(NNPA)—Three years ago when a coalition of civil rights organizations called for a foreclosure moratorium, their plea for struggling homeowners went largely ignored by mortgage lenders, loan servicers, and mortgage investors. Since that call for action, more than 2.5 million foreclosures have occurred and another 5.7 million more are imminent. Additionally and as previously reported, nearly one in 10 homeowners is now either in foreclosure or more than 60 days past due on their mortgage and nearly one in five homeowners is under water, owing more money than their home is now worth.
According to Wade Henderson, president and CEO of the Leadership Conference on Civil Rights, “It is estimated that if we don’t take drastic measures to stop this monster, the nation will experience over 12 million foreclosures before it’s all said and done. A disproportionate number of these foreclosures will involve Latino and African-American homeowners.”
Agreeing with Henderson, Mike Calhoun, president of the Center for Responsible Lending (CRL) added, “When we first issued our call three years ago, the industry responded by stating that we were crying wolf, that the foreclosure problem would be contained. They were wrong and as a result, we have had millions of preventable foreclosures. What’s more, our research reveals that African-American and Latinos are almost 75 percent more likely to experience foreclosures than similarly situated Whites. We cannot allow this injustice to continue.”
Now, in the aftermath of disturbing news that many lenders failed to follow the proper legal procedures for foreclosing that they also submitted to courts, Henderson, Calhoun and other colleagues representing the NAACP, National Council of LaRaza, and the National Fair Housing Alliance are repeating their earlier call for action.
This time, however, their voices are being joined by a growing number of others who have come to understand the devastation wrought by massive foreclosures and the resulting recession.
In an Oct. 4 letter to U.S. Attorney General Eric Holder and Federal Reserve Chairman Ben Bernanke, Speaker of the House Nancy Pelosi was joined by her California caucus colleagues in a formal request for swift and decisive action. Sharing how thousands of constituents tried to secure loan modifications, Pelosi advised that lenders “routinely fail to respond in a timely manner, misplace requested documents and send mixed signals about the requirements that need to be met to avoid foreclosure.”
She further added, “We have heard numerous stories of financial institutions being uncooperative at best or misleading and acting in bad faith at worst. These heartbreaking stories are commonplace.”
According to the CRL’s most recent foreclosure projections, California, the nation’s most populous state, will suffer 532,000 foreclosure filings in 2010. By 2012, California will account for $627 billion of the nation’s projected $1.7 trillion in lost wealth.
While the Justice Department reviews and prepares to respond to California’s acute needs, the state’s Attorney General and former governor, Jerry Brown, has asked lenders JP Morgan Chase and Ally Financial, formerly known as GMAC, to prove they are complying with state laws. And if they cannot provide substantiation, foreclosures are to be halted immediately.
According to Brown’s office, California law prohibits lenders from recording notices of default on mortgage made between Jan. 1, 2003 and Dec. 31, 2007. Lenders are to “diligently” attempt to contact borrowers to determine eligibility for a loan modification. Even in the event of a notice of default, the lender must include a declaration of compliance with California law.
But California is not alone in initiating state actions regarding foreclosures.
A multi-state agreement between Wells Fargo Bank and Arizona, Colorado, Florida, Illinois, New Jersey, Nevada, Texas, and Washington was announced Oct. 6. The nation’s fourth-largest U.S. bank will offer mortgage modifications to as many as 9,000 eligible borrowers. The estimated value of the modifications is expected to total $772 million.
Beginning Dec. 1 and continuing through June 30, 2013, the bank will offer modifications to eligible residential borrowers who are either 60 days late or facing imminent default. Additionally, Wells Fargo commits through the agreement to reach a decision on modification within 30 calendar days of receiving a complete application, offer other foreclosure alternative including short sale, deed-in-lieu and relocation assistance, and financially support the execution of the agreement.
For example, in Florida, another state plagued by high foreclosures, Wells Fargo will pay that state Attorney General’s office $10.2 million to assist with state investigative costs, efforts to prevent or mitigate foreclosures, and prevent mortgage or loan modification fraud.
In Texas, Wells Fargo will provide $5 million in relief to more than 200 Texas homeowners who had “payment option” adjustable rate mortgage loans. Wells’ efforts in the Lone Star state will focus on loan modifications and debt reduction.
Other states that have recently announced efforts to revisit foreclosures and their economic impacts include Iowa, Delaware, Massachusetts, North Carolina, and Ohio.
The irony, as the civil rights leaders noted, is that a quick response three years ago could have prevented many of the subsequent losses of homes and family wealth with far less effort.
“Our call to stop predatory lending practices went unheeded 10 years ago,” said Shanna Smith, president and CEO of the National Fair Housing Alliance. “Our call for a national moratorium on risky subprime loans went unheeded three years ago. We hope that our call for a national halt on all foreclosures will be taken seriously today.”
(Charlene Crowell is the Center for Responsible Lending’s communications manager for state policy and outreach. She can be reached at: Charlene.firstname.lastname@example.org.)