Gov’t programs not helping homeowners, renters

On Aug. 4 the U.S. Department of Treasury released its “servicer performance report” detailing the number of homeowners who have benefited from the federal Making Home Affordable Modification Program—also known as the Home Affordable Modification Program or HAMP — launched in March.

The HAMP, initiated by the Treasury pursuant to the Emergency Economic Stabilization Act (the federal bank-bailout bill), is the primary federal program aimed at helping homeowners facing foreclosures. It provides for loan modifications so that a homeowner’s mortgage payments, including taxes and insurance, are set at 31 percent of gross income for five years, with interest rates reduced to as low as 2 percent based on a 40-year amortization of the loan.

The Treasury reported that thus far only 235,247 trial loan modifications have been offered under the program. The report noted that this constituted 9 percent of eligible homeowners. However, the financialstability.gov Web site actually states that 7 to 9 million homeowners should be benefiting from the program, so the actual percentage of those helped constitutes a paltry 2.6 percent.

Under federal law the Treasury announcement should have caused an immediate moratorium on foreclosures. Title IV of the Helping Families Save Their Homes Act, signed into law on May 20, includes a foreclosure moratorium provision. It states there should be a moratorium on foreclosures until the HAMP is implemented and declared operational by the secretaries of the Treasury and the Department of Housing and Urban Development.

But rather than invoking a moratorium based on the lenders’ sabotage of the HAMP, the report cites a July 4 letter from Secretary Timothy Geithner to the loan executives and a July 28 meeting of Geithner and the lenders in which the Treasury secretary discussed the importance of compliance. Geithner made no demands on the bankers and lenders to comport with the terms of the HAMP or face consequences. There were no mandates or penalties threatened and there was certainly no mention of a moratorium as the law requires.

Currently all Fannie Mae- and Freddie Mac-backed loans are covered under the HAMP. About 40 mortgage lenders and servicers, including most of the major banks, have signed contracts with the federal government to evaluate all mortgage loans in their portfolios for modifications under the program. The Treasury estimates that 85 percent of all mortgage loans should be covered. The banks and servicers receive enormous sums from the federal government—on top of the $700 billion in bailout funds they received last fall and winter—for signing these contracts: $2.8 billion for Wells Fargo, $2.8 billion for Citi, $2.6 billion for Bank of America (including Countrywide), and $2 billion for JP Morgan Chase, for example.

Moratorium must be enforced by struggle

A July 30 article in the New York Times discussed how loan servicers are not implementing the HAMP because of the profits they make by charging enormous fees for delinquent home loans. As a home moves toward foreclosure, the servicers charge for title searches, insurance policies, appraisals and legal filings, and typically funnel these orders to companies they own or with whom they share revenues. The National Consumer Law Center noted recently that Countrywide made $400,000,000 just from late fees in a one-year period.

In addition, the lenders and servicers are not set up to carry out millions of loan modifications. They are in the business of collecting debts, not helping consumers. Borrowers who call the banks to discuss a loan modification are frustrated by their inability to find someone with knowledge of the HAMP. Oftentimes modification documents sent in by homeowners are misplaced or “lost.”

Borrowers who are eligible for loan modifications are summarily denied. The government has no mechanism set up to enforce its own program. Calls to Treasury result in borrowers being told to contact the same lenders who are frustrating them every day.

The Making Home Affordable Program is not the only federal program that is being violated continuously. Fannie Mae and Freddie Mac, both government owned, have initiated programs to protect renters in foreclosed properties. Under the Fannie Mae program, a renter who is not an immediate relative of the foreclosed owner is entitled to continue staying in the property as a renter or receive $4,500 in relocation funds.

Under the Freddie Mac program, the rental option and relocation funds are available to any residents of foreclosed homes. These programs are not being enforced because the private property management companies hired by Fannie Mae and Freddie Mac find it too bothersome to inform residents of their rights, and instead carry out illegal summary evictions.

Similarly, any resident of a Federal Housing Authority-insured home is entitled to an occupied conveyance and continued occupancy (a rental lease until HUD sells the home) after foreclosure. But these options are routinely denied renters and homeowners. In Detroit, for example, where there are thousands of FHA-insured homes, only a couple of residents have been offered this option and in both cases only after lawsuits were filed. Not only are residents deprived of the right to stay in their homes, but the homes end up being sold for a fraction of their values as the emptied-out and vacant houses are stripped and vandalized. In the meantime, the lender is being paid full value for the mortgage.

The unwillingness and inability of the federal government to enforce the few programs it has initiated to help homeowners and renters speak to the need for independent, militant, direct action by victims of banks and lenders—supported by their communities—to defend their homes.

In the 1930s the unemployed councils led by communists and socialists stopped tens of thousands of evictions and foreclosures by preventing bailiffs from carrying them out, or moving families and their possessions back into their homes after evictions. Moratoriums on foreclosures and evictions were implemented through direct action, and then laws were passed in 25 states and upheld by the U.S. Supreme Court ratifying the foreclosure moratorium. History teaches that justice for the workers and poor and defense of their legal rights will be won through militant action, not government reliance.