"The government's response to the foreclosure crisis is the equivalent of trying to put out a forest fire with an eye dropper." -- Senator Elizabeth Warren
While the foreclosure crisis continues to ravage communities around the country there's a pressing need for homeowner education and empowerment. Maegan Nikolic, a single mom in Whittier California, can attest to that. Since 2010 she's been run through the foreclosure wringer. She's woken up to find notices of default tacked on to her door, hired a succession of lawyers to try and find some way to resolve the mess but at every turn ran into a brick wall. After the tears, the stress, the overwhelming anxiety Maegan with her small boy in tow and threatened with a forcible eviction left her house of 17 years.
Maegan's story has been distilled down to a statistic; one that shows up on industry data bases like CoreLogic and Realty Trac but like all statistics they don't reveal the faces behind the numbers. While trillions were lost in housing values the human cost, measured in lost dreams, dislocation, divorce, depression, suicide, addiction, is incalculable. Since the housing bubble burst in 2007 there are upwards of five million stories similar to Maegan's, and if you're watching too much Fox Business News and CNBC you might think that this just an old bad dream and we're now back on the royal road to economic prosperity.
Well think again.
"What Housing Recovery?" a May 8th New York Times op-ed written by three economists made note of these sobering statistics: "more than 10 million Americans, spread across 23 states, live in zip codes where between 43 percent and 76 percent of homeowners are under water." And try this one on for size: "9.8 million households still owe more on their mortgages than the market value of their homes. That's one fifth of all mortgaged homes" An unreasonably large proportion are in African-American and Latino neighborhoods.
Yes, millions of Americans in homes euphemistically termed "distressed assets" are living lives of unrelenting anxiety and stress; many are desperately engaged in futile paper-chase efforts to modify loans to bring down monthly payments to affordable levels. In states where courts oversee foreclosure proceedings ("judicial foreclosures") homeowners may find themselves steamrollered by well-prepared lawyers from so-called foreclosure mills working on behalf of major banks, servicers, or the GSE's, Fannie Mae and Freddie Mac. As Florida's infamous "rocket dockets" highlighted, legal proceedings may rise to the level of "star chambers" where homeowners are considered guilty as charged and eviction the usual outcome. In states where foreclosures are not overseen by the courts ("non-judicial states") a homeowner who finds him or herself falling behind in mortgage payments may suddenly find their property listed for sale at an upcoming auction care of a foreclosure trustee with an ominous sounding name like Cal-West Reconveyance.
What's needed is a one-stop digital destination for dazed and confused homeowners. Under the umbrella of a willing national consumer agency a homeowner's outreach platform could provide unbiased and constantly updated information on foreclosure law, the impact of regulatory oversight on the banking and servicing industry and useful practical links to State and Federal regulators, consumer lawyers, anti-foreclosure groups and home retention specialists.
There's a pressing need for this kind of outreach resource. Ira Rheingold, executive director of the non-profit National Association of Consumer Advocates, put it succinctly: "I have seen far too many homeowners, unaware of their legal rights, lose their homes when this terrible outcome could have been avoided." Foreclosure isn't a one-size-fits-all process, added Rheingold,
laws vary from state to state and because mortgage servicer obligations to offer modifications and other relief varies widely, it is essential that consumers are provided with better information.
Often homeowners desperate to free themselves from foreclosure quicksand turn to the internet for any scrap of informational flotsam that offers financial salvation. That's counter-productive according to ex-mortgage servicing executive, Chris Wyatt. "In many cases," according to Wyatt,
the information they obtain is highly inaccurate and provides no actual benefits in dealing with their servicer or seeking appropriate loss mitigation options that would allow retention of homeownership.
There are also community based organizations offering a life-line to homeowner's who want to stay in place and they've received woefully little exposure. New Jersey Community Capital and Boston Community Capital, both non-profit lenders that provide help to financially strapped homeowners primarily in low-income neighborhoods. Then there's for-profit albeit socially conscious efforts like Chicago based American Homeowner Preservation, a company I wrote about for American Banker, which has been buying up pools of troubled mortgages at big discounts. Without having homeowner's jump through financial hoops AHP restructures mortgages with sustainable monthly payments while providing modest profits for investors who want to do a modicum of good with their money.
A homeowner casting around for a capable lawyer to deal with a loan modification or a pending foreclosure may often face something akin to the search for the Holy Grail. There are lots of attorneys who'll take a homeowner's case but many are ill-equipped to do battle in an area of law that's constantly changing. Maegan Nikolic learned this lesson the hard way, forking over $89,000 to three lawyers, each in turn screwed up her case, then turfed responsibility by telling her she should sue the others for malpractice. A homeowner's outreach platform could be useful in publicizing links to valuable legal resources including the aforementioned National Association of Consumer Advocates that maintains a network of lawyers, many of whom have gone through the rigors of anti-foreclosure training at Max Gardner's legendary "Bankruptcy Boot Camp." Law schools offer another resource with student populated outreach programs, the best known being Harvard's Housing Law Clinic, which dispatches law students into the community to defend at-risk homeowner's from eviction attempts by banks and lenders.
Homeowner's in distress really need a comprehensive easily digestible internet resource and it would be a mitzvah, as we say in Yiddish, if some national non-profit consumer agency would take on this challenge. Information is empowering and armed with knowledge a dazed and confused homeowner might be in a better position to decide on a course of action when faced with the devastating prospect of an eviction.