biggest mortgage lender, halted home evictions in 23 states this week
The stories coming to light are horrifying:
Ally Financial is now double-checking to make sure all documents are in order after lawsuits uncovered that a single employee of the company’s GMAC mortgage unit, a 41-year-old named Jeffrey Stephan, signed off on 10,000 foreclosure papers a month without checking whether the information justified an eviction.
and
Beth Ann Cottrell said in a sworn deposition in May that she signed off on thousands of foreclosures a month for JPMorgan Chase even though she did not verify the accuracy of the information.
and
In Georgia, an employee of a document processing company, Linda Green, for years claimed to be executives of Bank of America, Wells Fargo, U.S. Bank and dozens of other lenders while signing off on tens of thousands of foreclosure affidavits. In many cases, her signature appeared to be forged by different employees.
Thousands of families were undoubtedly booted out of their homes because of these callous, incompetent individuals working on behalf of callous banks and assisting companies. The whole story is well worth reading.
We can hope that the new consumer protection agency being set up by Elizabeth Warren will tackle this, but it’s hard to tell just yet what will fall under the purview of the new agency.
Tags: foreclosure crisis, foreclosures
The number of people falling behind on their mortgages is decreasing, but the number of homes being seized by the banks is increasing:
Bank repossessions hit a record monthly high in May, according to RealtyTrac, the online marketer of foreclosed properties. Lenders took back 93,777 properties, up 1% from the previous month’s record and 44% from the same period a year earlier.
Foreclosure filings, meanwhile, fell by 3% from a month earlier and edged up less than 1% from May 2009. One in every 400 homes received a foreclosure notice last month.
and
Nevada, Arizona and Florida once again top the state foreclosure rates in May, though the pace is moderating.
One in every 79 homes in Nevada received a foreclosure filing last month, down nearly 12% from April and 16% from a year ago. The state’s foreclosure rate is five times the national average.
Fewer foreclosures, but more property being seized by banks.
For people of color, the foreclosure rate is even higher:
Of borrowers who took out mortgages between 2005 and 2008, some 8% of both African-American and Latino borrowers have lost their homes to foreclosure, compared to 4.5% of non-Hispanic whites, according to a study by the Center for Responsible Lending, released Friday.
The racial and ethnic disparities continued even after controlling for income differences. The center’s research shows that African-American and Latino borrowers were about 30% more likely to get higher rate subprime loans than white borrowers with similar risk characteristics.
Of the total pool of homeowners, 17% of Latinos have lost their homes to foreclosure or are at imminent risk of losing their homes, while 11% of African-Americans are in that position. By comparison, 7% of non-Hispanic whites have lost their homes or are about to.
In other words, the risky, higher cost mortgages and loans were heavily marketed to people of color. Truly shameful. The property values of African American and Latino communities will be hard hit by this.
How many of us have seen promos for the Extreme Makeover reality show and thought, “I wish they’d come fix my house?” A cautionary tale; when something looks too good to be true, it almost always is, as a family in California is finding out:
Five years ago, the Wofford family’s home received a new house on ABC’s “Extreme Makeover” show. But now the family’s Encinitas home may be weeks away from foreclosure.
and
“A lot of people think when you get the house you get the mortgage. Well, you don’t,” said Wofford.
He failed several times to modify the loan with IndyMac, and he even hired an attorney, Mike Curran. “Providing documents, and providing documents again and again and again, and they still don’t have a modification at this point,” said Curran.
I hope it works out for them. What a terrible thing, to lose your wife, get a new home for you and your 8 kids, only to have it yanked away from you by the same banks that helped to destroy the economy.
Tags: foreclosures, mortgage crisis
The Washington Post reports on what is expected to be a new round of home foreclosures:
About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.
As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market.
This affects a whole different group of homeowners/borrowers:
The borrowers in trouble now are, for the most part, people who have better credit and safer loans and have become delinquent because they’ve lost their jobs or are dealing with other economic setbacks, economists said. More than 75 percent of the borrowers who are now seriously delinquent — meaning they have missed at least three monthly payments — have traditional prime loans, according to First American CoreLogic. Most of these borrowers have not made a mortgage payment in six months.
These borrowers are among the most difficult to help. Homeowners with economic troubles such as extended unemployment often cannot make even reduced mortgage payments. And the longer borrowers stay delinquent, the more difficult it is to fashion a mortgage relief plan for them.
From CBS Moneywatch some rare media honesty about the real unemployment rate:
The real question is what happens to foreclosure projections if unemployment stays high. Right now, true unemployment is running close to 17 percent, but another 20 to 30 percent of Americans have experienced a decline in pay. Half the country has less income to spend, and Americans are still losing jobs.
This serves to underscore the need for the One Million Local Jobs bill.
Tags: foreclosures, mortgage crisis
Economists are predicting that a coming wave of commercial real estate defaults will be the next problem facing the US economy. From imarketnews.com:
The coming wave of commercial real estate loan defaults will likely limit the flow of credit to small businesses and extend the “jobless recovery,” an economist with Grubb & Ellis Co told Market News International.
Bob Bach, chief economist for the firm, said, “The backlog of distressed loans is actually probably hindering the flow of credit to small business in this country and thus could serve to prolong the jobless recovery.”
From HuffPo: The Congressional Oversight Panel, the TARP watchdog group headed by Elizabeth Warren issued a report this week on the looming commercial real estate crisis:
Over the next five years, about $1.4 trillion in commercial real estate loans will reach the end of their terms and require new financing. Nearly half are “underwater,” meaning the borrower owes more than the property is worth. Commercial property values have fallen more than 40 percent nationally since their 2007 peak. Vacancy rates are up and rents are down, further driving down the value of these properties.
When the reckoning comes, it could threaten everyone from banks and pension funds to renters and small businesses — and small banks could be particularly vulnerable.
Warren warned against government inaction.
“When commercial properties fail, the result is a downward spiral of economic contraction; job losses; deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities,” she said. “These are the same small banks that provide loans to the small businesses that create jobs and boost productivity. If hundreds more community banks go under the effect could be to dump sand in the gears of our economic recovery.
The whole report can be found at the panel’s website, which offers this warning:
The Panel found that “a significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of nearly every American.” When commercial properties fail, it creates a downward spiral of economic contraction: job losses; deteriorating store fronts, office buildings and apartments; and the failure of the banks serving those communities. Because community banks play a critical role in financing the small businesses that could help the American economy create new jobs, their widespread failure could disrupt local communities, undermine the economic recovery and extend an already painful recession.
Elizabeth Warren is one of the strongest and sanest voices we have right now on the subject of the US economy. Let’s hope Washington is listening – because as we’ve learned, it’s easier to be proactive than it is to deal with cleaning up after the fact.
Tags: foreclosures
