Why Isn’t the Federal Housing Finance Agency Doing More to Help Keep People in Their Homes?

By Nancy Wilberg Ricks, Senior Policy Strategist, NCLR

Years after the economic crisis, when financial institutions profited by steering unsuspecting families into risky and expensive home loans, corporations are once again playing the housing market for profit while a majority of low- and middle-income families continue to see the values of their homes flounder.

A recent PBS Newshour piece (video below) reinforced what we have long known: many homeowners could remain underwater—owing substantially more on their mortgage than their home is worth—for a lifetime. In particular, the PBS story highlighted how large states like California and Florida, areas with large Latino populations, continue to experience trouble in the housing market. These ongoing issues are detrimental to the national economy and eliminate homeowners’ ability to pass their single greatest asset—their home—on to the next generation.

Principal reduction Newshour piece

More than five million homeowners in the United States are paying much more in monthly mortgage payments than their homes are worth. Some homeowners owe anywhere from $60,000 to $150,000 beyond the current value of their house. They are barred from refinancing and are stretched thin in a market where the recovery has been uneven for low- and moderate-income families. Many end up losing their home or remain beholden to a mortgage that far exceeds any return they’ll see on investment.

The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, has the power to permit reasonable and safe principal reductions to help families keep their homes and prevent lenders from taking a substantial hit. While FHFA’s own study indicates that this is a proven win-win, FHFA refuses to make a change. Even more troubling is that families are now losing their homes only to see them bundled and sold to investors at or even below the cost of a reasonably adjusted mortgage. In response to this practice, community organizations rallied earlier this week to discuss this issue with FHFA Director Mel Watt. In addition, many nonprofits, including Hogar Hispano, Inc, a subsidiary of NCLR, run programs that purchase distressed assets from lenders and sell them back to home-ready families at market rate.

Moving from a community of dedicated homeowners to a conglomerate of faceless investors alters the makeup of once-thriving neighborhoods. To truly stabilize the housing market, the FHFA should exercise every option they have to reverse this practice, keep families in their homes, and stabilize communities across the country.

Why Does Mel Watt Continue to Waver on Homeowner Relief?

By Nancy Wilberg Ricks, Senior Policy and Communications Strategist, NCLR

HousingDiscrimination_blogpic_newMore than five million homeowners in the United States are paying much more for their homes than they are worth. Ironically, one of those homeowners is Sylvia Alvarez, who heads the Housing & Education Alliance, a leading housing counseling agency in Tampa, Fla., and an NCLR Affiliate. Alvarez and her dedicated staff have helped many families escape unsustainable mortgages.

Alvarez is an ideal candidate for principal reduction, but she cannot get help because her mortgage is owned by Fannie Mae. Most of the largest banks have granted some families principal write-downs, understanding that reducing the principal on a home for a struggling homeowner is a win-win. Families stay in their homes, continue to pay their mortgages, and stabilize the economy.

After the housing crisis, many experts knew that the solution to a healthier housing market was large-scale principal reduction, and the best place to start was with the Federal Housing Finance Agency (FHFA), which manages Fannie Mae and Freddie Mac. Consumer advocates fought very hard to ensure that FHFA had a strong leader and advocate for homeowners.

That’s why NCLR and our allies rallied for Mel Watt, a former U.S. representative and housing proponent, to be appointed as director of FHFA. We fought for Watt so he could fight for homeowners like Alvarez who need relief now. In 2013 we won the fight, and Watt was confirmed as the leader of the most powerful housing entity in the business.

Two years later, we still wait for progress. During the first year of his leadership at FHFA, Watt wanted to study the issue. Research points to obvious benefits of helping homeowners keep their homes, and even the 2013 Congressional Budget Office reported that a principal reduction plan could assist 1.2 million borrowers and save Fannie Mae and Freddie Mac $2.8 billion.

Yet Watt wavered.

Mel Watt

Mel Watt

Now, eight years since the height of the crisis, Watt and FHFA refuse to implement principal reduction. Families pay mortgage dollars that far exceed the value of their homes, and many cannot keep up. In the meantime, banks and investors are pushing out homeowners and acquiring properties at pennies on the dollar. This devastates communities. Turning long-seasoned homeowner neighborhoods into rental communities might not seem bad, but studies indicate that homeownership translates into stability and greater investment in one’s own neighborhood.

When will FHFA and Mr. Watt finally give households the relief they need? Principal reduction remains the solution. It would finally restore homes to their true value. It would also help families hold on to the largest investment most will ever make.

A National Homeowner Bill of Rights Would Defend the American Dream

Family in front of houseWith mortgage servicers paying out settlements for discriminatory foreclosure practices and unnecessary foreclosures still occurring nationwide, Representative Michelle Lujan Grisham (D) of New Mexico has introduced a bill (H.R. 4963) to establish a comprehensive National Homeowner Bill of Rights designed to curb dishonest practices in the housing sector.

Homeowner bills of rights have been successfully implemented in states such as California, but Lujan Grisham’s proposal would be the first time such measures were enacted on a national scale. A national law in place means homeowners would gain essential protections against arbitrary abuses and discriminatory conduct from mortgage servicers, which occur in every state.

For homeowners in default, the bill would add a number of critical protections for those facing the threat of foreclosure. It sets limits on when the foreclosure process can be initiated and spells out when it is required to stop.

Under the new bill, mortgage servicers would be required to halt the foreclosure process upon receiving a loan modification request from a homeowner. Once the request is received, the servicer would have to immediately evaluate whether the homeowner is eligible for a loan modification. If the borrower is found to be ineligible, the servicer would be required to first present alternatives to foreclosure, such as short sales and forbearances.

Photo: Jeffrey Turner

Photo: Jeffrey Turner

If the borrower is found to be eligible for a modification and in default, underwater homeowners—those who owe more than their home is worth—would be allowed to readjust the value of their mortgages to a level closer to what their home is actually worth today. This principal reduction would represent a major victory for struggling homeowners who received mortgages during the housing bubble. Under the proposed bill, they would no longer be required to make payments tied to highly inflated home values.

If the borrower were not underwater but still in default, the servicer would be required to offer affordable monthly payments to avert needless foreclosures.

In a major win for language access in the housing industry, the proposed bill would require mortgage servicers to translate all documents and provide language interpretation services. Currently, too many Latinos are locked out of adequate customer service due to a lack of language access in the housing sector. By requiring translation services, mortgage servicers could help close the gap between English- and Spanish-speaking homeowners.

Additionally, the bill would add a number of other protections designed to improve the lives of homeowners who have long been forced to deal with the often-opaque mortgage servicing industry. When mortgages are bought and sold from one servicer to another, the homeowner would gain added protections. The dangerous practice of “robo-signing” would be subject to legal penalties, and homeowners would gain tools to learn their rights.

Lastly, the bill would create a new office for a Mortgage Service Ombudsman tasked with assisting low-income homeowners.

While much of Congress remains stalled in partisan gridlock, a National Homeowner Bill of Rights is a commonsense proposal bringing together a set of protections from unscrupulous behavior by dishonest mortgage servicers. Far too many Latino families have already lost their homes—it’s time for practical solutions to protect our nation’s struggling homeowners. The National Homeowner Bill of Rights is the kind of legislation we need to defend the American Dream.

Underwater Homeowners Receive Much Needed Help, But Are Latinos Being Left Out?

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.

Family in front of houseEarlier 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.

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