Up against the banks
The effort to halt foreclosures grows
Published: July 6, 2011
In a 2008 analysis of the issue by the nonpartisan Congressional Research Service, the Depression-era moratorium legislation produced mixed reviews.
As the report pointed out, "economists might argue that interference with lender's ability to recover loan collateral will tend to either reduce the amount of lending or raise interest rates on new loans."
It is certainly an unpopular idea on the right.
Peter J. Wallison, a fellow in financial policy studies at the conservative American Enterprise Institute think tank, contends that the "first victims" of a moratorium will be the nation's banks.
"If they are not going to receive any revenues from these mortgages, and they cannot foreclose, they will be weakened. If that happens, they cannot continue to make loans to small businesses, to consumers, or to those people who would like to take advantage of today's low interest rates to buy a home, whether or not it is a foreclosed property. So the foreclosure moratorium will further weaken local economies and produce yet more unemployment."
But it is not only the right that poses such criticism.
In October, amid growing evidence that there was widespread illegality in the way foreclosures were being handled, White House press secretary Robert Gibbs said that the administration opposes a blanket, nationwide moratorium because "unintended consequences" could damage the fragile economic recovery.
Activists in Michigan are saying the problems with foreclosures extends far beyond the so-called "robo-signings," which involve foreclosures being pursued without having been properly notarized and other irregularities. Those failings led to a temporary halt of foreclosures for a time last year in the 23 states that require judicial review at the start of the foreclosure process. (In Michigan and other states, all a lender must do is post notice in a newspaper that a house has gone into foreclosure.)
It's not that those issues are insignificant. As U.S. Rep. Marcy Kaptur (D-Ohio) began pointing out at least as early as 2009, in many instances those robo-signings weren't merely clerical contrivances; they were being done because those attempting to foreclose on a home didn't have the documentation necessary to prove they had a legal right to do so.
That's because, as mortgages were bundled and sold to investors, the "notes" proving a legal claim were spread far and wide.
Homeowners should demand that those attempting to foreclose produce the note, and people should "squat" in their homes until that happens, Kaptur advised. "Possession is nine-tenths of the law," she told Amy Goodman of the Democracy Now syndicated radio program. "Therefore, stay in your property. Get proper legal representation. ... [If] Wall Street cannot produce the deed nor the mortgage audit trail ... you should stay in your home. It is your castle. It's more than a piece of property. ... Most people don't even think about getting representation, because they get a piece of paper from the bank, and they go, 'Oh, it's the bank,' and they become fearful, rather than saying: 'This is contract law. The mortgage is a contract. I am one party. There is another party. What are my legal rights under the law as a property owner?'
"If you look at the bad paper, if you look at where there's trouble, 95 to 98 percent of the paper really has moved to five institutions: JPMorgan Chase, Bank of America, Wachovia, Citigroup and HSBC. They have this country held by the neck."
Recent reports indicate that Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and other financial institutions accused of malfeasance by the 50 attorneys general and federal regulators in the robo-signing scandal are close to agreeing to a $20 billion settlement.
Even that is controversial.
"Though this figure sounds like a large settlement to those unfamiliar with the scale of the foreclosure crisis, we must remember that over 3 million homes have been lost to foreclosure since 2006," U.S. Rep. Maxine Waters (D-Calif.) was quoted saying. "This settlement is too small, and will likely have one of two results: Either borrowers will receive insignificant principal reductions, or reductions will only be available to a small subset of troubled borrowers."
The issue, however, goes much deeper than that.
Detroit attorney Vanessa Fluker, one of the leaders of the Moratorium Now! coalition, spelled out the issue clearly when she testified before the U.S. House Judiciary Committee in December.
It has to do with the issue of so-called subprime or "predatory" loans, where low introductory rates were used to lure people into buying or refinancing their homes at levels lenders knew couldn't be sustained once the higher, often hidden, rates kicked in.
"Contrary to media hype and popular belief, the average individuals affected by subprime lending are the poor, minorities and elderly," noted Fluker in a written submission co-authored by Detroit attorney Jerome Goldberg, another leader of the local moratorium movement. "In my practice, which unfortunately now consists almost solely of predatory lending cases and foreclosure matters — the vast majority of my clients are the working-class, poor, minorities and senior citizens over the age of 75 years old, who initially owned their home outright until steered into ARMs [adjustable rate mortgages], despite the fact they were on a fixed income, and now face foreclosure and homelessness.
"Several associates and myself have committed our practices to attempting to help these people and bring some sense of justice back into the legal process. I would like someone to truly address the foreclosure issues, and look at the front-line stories that we see every day. My client who works every day, with a mother suffering from pancreatic cancer who is still fighting to stop an eviction after being denied a modification from Countrywide/Bank of America, which just received an additional $7 billion for modifications in January of 2010. The senior citizen with dementia since 2000, who was placed in a pay option ARM by Washington Mutual in 2007, and is now fighting in litigation with Chase for some type of resolution. The 79-year-old man whose home is worth $12,500, but the predatory mortgage is almost $200,000, and Citimortgage refuses to modify or let him purchase the home at fair market value, but would rather foreclose and evict him and collect full mortgage value from Fannie Mae. This is just a very small example of the instances I encounter every day resulting from the unjust and unreal rollercoaster of predatory lending, and of everyone getting assistance except for people defrauded."
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