The St. Ambrose Legal Services department has compiled the following tips for what to do if you’re slipping towards foreclosure:
- Ask for help as soon as you realize you are in financial trouble. The sooner you ask, the more likely you are to get the necessary support to resolve the problem.
- Stay in contact with your bank/lender so that they are aware of your situation. If you are upfront and transparent about your financial situation, your bank will better understand your needs and interests.
- Do not pay fees for services to assist you with your financial situation when the service is available for free. Thoroughly investigate anyone who is charging you for financial services and what they are doing for the fees.
- Take advantage of free services! The state and the banks will inform you of free counseling and legal services that are available to you.
- Do not take advice from friends, neighbors, or family, unless they are trained in financing.
- Open all of your mail, promptly. Don’t assume you already know what’s inside.
- There is no way to get out of the debt obligation. Don’t bother looking for a way out. Instead, determine if a loan modification is a viable option for you.
- Understand your responsibilities under the debt obligation. A deed of trust is the same thing as a mortgage. A deed is the document that transfers ownership of real estate.
- Know your rights and don’t sign any contracts unless you fully understand the document. You may be offered a ‘friendly foreclosure’ at mediation, but thoroughly research the implications of this sort of agreement before signing any contract.
- Do not think the problem will just go away. If you cannot afford your house, start considering what next steps you will take in order to find a new living space.
The threat of foreclosure can be intimidating, but being informed of your rights and responsibilities can make the process easier. Going through a foreclosure doesn’t mean losing everything. If you remain informed and proactive throughout the process you’ll be able to salvage the maximum amount of your investment. Find help, resolve the problem, and look ahead to life after foreclosure. Call St. Ambrose for free legal advice and foreclosure counseling: 410-366-8550
The network apparently asked mayoral candidates to weigh in on the issue. From what we can tell, they received at least one response, from Frank Conaway, Sr., pasted below:
We need to conduct triage on our inventory of vacant and blighted properties. Properties that are in viable locations should be fixed if they are city owned, or acquired through condemnation if they are privately owned and repaired for occupancy. In areas where the neighborhoods are on the borderline between viability and failure, we should have a broader strategy to acquire multiple properties and rehab them in groups. We need to acknowledge that there are some houses that are not suitable for rehab. These properties should be razed. No one in Baltimore has wanted to deal with this reality, but the truth is that some areas are beyond repair and need to be redone from the ground up.
Earlier today, The Huffington Post, one of the nation’s most popular news sites, drew attention to some of the ongoing research of Matthew Kachura and the Baltimore Neighborhood Indicators Alliance–the Post covered BNIA’s study cataloguing the increased presence of rats in Baltimore City since the foreclosure crisis began. From the article:
The rise in rats is an example of the declining quality of life in some sections of the city as foreclosures and vacant properties have begun to take their toll.
Since 2003, rat incidents in his majority-black city of nearly 621,000 are up more than 300 percent, according to the Baltimore Neighborhood Indicators Alliance-Jacob France Institute at the University of Baltimore. There were more than 37,000 reports of rats in 2009, data show.
The rate of dirty streets and alleys is up nearly 250 percent since 2003, according to the research institute.
Like urban centers across the country, Baltimore is fighting foreclosures with fewer resources at a time when home prices are still declining and a rise in home seizures remains a constant threat. While home prices shot up during the bubble, boosting neighborhoods that had been slowly making progress, the precipitous decline has wrecked what were up-and-coming sections of the city.
Baltimore rats have long commanded a storied reputation for their pervasiveness, a notion that has been internalized by residents and non-residents alike. Thoughts and comments on this long present nuisance, as well as perceptions about whether the rat rate is, indeed, increasing, are welcome.
Late last month, Bank of America, one the nation’s largest mortgage servicers, entered into a settlement agreement with multiple investors, in what has been hailed as one of the most significant settlements involving mortgage-backed, toxic assets since the onset of the financial crisis. At $8.5 million, the settlement, at least on its face, seems to present an optimistic message for investors, who can now maintain some measure of hope that legal remedies exists for the opaque, sometimes fraudulent securities on which they spent their money.
But a closer look at the agreement reveals a different picture. While $8.5 million may be a convincing figure to some, the value of the mortgages held by the Bank of America totals at about $172 million, meaning that Bank of America secured a deal in which they were obligated to pay back less than five cents on every dollar. This statistic has prompted many, including New York Attorney General Eric Schneiderman, to demand more information about the settlement. Schneiderman and other critics suspect that the deal was put together hastily and unfairly: the New York Times reports that the investors involved in the settlement hold interest in merely one quarter of the 172 million in assets. Moreover, because of the legal parameters of such a settlement, the deal would have a comprehensive effect, foreclosing claims from investors and individuals that may hold interest in the BoA loans but were not privy to the settlement negotiations.
More specifically, the settlement involves loans held by a BoA subsidiary, Countrywide Financial, which BoA purchased in late 2008 under what was apparently a disaster mitigation circumstance. While BoA has every incentive to get rid of the Countrywide loans, given their toxicity and total lack of profitability, they neglect to consider the far-reaching policy effects that the deal will have. Most conspicuously, the settlement will almost certainly accelerate foreclosure processes, which will impose devastating consequences on families. These foreclosures will have broader economic ramifications. According to Times columnist Paul Krugman, the settlement:
“would just accelerate foreclosures, and if more families were evicted from their homes, that would mean more homes offered for sale — an increase in supply. An increase in the supply of a good usually pushes that good’s price down, not up. Why should the effect on housing go the opposite way?”
Indeed, as Krugman writes, this settlement presents yet another example of letting bankers of the hook. Furthermore, the Countrywide mess and the subsequent short sale of the firm to BoA indicates the crucial need for greater regulation of asset-backed securities, the danger of which is now well documented. The deal will certainly affect our job at here at St. Ambrose, where our foreclosure prevention team negotiates with banks everyday in an effort to stymie foreclosures. Settlements like this one set a precedent of “going easy on the banks,” as Krugman writes, enabling them to feel that they are beyond legal remedies for honest negotiation. Such settlement will, in other
By Anne B. Norton and Harsha Sekar
A few days ago, the New York Times presented yet another angle of the chaotic and disorganized foreclosure crisis, a maelstrom that has revealed, among other things, poor ethical practices and other bizarre behaviors on the part of both homeowners and lenders. Apparently, the backlog of foreclosures is now so extensive that mortgage servicers may be delaying the process altogether. In some cases, this practice (or lack thereof) has conferred legitimate relief upon buyers, who are able to continue living in their homes. In others, buyers have taken advantage of stalled foreclosure processes, strategically defaulting on their loans. The Times reports that some homeowners have even discovered creative (yet unscrupulous) was to earn a profit off of their foreclosure, one of the more shocking news items we’ve come across.
The Times explains the magnitude of the crisis straightforwardly:
In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.
Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.
The Times goes onto distinguish states which mandate that foreclosures be filed in court versus those that do not (and states are more or less evenly divided throughout the country). “The pace is much more brisk,” in states that bypass the court process, declares the paper, “three years in California, two years in Colorado and Nevada.” According to a foreclosure lawyer to whom the Times was able to speak, “banks aren’t trying to win.” While the banks, in a strong effort to mitigate the understandable concerns of investors that may purchased their assets, have categorically denied allegations that they have made any attempts to intentionally prolong foreclosures.
Perhaps not surprisingly, while the new phenomenon is a relief for those less fortunate, certain people have chosen to take advantage of the situation:
Mr. Stopa, the Florida lawyer, said he divided his clients into three groups. Some are unemployed or disabled and just getting by. Others are able to save money and improve their financial situation as their case drags on. The third group are those who have strategically defaulted. They can afford to pay but are taking advantage of the banks’ plodding pace. Often the members of this group rent out the foreclosed home and keep the proceeds.
While so much of the coverage of the foreclosure crisis has emphasized ordinary American families that have fallen on hard times, here, we get a rather appalling glimpse of another, new side of the equation.
Is the backlog for real, and what does this all mean in the grander scheme, one might ask? In total, the Times definitely delivers a few valid points in terms of delay. The process in NY will be substantially longer due to the judicial process that can take more than 500 days to complete if there was no backlog and no objections to the foreclosure sale filed. As for locally, there is no question that there is backlog of foreclosures in Maryland thanks to the July 1, 2010 mediation law followed by robo-signing followed by new changes to the mediation law coming soon as well as a looming settlement with the OCC, DOJ/AG group and state bank regulators. The state’s Foreclosure Bar has said that there largest national bank clients have 10’s of 1,000’s of loans in the pipeline that are waiting for some of the uncertainty to resolve.
Everyone’s hope is that the economy will start to pick up a little as the filings start to move through the system and that certain changes in servicing make it more likely that the homeowners in line for foreclosure will find relief. But, without clearing the market of the foreclosure inventory, can there be a true economic recovery? We’re not certain.
The Washington Post’s new expose that purports to reveal to the public the widespread incompetence affecting the Department of Housing and Urban Development has engendered much controversy. The series ostensibly addresses only a single program within HUD, the HOME Investment Partnership Program, which administers funding to local government and private entities to develop affordable housing projects. In stentorian fashion, the opening sentence of an article titled, “A trail of stalled or abandoned HUD projects,” (part of the multi-article investigative series titled, “Million Dollar Wasteland”), declares, “ the federal government’s largest housing construction program for the poor has squandered hundreds of millions of dollars…and routinely failed to crack down on derelict property developers or the local housing agencies that funded them.” The Post goes onto report that some 700 projects, totaling “nearly $400 million” have been stalled for years, some even for decades, causing widespread blight. The article then lists widespread deficiencies in oversight and accountability within HUD, contending that the agency doles out cash without properly vetting recipients, that money was delivered when projects were only in an inchoate phase, and that HUD should have imposed more regulations on funding recipients, whether they be housing agencies, non-profit organizations, or the partnered developers. Needless to say, we were surprised.
Perhaps the main reason the article surprised us, however, was what appeared to be the intentional misrepresentations of the available housing statistics, most of which were pointed out lucidly by Secretary Donovan. In a response published on June 10, Donovan rebutted the Post by indicating out that HUD has received numerous acclaim in recent years as well introducing his own stats:
Although HUD provided data and information to The Post for more than a year, the paper has not shared with us the list of projects it generated. So after the articles ran, we conducted our own project-by-project review using The Post’s parameters. We determined that more than half of 797 projects that could have been flagged as “stalled” based on The Post’s criteria are finished.
Of the remaining projects, 97 have been canceled and their funding moved to viable projects, while 154 are progressing toward completion. The final 85 properties are experiencing delays, but in the vast majority of cases there is a simple reason for this: the recession.
Donovan goes on to state the conclusions of HUD’s internal study: only four percent of the more that 5,000 Home projects are “delayed” or “cancelled” (employing the metrics used by the Post). Moreover, the Post misleadingly gives the impression that funds were squandered, when in fact HUD policy stipulates that “[if] there are delays, money can be moved to other viable projects or must be returned if it is not used within five years.” Donovan then goes on to defend the decentralized nature of the HUD grants, which give large discretion to local communities and their governments, by suggesting that this framework is a preferable to a “one-size-fits-all” federal mandate.
In addition to what could be blatant misrepresentations or mistakes, the article is unfair in a number of other respects. For starters, it assumes more regulations and requirements are a solution, while ignoring the fact that these could quite possibly further stifle such developments. Moreover, it completely neglects to contrast the HUD programs with the ways in which the private sector has aimed to deliver affordable housing in recent years. While this phenomenon also resulted from public-private partnerships, namely government policies encouraging homeownership and many private entities vying to advantage from government guarantees by engaging in the lucrative process of securitizing credit, the private sector likewise failed, resulting in the financial crisis. The HUD developments, which involve the government to a greater extent than most other housing developments, are one of the few bright spots of economic creation in the housing industry, which many commentators have pointed out is crucial to broader economic recovery. Let’s keep this in mind, and give the developments a chance.
We at St. Ambrose were also particularly chagrined about the fact that the article seemingly attempts to paint the entire Department of Housing and Urban Development in a negative light. The Post does this in part by implying that HUD is a single-faceted organization aimed at the development of new properties for low-income citizens. While it is true that this area comprises a major part of HUD’s activity, the organization also provides other, far different services, many of which remain crucial to mitigating the widespread financial pain incurred by the current financial crisis. These services include both mortgage and foreclosure prevention counseling—we believe that the former type of assistance needs to be implemented on a large scale, as mortgage counseling is often key to ensuring that families understand their commitments, the terms of their mortgages, and what it will take to keep above water over the long term. As for the latter, we know that foreclosure prevention assistance is paramount in enabling families to stay in their homes longer. Take for example our unique study on foreclosure prevention conducted earlier this month, which among other things found that 70% of homeowners that underwent counseling in 2007 reported positive outcomes, and that homeowners who utilized counseling services were 79% more likely to experience a positive outcome. (More insight on the study will appear here next week).
More than anything, in light of Donovan’s straightforward statistics, which serve to debunk much of the Post’s shocking data, we wonder how the Post could have come up with numbers that contrast so sharply with HUD’s. As far as we know, the Post is yet to respond to Donovan, and on this point we think it may be fair to take a hint from one of Baltimore’s great social critics, David Simon. In Season 5 of The Wire, the city’s local paper runs into some problems with balancing sensationalism with thorough, honest journalism. And while we certainly don’t equate the Post series with Scott Templeton, it’s reasonable to suspect that the Post may be guilty of a similar, all too common imbalance.
This week, several sources have reported new information indicating that a colossal backlog of foreclosed properties has amassed, where banks, unable to convert the repossessed homes into sales, simply hang on to them for an indefinite period, with no discernible hope that a transaction may take place. While most Americans are keenly cognizant of the foreclosure crisis, even housing experts found themselves shocked to come across some of the newly released statistics: according to the New York Times, lenders “own more that 872,000 homes as a result of the groundswell in foreclosures, almost as twice as many as when the financial crisis began in 2007.”
In addition to demonstrating that the crisis never really ended, this figure suggests that policies aimed at prevention have not worked, and in this severe economy, middle-income families throughout the nation continue to face the constant threat of losing their most valuable asset. In Atlanta, for instance, “lenders are repossessing eight homes for each distress home they sell,” a staggering ratio. The ratio is six to one in Minneapolis, and in “once hot” markets like Chicago and Miami, whose real estate is among the most expensive in America, the ratio still remains about two to one. Indeed, if banks continue to foreclose while maintaining a systematic inability to sell, this glut is sure to continue, signaling that there really may be No End in Sight.
The Times offers two reasons for the glut: “inadequate staffs” and “delays imposed by lenders because of investigations into foreclosure practices.” While it’s difficult to comment on the former without further information, the latter cause is surprising, since such “investigations” were presumably initiated to assist foreclosure victims and therefore help families stay in their homes. Of course, if these “investigations” were effective—assuming the term refers to an overhaul of foreclosure practices—then the end result should be a decrease in lender owned homes, not the other way around.
While the paper concedes that “the biggest reason for the backlog” is that it takes longer to sell a foreclosed property than owner-owned home, the paper goes on to suggest that slowing down the foreclosure process has contributed to this stagnant market.
In contrast to this suggestion, home owners require a more drastic overhaul of foreclosure practices, not less. The writer seems to miss the point that stymieing the process often diverts foreclosure altogether, benefiting the home owner and the bank alike. Indeed, the Times would serve the public by presenting this backlog in a much more nuanced fashion. While the investigations may slow down sales in the short term, they serve a larger purpose of ensuring that faulty practices that should never have taken place began to finally desist. Moreover, while the policies encouraging the investigations have too often fallen short, they are nevertheless crucially important. It’s easy for both parties to scapegoat government programs like HAMP, but to really curtail the rise of lender owned homes, the government must strengthen aid programs, ensuring that that enforcement mechanisms exist and that homeowners have the ability to access the services of HAMP and similar programs in an efficient and understandable context.
In short, while this problem is enormous, the first step to mitigating it is to prevent foreclosure altogether, and for that, we require more government programs and yes, more investigations into unfortunate practices (take, for example, the Washington Post columnist Dana Millibank, whose home was mistakenly foreclosed upon. And as Paul Krugman points out, there’s no reason to think that this is an exception).
Unfortunately, all indications suggest that this won’t happen. Proposed cuts in HUD have already taken place, and, coupled with a federal government obsessed with spending cuts, this could only mean one thing: less foreclosure prevention help, the return of unethical lending practices, and no solution to growing stock of foreclosed homes that no one is willing to buy
Today, we Talk To St. Ambrose have posted our second interview of our “Talking with the Experts Series,” and we are honored to host Program Manager for the Baltimore Neighborhood Indicator Alliance-Jacob france Institute, Dr. Matthew Kachura. As many of you already know, Dr. Kachura is a hugely respected community member and activist on behalf of Baltimore City. He is likewise a pre-eminent scholar in the areas of housing, community economic and workforce development, and other issues affecting urban communities. Dr. Kachura recently conducted an innovative study examining the effects of foreclosure on Baltimore’s schoolchildren, which gained much deserved local and national attention, as it remains one of the only empirically-backed projects studying the residual, far-removed affects of the foreclosure crisis. Dr. Kachura has also conducted influential research on the Baltimore Empowerment Zone, the earned income tax credit, and commuter issues, among many others.
Again, we are honored to host such an important and distinguished scholar and community member. My interview with Professor Kachura is below.
Harsha Sekar: It was fascinating to read the results of Phase I of your study on the effects of foreclosures on Baltimore’s schoolchildren. For me, one of the study’s most salient implications concerned the interrelationship of social problems. It appears that public policies that encourage affordable housing will not be effective without the implementation of a broader welfare state, as widespread access to decent housing seemingly cannot materialize without strong neighborhoods, schools, and access to healthcare. Given the findings of your study, can policymakers effectively curtail the problem of inadequate housing without simultaneously addressing the needs of other, related social institutions?
Matthew Kachura: The short answer is no. I believe that urban issues, whether it is affordable housing, high unemployment, social ills such as crime, or issues relating to education, are all interconnected and that policies that take into account this interdependency need to be created and implemented. Trying to address one issue without recognizing that there are a host of other issues related to it will not lead to sustainable or long-term improvement.
HS: Following up on the last question, what are some of the other, less obvious residual effects of foreclosure that you have noticed in your work?
MK: I think a non-obvious issue is exactly what we set out to identify. Little attention has been paid to the smallest victims of foreclosure – children. It is not just that children are also victims of foreclosure, but that the increased mobility resulting from foreclosure can have lasting, long-term effects on their social and personal development and educational performance. These negative impacts might not occur in the year following the foreclosure, but research has shown that missing days of school as a result of having to move can lead to an increased chance of a student dropping out of school, not completing their degree and in the long run earning less income.
HS: Your study also catalogues the disproportionate effect of foreclosures on minorities. While many commentators have discussed this issue, few academic studies document this phenomenon with empirical data. How has the foreclosure crisis functioned to reinforce systemic racism?
MK: We found several interesting findings as a result of this analysis, including the largest numbers of students who were affected by foreclosure in Baltimore City were African American. This was not surprising though since two thirds of the residents of Baltimore City are African American. There were two other important findings. First, the share of Hispanic students impacted by foreclosure had been increasing to a point where the share of students impacted by foreclosure was the same as the total percentage of students attending the City public schools. Second, we believe the share of white students impacted by foreclosure was not accurately counted, potentially being significantly undercounted. According to American Community Survey data, nearly a quarter of the children in Baltimore City are white but only 8% of children that attend the City public schools are white. This means that these students are attending other schools – most likely private schools – and were not included in the analysis. Overall though, the fact that African American residents and their children were affected by foreclosures in such large numbers supports the facts that predatory lending policies and sub-prime loans were targeted to those persons who could least afford to lose their home. The loss of the home, the primary vehicle to building wealth for many of these families, only perpetuates a vicious cycle of poverty.
HS: At Mayor Rawlings-Blake’s recent Vacants to Values Summit, the market-drive notion of “Code Enforcement” was promulgated a means to reduce blight in the city, which would impose sheriff sales on properties that do not meet the city’s code. How do you feel about this tactic, and what other policies do you advocate to incentivize property owners to invest in Baltimore’s underserved neighborhoods?
MK: I believe that the Mayor’s plan has merit and there have been a variety of other strategies taken in an effort to reduce blight and to turn vacant housing into occupied housing. There are issues with using code enforcement including identifying and locating individuals to serve them with the necessary paperwork, issues relating to selling the properties at Sherriff sales, and then trying to turn them into occupied properties. Many of these properties are so beyond being able to be lived in, they will require significant repairs and persons willing to take the time and expense in making the repairs before anyone can live in the property.
I also believe that there are already a number of policies that are making strides in having residents invest within Baltimore’s neighborhoods. Among these are live where you work programs, which also encourages employment, Healthy Neighborhoods, and the Neighborhood Stabilization Tax Credit. I also believe that the City’s use of data and its Housing Typology model supports the use of strategic investment – targeting neighborhoods with the types of interventions that are needed most within those neighborhoods instead of spreading resources too thinly across a variety of neighborhood types. Most of all, I believe that residents living in Baltimore’s neighborhoods are the best means to encourage other residents to invest and live in Baltimore City.
HS: Much of your scholarly work examines economic development in urban areas. How have established NGOs like St. Ambrose contributed to economic development and vibrancy in the Baltimore area over the past few decades? What do you feel is the role of NGOs in stimulating economic activity relative to that of the city government and the private sector?
MK: NGOs are a critical component to the overall continued health, vitality, and improvement to Baltimore City and its neighborhoods. NGOs have been recognized as an important partner in economic development strategies that cities, such as Baltimore City, rely on for their ability to produce results and make an impact. With fiscal constraints and the need to provide the same if not improved services for a shrinking residential base, NGOs have become a more important partner that the City has embraced to push economic and workforce development. NGOs typically can operate without the bureaucracy and red tape that government agencies have in place, making them, in many cases, more effective and efficient in creating job opportunities and in neighborhood vitality.
As many of you may know, Maryland recently gained $40 million for foreclosure assistance as part of the Emergency Homeowner Loan Program, signed into law several months ago by President Obama. Governor O’Malley used these funds to kick off the Emergency Mortgage Assistance Program last week. On her popular Real Estate Wonk blog, Jamie Smith Hopkins succinctly describes the program’s bullet points:
Borrowers could receive as much as $50,000 in interest-free loans to pay off past-due amounts and to make up to two years of payments. They must have taken an income hit of at least 15 percent, be three to 12 months behind on their mortgage and have a “reasonable likelihood” of being able to get back on their feet.
The emergency help is like loan-to-grant money given to first-time homebuyers: No payments are due for five years, and every year the total is reduced by 20 percent until nothing is owed — as long as the homeowner keeps the property and stays up-to-date on the mortgage during that time.
Ms. Hopkins then asks: “what do you think? Better or worse off than loan modifications?” While perhaps failing to directly proffer a response, my thoughts are below:
Maryland’s adoption of the new Emergency Mortgage Assistance Program is welcome news, no doubt, but it’s important to temper our optimism with strong caution. As it stands, the new program delivers cash, not regulation. And as we’ve seen all too often in our counseling sessions and discerned from our peers across the nation as well as from the news media, cash alone certainly may not result in a tangible step towards mitigating the impact of the foreclosure crisis, which, at least ostensibly, is the goal of this legislation. Take for example Bryan Sheldon’s recent commentary about a “typical” mediation process, in which Bryan, a veteran counselor, accurately describes some of the common troubles that home-owners face while utilizing HAMP: banks’ ridiculous and erroneous demands for documents unrelated to foreclosure, the government’s inability to enforce program guidelines (and the banks’ inability to comply), and the banks’ illegal practice of commencing foreclosure proceedings while the borrower is under review for HAMP assistance. Recently, policymakers were forced to draft legislation prohibiting lenders from initiating a foreclosure while the borrower is actively seeking mediation. While this prospective reform is a breath of fresh air, it should have been totally unnecessary: common sense should prompt one to realize that such a practice is dishonest and unethical.
Frankly, Bryan hits the nail on the button when he writes, “the basic problem with the available government programs is that they have been implemented in the grossly deficient regulatory system which contributed to the foreclosure crisis in the first place.” Indeed, I’m not convinced that this new program will produce results without robust, broad financial regulation to accompany it.
It’s important to remember that the foreclosure crisis was two-fold. The predatory lending scams defined stage one, causing massive foreclosures and therefore families without housing, an aggregate loss of equity across the nation, and oddly as well as most consequentially, a crash in the U.S. securities market. This last consequence led to stage two: large-scale layoffs, which subsequently forced many middle class families to default on their mortgages and eventually face the inevitable.
These victims still exist. Many are still jobless, even homeless. And while many such people borrowed beyond their means, this trend emerged because of the gaping income inequality and stagnant wages that pervaded the last few decades, obligating many middle-class Americans to borrow more than they could take on.
These problems are now structural, and in addition to emergency benefits like the one’s offered in the new package, a structural fix is likewise necessary. To be sure, The administration has made some good efforts: the Frank-Dodd bill aimed at regulating the financial markets, the concept of a Consumer Financial Protection Bureau, headed by Elizabeth Warren, to name a few. But these development aren’t cutting it, indicated by the continuing prevalence of foreclosures nationwide.
I’m worried that the administration will stop with this initiative and that it will turn into another HAMP, which does not grant the Treasury Department the ability to impose fines on banks, a loophole that the latter group routinely abuses, among other shortcomings. Along with foreclosure assistance to states, the President Obama needs to return to the drawing board and draft comprehensive financial regulation that 1) includes consumer protection measures, 2) defines and streamlines the process of responding to a foreclosure, while consolidating paperwork, 3) rigorously regulates the trading and development of dangerous securities, and 4) provides stringent enforcement measures. This last point is crucial, as it had become fairly obvious that the government, all too often, has been plainly unable to administer the rule of law.
Until then, unfortunately, I am not convinced that this measure won’t fall short. So while the state should welcome the Emergency Homeowner Loan Program with open arms, first and foremost, in order to stymie the foreclosure crisis and ensure it does not reoccur, we must mend “the grossly deficient regulatory system” that caused it.