Why are Homeowners Still Left to Struggle Against Big Banks Alone?

Shafted!

Across the country, states are diverting foreclosure settlement funds to plug budget holes.

May 18, 2012  |  

 

Photo Credit: woodleywonderworks on Flickr

It was with great fanfare that the Obama administration, alongside nearly every state’s attorney general, announced in February that a $25 billion accord had been reached with the nation’s five biggest banks, settling charges that the banks engaged in widespread foreclosure fraud. Those billions were intended to provide relief to struggling homeowners, using the banks’ own money to help the victims of Wall Street malfeasance.
“These banks will put billions of dollars towards relief for families across the nation,” President Obama said. “They’ll provide refinancing for borrowers that are stuck in high interest rate mortgages. They’ll reduce loans for families who owe more on their homes than they’re worth. “
However, more than a dozen states across the country are doing their best to undermine the settlement by diverting the funds to other areas of their budgets. Arizona recently became the latest state to do so, taking $50 million meant to aid homeowners and instead plowing it into the state’s general fund (after scrapping an earlier plan to use the money to pay for prison construction).
Under the terms of the settlement, each participating state receives a lump sum to craft its own housing aid programs. (The banks are also responsible for directly helping homeowners with a large share of the settlement money.) The funds directed to the states were intended to support counseling, foreclosure mediation, mortgage modification programs, and legal services for those facing the prospect of losing their homes.
But states are taking advantage of loose wording in the settlement to use the funds for, essentially, whatever they want, since a pot of free money is simply too tempting for state legislators who have faced years of budget woes. “There’s a lot of pressure on the budget,” said Arizona House Speaker Andy Tobin (R) to justify his state’s move.
While it’s true that state budgets have been hammered, so have American homeowners. The financial crisis of 2008 and the ensuing Great Recession threw millions into foreclosure. More than 11 million others found themselves underwater, owing more on their mortgages than their homes are currently worth, according to data from the real estate firm Core Logic.
And the pain felt by families across the country won’t end there. William Dudley, president of the Federal Reserve Bank of New York, estimated that 3.6 million Americans will lose their homes to foreclosure in the next two years.
The Obama administration has rolled out a host of programs to help families stay in their homes, but the results of those efforts have been underwhelming, to say the least. The Home Affordable Modification Program, for instance, was meant to help between three and four million homeowners, but has yet to aid even one million. The impotence of the administration’s efforts makes the settlement that much more important.
It’s perhaps no surprise that Wisconsin’s ultra-conservative Republican governor, Scott Walker, was the first to redirect settlement money, dumping $26 million of his state’s $30 million allocation into Wisconsin’s general fund in order to balance his budget. Missouri lawmakers were next, placing all $40 million of their share into Missouri’s higher education budget.
Even Jerry Brown, California’s Democratic governor, used some accounting sleight-of-hand in order to plug a hole in the Golden State’s general fund with the settlement money. "We have time to work on the budget, but we're looking for money where we can find it,” Brown said.
As Enterprise Community Partners, an affordable housing group, has documented, party politics plays little role in these decisions, as the states diverting foreclosure settlement funds run the gamut from deep red to deep blue: Kansas, South Dakota and Vermont are all on the list of those using the money for purposes other than housing aid.
The wording of the settlement does seem to give the states significant wiggle room to redirect funds:

To the extent practicable, such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants. Such permissible purposes for allocation of the funds include, but are not limited to, supplementing the amounts paid to state homeowners under the Borrower Payment Fund, funding for housing counselors, state and local foreclosure assistance hotlines, state and local foreclosure mediation programs, legal assistance, housing remediation and anti-blight projects, funding for training and staffing of financial fraud or consumer protection enforcement efforts, and civil penalties.

According to Mark Ladov and Meghna Philip of New York University’s Brennan Center on Justice, repurposing funds is a direct violation of the settlement. “Arizona is violating the legal terms of the agreement, which unequivocally directs that the state ‘shall’ use the funds for foreclosure-related purposes only,” they wrote in an op-ed for the Arizona Republic.
Some of the states are using the poached settlement funds for what would otherwise be laudable programs. Indiana, for instance, is planning to use some of its repurposed funds to provide energy assistance to low-income residents. But noble as those intentions are, the settlement was not meant to help states fill in a bevy of gaps in their budgets; it was meant to provide a specific kind of aid, addressing a specific, pressing problem.
Some progressives have pushed back on efforts to redirect settlement money. “This decision takes away the one chance Arizonans had to get some help navigating the banking bureaucracy that greased the skids on millions of foreclosures. It’s a clear statement of principles, that’s for sure,” said Rep. Raul Grijavla, D-Ariz. “While the state is undeniably facing a difficult budget gap, these funds should be used to help Californians stay in their homes,” said California Attorney General Kamala Harris (D).
The fact of the matter is that housing remains an anchor on the economic recovery, and the funds provided by the settlement, while not fixing the problem entirely, will certainly help. In Arizona, the money could provide aid to 85,000 homeowners, according to estimates by the Arizona Housing Alliance. But the states seem intent on taking the funds, and the hope that comes with it, right out of homeowners’ hands, leaving them to continue struggling against the biggest banks alone.

Pat Garofalo is economic policy editor for ThinkProgress.org. His writing has also appeared in the Nation, the Atlantic, U.S. News & World Report, and other publications. Follow him on Twitter at @Pat_Garofalo.

Wells Fargo Has Blood on Its Hands:

 Desperate Man Commits Suicide After Shocking Foreclosure Mistreatment

This is the story of what happens when an average couple is up against a giant, wealthy, powerful bank.

May 15, 2012  |  

 

Photo Credit: AFP

 Norman and Oriane Rousseau were one more couple pushed by a huge, greedy bank to the brink of homelessness. On Sunday, desperate and with nowhere to go, Norman Rousseau shot himself. 

This is the story of what happens when an average couple is up against a giant, wealthy, powerful bank. Unfortunately the result is what the result always is when people are on their own against the wealthy and powerful: the bank ends up with all of their money, takes their house to sell and throws them out onto the street. In this case the bank is Wells Fargo.

The quick version of this terrible story is that Norman and Oriane Rousseau of Newbury Park, California were scammed into a predatory mortgage. But they made their payments anyway, always paying with a cashier’s check in person at the same branch. Then one day the bank misapplied their payment and said they still owed the money. This started a long, nasty process that led to the bank evicting the Rousseaus from their home. 

Here’s the shocker: right at the start the Rousseaus came up with proof that the bank had received the payment and had cashed the check. But the bank continued to claim it had missed the payment, gave the Rousseaus the runaround, started applying fees, and used it as an excuse to foreclose on the house anyway. 

The Rousseaus fought back, the bank dragged it out for so long and pulled so many tricks, getting its way every step of the process, until this last Sunday Norman Rousseau finally gave up and shot himself in despair – two days before the scheduled eviction, Tuesday, May 15. (The Rousseau’s lawyer just said he was able to win a 2-week delay.)

Drive Banks Crazy by Occupying Foreclosures

by: Mike Konczal, New Deal 2.0 | Op-Ed

Could the next step after camping in Zuccotti Park be camping out in homes facing foreclosure?

As people think a bit more critically about what it means to “occupy” contested spaces that blur the public and the private and the boundaries between the 99% and the 1%, and as they also think through what Occupy Wall Street might do next, I would humbly suggest they check out the activism model of Project: No One Leaves. It exists in many places, especially in Massachusetts — check out this Springfield versionof it — and grows out of activism pioneered by City Life Vida Urbana. It is similar to activism done by the group New Bottom Line and other foreclosure fighters. Here is PBS NewsHour’s coverage of the movement.

The major goal of Project: No One Leaves is to mobilize as many resources as possible to protect those going through foreclosure and keep them in their homes as long as possible in order to give them maximum bargaining power against the banks. For those focused on “weapons of the weak,” this moment — with banks and creditors using state power to conduct massive amounts of foreclosures, thus impoverishing poor neighborhoods through a financialized rationality — is a crucial opportunity for resistance. From the webpage:

Post-Foreclosure Eviction Defense. We mobilize tenants and former homeowners living in recently or about to be foreclosed homes (bank tenants) to stop evictions, protect Springfield’s housing and communities, and mobilize bank tenants to fight back against major lending institutions and banks that are tearing our communities apart.

Their model, a two-step process known as the Sword and the Shield, works:

“The Sword”. Encouraging residents to stay in their homes, and to make their stories public, we organize blockades, vigils and other public actions to exert public pressure on the banks. The sword works together with:

“The Shield”: We inform bank tenants of their rights and work with legal services & progressive lawyers, to use aggressive post-foreclosure eviction defense to get eviction cases dismissed, win large move-out settlements (if it makes sense for that family/person), and force the banks to reconsider foreclosure evictions.

They use public action through blockades, protests, and marches, along with smart legal advice on how to maximize legal resistance to forced removal. Beyond the fact that this is a major space for resistance, it is also a great way to mobilize people. And as JW Mason notes, there is power in having a clear opponent as well as a special type of bargaining power people might not realize they have:

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Homeowners who still have title have a lot to lose and are understandably anxious to meet whatever conditions the lender or servicer sets. But once the foreclosure has happened, the homeowner, paradoxically, is in a stronger negotiating position; if they’re going to have to leave anyway, they have nothing to lose by dragging the process out, while for the bank, delay and bad publicity can be costly. So the idea is to help people in this situation organize to put pressure — both in court and through protest or civil disobedience — on the banks to agree to let them stay on as tenants more or less permanently, at a market rent.

But there’s another important thing about No One Leaves: They’re angry. The focus isn’t just on the legal rights of people facing foreclosure, or their real chance to stay in their homes if they organize and stick together, it’s on fighting the banks. There’s a very clear sense that this is not just a problem to be solved, but that the banks are the enemy. I was especially struck by one middle-aged guy who’d lost the home he’d lived in for some 20 years to foreclosure. “At this point, I don’t even care if I get to stay,” he said. “Look, I know I’m probably going to have to leave eventually. I just want to make this as slow, and expensive, and painful, for Bank of America as I can.” Everyone in the room cheered.

Slow, expensive and painful indeed — it’s like putting the banks through their own version of HAMP. Some may reply, “But wait, aren’t foreclosures healthy for the economy? Mitt Romney thinks so.” But according to the latest research using discontinuities across state lines, “estimates suggest that foreclosures were responsible for 15% to 30% of the decline in residential investment from 2007 to 2009 and 20% to 40% of the decline in auto sales over the same period.” This research is being debated, but the opposite evidence — that quicker foreclosures help the macroeconomy — can’t be found there or anywhere else.

So does this fit well with Occupy Wall Street’s agenda? Given the rampant fraud and abuses in the current foreclosure chain, from manufacturing documents to “robo-signing” to fee-stacking to everything else, the Obama administration’s refusal to support a serious investigation is a major example of the government-financial alliance and two-tier system of justice that those in Occupy Wall Street hate. Occupy Wall Street likes to pick spaces that are legally contestable — like private-public parks — and draw attention to real conflicts between those with power and those without. A residence post-foreclosure is one of those spaces.

This type of demand allows Occupy Wall Street to tap into already existing networks of foreclosure fighters, avoiding the risk of looking powerless by relying on Congress to do anything. And ultimately, it gets at the banks in a way occupations normally don’t: Banks may or may not feel that they aren’t appreciated enough because of these protests, but they’ll definitely be mad if someone is disrupting their foreclosure mills through occupation and refusal to leave.

Mike Konczal is a Fellow at the Roosevelt Institute.