It’s been over a year since the nation’s five largest mortgage servicers agreed to the historic $25 billion National Mortgage Settlement aimed at providing relief for underwater homeowners and preventing future unnecessary foreclosures. Fortunately, it seems we’re headed in the right direction.
Earlier this week, Joseph Smith, Independent Monitor of the Office of Mortgage Settlement Oversight, released his fourth report detailing the progress made under the deal. Between March 2012 and March 31, 2013, more than 620,000 homeowners received over $50 billion in overall consumer relief. A big portion of this came in the form of a principal reduction.
Principal reduction allows underwater homeowners who owe more than their house is actually worth to reduce or modify their loans, sometimes down to the current market value of the house. The National Council of La Raza (NCLR) has long said that principal reduction is one of the most effective tools in preventing foreclosure, yet it remains underutilized.
According to the Monitor’s report, approximately $30 billion of relief went to principal reduction for first or second lien loans, as well as for refinancing. In Philadelphia at NCLR Affiliate Congreso de Latinos Unidos, housing counselors report that during the first quarter of 2013 they saw more loan modification offers with principal reduction and more affordable trial modification. Yet, many other community organizations, including NCLR Affiliates in Florida, Ohio, and Arizona, have not seen significant principal reduction modifications for their clients. While this settlement is one of the broadest principal reduction efforts to date, the question of who is receiving relief through principal reduction still remains.
Numerous studies indicate that communities of color were disproportionately targeted with abusive and expensive mortgages in the years leading up to the recession and, as a result, have been losing their homes at record rates. So, while the overall numbers are positive, we remain concerned that those who were hardest-hit by the foreclosure crisis are still underwater. If servicer data were available to the public, broken down by race/ethnicity and ZIP code, we could more effectively measure how much consumer relief is actually reaching Latino communities. There is rising frustration with this glaring lack of information, without which banks will not be truly accountable to serving the very homeowners who need the most help. The dollars in relief continue to climb, which in part has helped stabilize the economy, yet we continue to wonder just how many of those hardest-hit with foreclosure are given the opportunity to keep their homes.