‘Mortgage relief’ deal won’t stop one foreclosure

The writer is a Detroit-based anti-foreclosure attorney and a leading organizer in the Moratorium NOW! Coalition to Stop Foreclosures, Evictions & Utility Shutoffs.

A settlement has been trumpeted between the federal government and 49 state attorneys general with Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial “to address mortgage loan servicing and foreclosure abuses.” (Department of Justice, Feb. 9) While acknowledging the massive fraud perpetrated by these institutions in carrying out foreclosures, the agreement provides minimal compensation for the hundreds of thousands of families who have lost their homes.

The $25 billion settlement will not prevent or stop one foreclosure. Instead, it is projected that the banks, with the settlement behind them, will actually accelerate the pace of foreclosures in 2012. (Global Finance News, Feb. 11) In 2011, a whopping 2.7 million foreclosure filings were reported in the U.S. (RealtyTrac, Jan. 12) This figure will likely rise significantly this year.

While the settlement details have yet to be published, the Department of Justice notes that $1.5 billion will be used to establish a fund to “compensate” borrowers who lost their homes between 2008 and 2011. This means the banks will pay less than $2,000 per loan file for “lying to courts and end-running the law.” (New York Times, Feb. 11)

Seventeen billion dollars of the $25 billion settlement is for principal reductions on underwater loans. (“Underwater” means the current value of the home is worth less than the amount owed on the mortgage.) Approximately 11 million borrowers are underwater on their loans to the tune of $700 billion in total, so $17 billion in write-downs amounts to a measly 2.4 percent of the total negative equity weighing down homeowners across the U.S.

Moreover, these write-downs do not affect any Fannie Mae- or Freddie Mac-backed loans, which encompass at least 56 percent of all mortgages. Fannie and Freddie are U.S.-government-owned and taxpayer-funded agencies that insure and own mortgage loans.

The settlement earmarks $5 billion for compensation to the states for the losses they suffered due to the foreclosure epidemic. But there has been $1.9 trillion, yes, trillion, in home equity loss due to foreclosures. (Center for Responsible Lending, August 2010) This huge home equity loss has destroyed the tax base of city, county and state governments across the U.S. and led to the destruction of public services and the elimination of millions of jobs. The $5 billion in “compensation” is a paltry sum and cruel joke to the workers and communities that have been devastated by the foreclosure epidemic.

Demand moratorium to stop foreclosures

The settlement website lists a set of new servicing guidelines that are supposed to help homeowners avoid foreclosure. In fact, most of the guidelines listed are already encompassed in directives and regulations published in connection with the federal Home Affordable Modification Program, or HAMP.

The HAMP guidelines are routinely ignored by the banks, however. This is acknowledged in the new settlement as well as in previous consent decrees with every major bank, and the Federal Reserve and Office of the Controller. Families who qualify for modifications under federal law and regulations, who submit every document required, and who make every trial payment required under these programs, suddenly find themselves in foreclosure.

Government entities refuse to enforce the very programs they create mandating modifications by the banks, and judges routinely side with the financial institutions. The settlement has no mechanism for individual borrowers to enforce their right to loan modifications. And, with the attorney general litigation now over, the banks are freed up to continue their routine disregard for federal laws and regulations without fear of prosecution.

While this settlement provides little actual relief to homeowners, the acknowledgement by the five largest mortgage banks of their fraudulent activity strengthens the argument for the immediate implementation of a moratorium on all foreclosures and foreclosure-related evictions in the U.S. The settlement will take three years to be implemented. Why should there be one foreclosure while homeowners await the little relief being promised?

There is already an independent foreclosure review of all foreclosures initiated in 2009-2010 pursuant to a Federal Reserve consent decree for servicing abuses. Why should one homeowner face the loss of their home while their foreclosure is being investigated for bank fraud?

Why should the same federal government that trumpets how it is allegedly fighting for homeowners be, at the same time, the primary conduit of foreclosures and evictions through Fannie Mae, Freddie Mac and the Federal Housing Authority? These government-controlled institutions together own or insure 75 percent of mortgage loans in the U.S. and have funneled approximately $200 billion to the banks through the silent bailout that occurs with every foreclosure when the bank receives full value for the underwater mortgage.

A national conference in Detroit on March 31 called by the Moratorium NOW! Coalition will strategize furthering a campaign to demand President Barack Obama place an immediate long-term moratorium on all foreclosures through executive action. A national moratorium on foreclosures will keep people in their homes while they organize for real relief for the victims of the foreclosure epidemic, along with criminal prosecution of the bankers who created the crisis. Contact nationalmoratorium.org to register for this important conference.