Exactly one year ago homeowners from PICO organizations in California, Missouri and Massachusetts marched into the U.S. Treasury and handed officials a foot-high stack of documents from 150 families trying to save their homes. These were stories of people who had auction notices posted to their doors while they were in the midst of trying to negotiate loan modifications, stories of people facing endless wait times, lost paperwork and no way to get clear information from their lenders about the status of their applications or the reasons for denial.
Now the nation’s largest banks have admitted publicly what we’ve been hearing from homeowners for the past two years – that in their rush to foreclose mortgage servicers have engaged in systematic fraud. They’ve forged signatures on documents, robo-signed affidavits and taken people’s homes without proof that they actually own the underlying mortgage note. This is a mortgage servicing industry that, despite repeated promises to help people avoid unnecessary foreclosure has stacked the deck against homeowners who are trying to stay in their homes.
The rules that the banks have broken are not trivial – they are rules designed to give people a fair chance to save their homes from foreclosure. The banks promised to prevent foreclosures in exchange for taxpayer bailouts, but instead they chose to create foreclosure mills.
By flooding communities with unnecessary and in some cases illegal foreclosures, banks are not only hurting families but also driving down everyone’s housing values. What the country needs is for banks to clean up their act and begin working in good faith with homeowners to provide sustainable loan modifications that stabilize housing values. It may eat into some of the record-breaking bank profits and bonuses, but it would be good for America and fair for families.
PICO and many other organizations, including an alliance of the nation’s largest networks of community-based organizations and unions have been asking the Treasury to adopt a set of common-sense steps to get to the root of the foreclosure crisis. These include requiring banks to reduce the principal on loans where housing values have fallen through the floor, imposing financial penalties on banks that fail to offer good loan modifications to eligible homeowners, and offering extended forbearance to unemployed homeowners who are having trouble keeping up with their mortgage payments.
We’ve also repeatedly demanded that banks adequately maintain vacant foreclosed homes and transfer them quickly and responsibly to new owners. The banks are claiming that stopping foreclosures would result in more vacant property, but the reality is that the largest banks are already sitting on a shadow inventory of hundreds of thousands of abandoned properties that they have foreclosed. These properties are often left open and in disrepair. The best way to stabilize the housing market and get the economy going is to prevent, not facilitate foreclosures and to hold banks accountable for maintaining and transferring vacant properties.
We need fewer not more foreclosures, which is why it is disheartening to see Treasury Secretary Timothy Geithner and White House advisor David Alexrod come out against the growing call by local and state officials and non-profits for a national freeze on foreclosures that would set the stage for a new approach to this crisis.
The Administration needs to come out clearly on the side of families and communities, not the big banks who caused the crisis in the first place. It needs to reject the scare tactics of the big banks, who are now using the same “bailout logic” from two years ago, warning us that stopping their fraudulent foreclosure machinery would have drastic consequences on the housing market. We all remember what came out of that period: The largest banks received hundreds of billions of taxpayer dollars and returned to record profitability, while ordinary Americans were left out in the cold and footing the bill. We cannot allow this to happen again.