Coalition wins foreclosure victories

The Michigan Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shutoffs has recently scored important victories in the fight against home foreclosures and evictions.

After a one-year battle, the coalition, along with neighborhood activists, stopped the eviction of Belva Davis and forced Ocwen Loan Servicing to modify her mortgage. The effort included rallies at her home; a picket at Wachovia/Wells Fargo, the administrator for the trust fund that owned Davis’ mortgage; and a massive telephone and e-mail campaign to Ocwen CEO Ronald Faris.

Attorneys who work with the coalition won a significant court victory on an appeal in a foreclosure eviction case. The Macomb County Circuit Court held that a lender’s failure to modify a loan in accordance with the federal Home Affordable Modification Program can be asserted as a defense to void a foreclosure, and that this defense can be raised by homeowners in an eviction proceeding stemming from the foreclosure. This is one of the first cases in the country to affirm this right.

Despite these victories, coalition organizers report that the foreclosure and eviction crisis is intensifying. Jerry Goldberg, a foreclosure attorney and coalition leader, noted how increasingly the government, through Fannie Mae and Freddie Mac, is the main culprit in eviction actions stemming from foreclosures.

Goldberg told Workers World: “These entities have announced programs to allow renters in foreclosed homes to remain in the homes after foreclosure or receive significant relocation funds. However, in 36th District Court I have seen tenant after tenant being evicted by Fannie Mae illegally, without having been afforded this rental option. I’ve observed lender after lender evicting homeowners without affording them their rights to loan modifications pursuant to the new federal program.”

In response to this illegal activity, the coalition met with law students from the University of Michigan National Lawyers Guild on Nov. 5. They will be preparing a fact sheet for mass distribution at 36th District Court in Detroit, the busiest eviction and foreclosure court in the country. It will contain information on how to challenge foreclosures and evictions, and detail how to fight utility shutoffs—as winter approaches and thousands are threatened with cut-offs.

According to Goldberg, “The government takeover of Fannie Mae and Freddie Mac, along with more and more loans being backed up by the Federal Housing Authority, is in reality a newly disguised bailout for the banks and lenders.”

Fannie Mae and Freddie Mac own or guarantee slightly more than half of all U.S. mortgages, valued at more than $5 trillion. Fannie Mae’s delinquency rate on single family mortgages jumped to 4.17 percent in July 2009, the highest it has been in the 11 years for which records are available. A year ago the delinquency rate was 1.45 percent. (Real Estate Economy Watch, Sept. 29)

The percentage of mortgages owned or guaranteed by Fannie Mae or Freddie Mac is growing, with 70 percent of U.S. mortgages made in the first half of 2009 going through Fannie or Freddie. (Associated Press, Sept. 4) In addition, FHA-insured loans are also on the rise. In July 2008, 30 percent of new loan applications had FHA backing, compared to 2 percent in 2006. (forbes.com, Aug. 26, 2008)

Goldberg notes, “When a mortgage loan that is backed up, insured or owned by Fannie Mae, Freddie Mac or the FHA is foreclosed, the government pays off the lender for the value of the loan. As a result, the banks are receiving the full amount on loans they deliberately overvalued. The government then sells off the home at a reduced amount, with the taxpayer picking up the difference.”

Fannie Mae had nearly $171 billion in troubled loans as of June, with only $55 billion to cover the losses, while Freddie had nearly $78 billion in troubled loans with reserves of only $25 billion. (AP, Sept. 4) That means another $169 billion of taxpayer money will have to be appropriated to cover the losses.

The federal Home Affordable Modification Program, while offering some relief in the form of reduced payments to borrowers, actually perpetuates this government bailout, as the loans are modified based on the existing principal (with arrearages tacked on to the end of the loans), even though the actual value of the home has drastically declined.

Coalition activists say it’s time to bail out the people, not the banks. They demand that home loans be reset to the actual value of the homes, with the banks absorbing the loss in principal that stems from their predatory lending practices. Mortgage payments must be set at a reasonable amount for all homeowners and suspended for the unemployed. Most importantly, there must be an immediate moratorium on all foreclosures and evictions until the mess created by the banks and backed up by the government is undone.