There are a lot of things
you wouldn’t know from
reading most of the papers or watching the TV. For instance,
there were demonstrations and press conferences across the country
earlier this month, demanding action to deal with the growing
crisis in the home ownership business. Major civil rights and
housing groups have called for a moratorium on the home foreclosures
that are devastating individuals and families, and hitting African
Americans and Latinos at a disproportionate rate. After a flurry
of interest this spring, the major media - having been sold on
the dubious idea that the sub-prime mortgage calamity won’t spill
over to the larger economy - have pretty much dropped the story.
(The New York Times, did run a front page story, June
12, on counseling for borrowers, accompanied by a devastating
graphic showing the foreclosure carnage underway in Black and
Latino neighborhoods in Chicago). The one thing most ignored is any suggestion that something
might be done to rescue people now threatened with losing their
homes.
“As the nation seeks to recover from the devastation caused
by reckless sub-prime lending, we must squarely address the disproportionate
impact on African-Americans and Latinos and other traditionally
underserved communities,” read a statement issued April 4 by
a coalition of rights and housing groups. “For years, sub-prime
lenders have targeted communities of color and aggressively marketed
dangerous and abusive loans. As a result, people in communities
of color have lost billions of dollars in home equity, and today
they are losing their homes on a massive scale.”
National civil rights groups, including the Leadership
Conference on Civil Rights, the NAACP,
the National
Fair Housing Alliance, the National
Council of La Raza, and the Center
for Responsible Lending, have called for mortgage lenders,
loan servicers and investors who hold unaffordable sub-prime
loans with “payment shock” all over the country, to "institute
an immediate six-month moratorium on sub-prime home foreclosures
and to work actively with homeowners to help them keep their
homes by putting these borrowers into affordable loan products."
“Lenders, servicers and investors have a variety of tools at
their disposal to restructure or otherwise change the terms of
mortgages to provide relief to homeowners who now struggle with
unaffordable loans that were never designed to be sustainable,” the
groups said. “The six months will be time for the industry to
work with these groups to establish benchmarks and set long-term
goals for easing the foreclosure crisis and to assist borrowers.”
“The need for a moratorium on foreclosures of unaffordable sub-prime
loans with ‘payment shock’ is urgent,” the statement went on. “If
lenders, servicers, Wall Street and policymakers allow the flood
of sub-prime foreclosures to continue rising unchecked, years
of economic progress in communities of color will be wiped out,
and the racial wealth and equity gap will widen even further.
Borrowers must be put into affordable loan products now.”
Well, over six weeks have passed since that
call was made and there’s been no action, no moratorium and,
for most people, no knowledge that such a suggestion was ever
made.
We’re in the middle of a premature Presidential
election cycle and three of the leading candidates have had
a little to say
about the situation.
Senators Hillary Clinton of New York, Christopher J. Dodd of
Connecticut and Barack Obama of Illinois have demanded federal
action to prevent a recurrence of the such a crisis, but as the Los
Angeles Times notes, none of them “has offered more than
general ideas for aiding borrowers, and none has called for a
massive federal assistance program.”
And, if you think the lack of attention
to the mortgage crisis means it has subsided, think again. “Anyone who believes that
the worst is over in the sub-prime mortgage fiasco need merely
wait awhile,” wrote New York Times business commentator
Gretchen Morgenson. “A tsunami of interest rate increases on
these loans is headed your way.”
“During the next five years, some $1 trillion in adjustable-rate
mortgages will reset,” wrote Morgenson, who hasn’t let the story
go and who has penned the most informative reports on it. “But
in the here and now - from just June to October this year - more
than $100 billion of that amount is scheduled to reset, and all
of it is in loans that are in the riskier sub-prime category.
Given the recent interest rate spike, many of those loans that
once carried low teaser rates are on track to reset to at least
11 percent - or more than four percentage points higher than
the current rate on a conventional, 30-year home loan.”
“Chances are slim that even the most creditworthy borrowers
can survive payment shocks like these,” writes Morgenson. “And
so, as the reset storm hits, delinquencies will rise and foreclosures
will follow,” adding it is too early to tell how many foreclosures
to expect but cites a RealtyTrac report that say there were 1.2
million in 2006.
Three quarters of the home loans made in
the first half of last year are now past the delinquency rate
projected when their mortgages
were packaged and sold to investors, writes Morgenson. “Add to
this grim picture the fact that many of the loans taken out most
recently are held by people who probably have little or no equity
in their homes. As prices soften further, these borrowers will
find themselves ‘upside down’ - owing more on their mortgage
than their houses are worth.”
“None of this bodes well for home prices, which are already
flat or falling. Then again, this is what a mania always looks
like when it unravels,” she adds.
On June 4, the new Federal Reserve Chairman
Ben Bernanke admitted the residential real estate slowdown "appears likely to
remain a drag on economic growth for somewhat longer than previously
expected," but once again expressed his faith that the slowdown
won’t adversely affect the larger economy – a seeming contradiction.
In San Francisco, on June 6, members of the Association of Community
Organizations for Reform Now (ACORN),
held a press conference in front of the local office of the Federal
Reserve Bank calling on the Fed to take action to protect homeowners
from unregulated sub-prime loans, and for Bernanke to issue regulations
to protect hard-working families from predatory lending practices. "We're
asking the Federal Reserve to use the power that it has to regulate
the industry more strictly so that brokers and lenders take some
responsibility for their actions,” predatory lending victim Jackie
Phillips told the online Beyond Chron (the real San
Francisco Chronicle didn’t bother to cover the event).
ACORN sponsored similar actions in 25 other cities around the country.
In California in 2006, there were 142,429
foreclosure filings - up 131% from 2005 and the third largest
percentage increase
in the country. That’s one foreclosure filing for every 86 households
in the state, the 14th highest foreclosure rate in the country.
Nationally, there were 323,102 mortgage defaults between January
and March, compared with 188,122 during the same period last
year — an increase of 72 percent. As far as cities are concerned,
Indianapolis is ahead, with one out of every 69 homes in some
stage of foreclosure. For Atlanta, it’s 1 in 70 homes, followed
by Dallas, 1 in 99, and Memphis, 1 in 101, with Denver registering
1 in 105.
“People sign up for loans with one interest
payment, and, oftentimes, unknown to them, two years later it
is completely different,” San Francisco ACORN member Valarie
Adams told Beyond Chron. “This will be an epidemic as
more and more people will be forced out of their homes; families
will have no place to go.”
“Our objective is to make sure the hard working families will
get protections, justice and have peace a mind, instead of continuing
to have sleepless nights,” said Adams.
Meanwhile, Federal Deposit Insurance Corporation
(FDIC) Chair, Sheila Bair, has urged Wall Street to help solve
the mortgage
crisis for borrowers with bad credit. In a recent address to
the American Securitization Forum, a group that represents the
people who bundle and sell mortgages to investors, she asked
investors for flexibility in restructuring troubled loans and
to take responsibility for the risky mortgages in which they
invest. "There's a lot of money at stake, and millions of
people whose homes are on the line," she said.
ACORN says it favors legislation that would
prohibit lenders from making mortgages that the borrower clearly
has no ability
to repay, either from the beginning or after the interest rate
increases. Further, that lenders be held responsible for the
actions of brokers and that repayment penalties on sub-prime
loans be reduced or eliminated. They are also asking that the
state attorney general prevent foreclosures on predatory loans
and the county sheriffs and courts refuse to conduct foreclosure
sales or auctions on the properties. When asked what the community
and other organizations and institutions can do, Adams told Beyond
Chron, “go to every nook and cranny, every neighborhood and
let them know the severity behind this and get them to help because
you could be next.”
BC Editorial Board member Carl Bloice is a writer in
San Francisco, a member of the National Coordinating Committee
of the Committees of Correspondence for Democracy and Socialism
and formerly worked for a healthcare union. Click
here to contact Mr. Bloice. |