CRL to Congress: No silver bullet will end foreclosure crisis

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CharleneCrowell

(NNPA)—Earlier this year, Foreclosures by Race and Ethnicity: the Demographics of a Crisis, a Center for Responsible Lending research report found that for every 100 African-American homeowners, 11 have either lost their homes or are at imminent risk of foreclosure. For Latino families, the figures are even worse—17 of every 100 Latino homeowners are affected by foreclosures. This loss of wealth by 2012 could reach $1.86 trillion, far more than the total cost paid by the Gulf Coast states in response to Hurricane Katrina.

Now, as many families begin to gather for the annual Thanksgiving holiday, there are millions who have no home in which to give thanks—2.5 million foreclosure sales were completed between 2007 and 2009, and another 5.7 million families are at imminent risk of foreclosure now.

In the face of these disturbing data points, some might wonder, ‘What are communities still suffering in this recessionary economy supposed to do?’

‘Sue’ is the eventual answer from the State of Maine. A class action suit filed in Maine state courts last October takes to task the still-unfolding “robo-signing” issue, the descriptive term given to documentation practices by loan servicers that are either highly questionable, or downright fraudulent.

CRL’s litigation group is a co-counsel in the case, Archibald et al v. GMAC Mortgage, LLC that alleges GMAC, in its role as servicer on loans to Maine homeowners, violated court rules and committed fraud in filing foreclosure actions and taking their homes. For all class members, the legal action seeks monetary damages. For troubled homeowners with foreclosures still in progress, the suit additionally seeks a solution that will prevent fraudulent filings and require only honest foreclosure actions by servicers. If successful, the action will benefit more than 1,000 consumers spanning foreclosures filed from 2004 to 2010.

Earlier in 2009, Maine advocates worked hard to help pass an omnibus foreclosure prevention law as their response to the pain and suffering caused to families and communities. It is one of the laws that the class action alleges has been violated by GMAC.

‘Investigate’ is the reaction of all 50 state Attorneys General. Begun in mid-October, the bi-partisan effort will coordinate efforts between state AGs and state bank and mortgage regulators to probe charges of deceptive acts, unfair practices, or violations of state laws.

‘Reform’ is a third response to the question of what to do in the face of the foreclosure fiasco. In Oct. 27 testimony before the Congressional Oversight Panel, Julia Gordon, CRL senior policy counsel spoke to servicer abuses, prevention strategies, and the shortcomings of the federal program intended to encourage loan modifications, Home Affordable Modification Program.

In part, Gordon said, “Millions of homeowners are in dire straits due to abusive mortgage originations, incompetent and predatory mortgage practices, ineffective government oversight, and a complex securitization system that lacks accountability all the way up and down the chain.”

Servicer errors cited in the testimony included misapplying payments, disregarding requirements to evaluate homeowners for non-foreclosure options, force place insurance and fabricating documents related to the mortgage’s ownership or account status.

“The system is still entirely at the mercy of those servicers who frequently have not acted in the best interest of either investors or homeowners, and have demonstrated a complete disregard for the legal requirements of the foreclosure process,” added Gordon.

Looking ahead to July 2011 when the Consumer Financial Protection Bureau will acquire rulemaking authority to prevent abusive practices to supplement concurrent state authority, Gordon advised lawmakers that “CFPB should quickly move to regulate the servicing industry to prevent the abuses of the past.”

One of those abuses was illustrated by the real-life account of a California Latina homeowner who first applied for a HAMP modification in April 2009. After her lender approved a three-month trial plan four months later, the homeowner made every $1,000 monthly payment required. Even so, a notice of default was filed against her home in November 2009. By the time a non-profit attorney interceded on her behalf in January 2010, income information in her file was found to be inaccurate. While the lender agreed to put the foreclosure ‘on hold’, the homeowner continued making regular payments every month. Still, in April 2010, a Notice of Trustee Sale was posted on her door.

It will likely take the continued and combined efforts of state attorneys general and even more related litigation combined with vigilant voices of consumer advocates and the CFPB to finally halt the foreclosure crisis. CRL applauds all elected officials and stakeholders who embrace the urgency to act now.

As my colleague Gordon recently said to Congress, “There is no silver bullet strategy to fix every mortgage or repair every foreclosure-ravaged neighborhood… To make a real difference in preventing foreclosures and reducing associated losses, we need a multi-pronged strategy that strengthens the way current foreclosure prevention programs are implemented and also invests in new approaches.”

(Charlene Crowell is the Center for Responsible Lending’s communications manager for state policy and outreach. She can be reached at: Charlene.crowell@responsiblelending.org.)

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