Civil Rights Groups Push for Relief as Foreclosure Crisis Intensifies
Civil rights groups are pushing government at all levels to do more to alleviate the suffering of struggling homeowners as new data indicates that the foreclosure crisis that began in 2006 and played a central role in the economic collapse of 2008 is continuing unabated, and even intensifying.
RealtyTrac, a company that monitors home foreclosures, recently reported that banks seized more than one million homes in 2010 – a record number for one calendar year – and are expected to top that number in 2011. Amherst Securities projects that as many as 13 million more households face foreclosure.
Americans for Financial Reform (AFR), a project of The Leadership Conference on Civil and Human Rights, recently outlined a series of recommendations that the Obama administration can do to prevent foreclosures and boost the economy. A few key recommendations are:
- Loan servicers should be required to make cost-effective loan modifications that include principal reductions for homeowners if doing so would provide a greater return on investment for the investor than foreclosure.
- Fannie Mae and Freddie Mac must improve their loan modifications.
- The Department of Housing and Urban Development and all government housing programs must enforce their rules that require servicers to try to modify loans before proceeding to foreclosure.
In addition, there has been a steady stream of evidence of reckless, improper and illegal practices in the lending industry and evidence that lenders have been foreclosing on homes based on fraudulent or incorrect bank data that have prompted investigations from all 50 state attorneys general and federal regulators. In an October 21 letter, AFR told state attorneys general conducting investigations into the fraudulent behavior that they “have the opportunity to require servicers to make meaningful changes so that foreclosures will truly be the last and most appropriate resort.”
The letter also states: “This complete disregard for the homeowner is characteristic of how servicers engage in loss mitigation. Servicers have strong financial incentives to push people into foreclosure, and avoid loan modifications. As a result, servicer non-compliance with HAMP is standard behavior and is well documented, and homeowners who qualify for loan modifications are routinely losing their homes to foreclosure.”
The foreclosure crisis has wreaked havoc on communities around the country, especially among low-income and minority homeowners who are bearing a disproportionate share of the burden. A 2008 report by the United for a Fair Economy found that Black and Latino families lost between $164 billon and $213 billion as a result of foreclosures. The Center for Responsible Lending found that between 2009 and 2012, African American and Latino communities will lose $194 billion and $177 billion, respectively, as a result of depreciated property values alone.
Civil and human rights groups have long warned Congress about the effect predatory lending has on minority communities and have urged Congress to take into account the role that predatory lending had in the collapse of the mortgage industry and the subsequent economic collapse when divising policy solutions to help struggling homeowners.