Jessica Yager and Franklin Romeo know what it means for a neighborhood to be "hard hit" by predatory and discriminatory lending. As directors of the Foreclosure Prevention Project and Consumer Rights Project at Queens Legal Services, they have led a team of lawyers and advocates to assist more than 800 homeowners in the hardest hit borough in New York City, and to reach another 1,300 homeowners through extensive education and outreach efforts.
A recent report by the Neighborhood Economic Development Advocacy Project (see a previous dispatch with them here) shows that Jessica and Franklin's work is far from over. In 2011, in Queens County alone, 36,590 households received "pre-foreclosure" notices. Take a close look at a map of where these defaulted loans are concentrated in New York, and the dark colors bleeding through Southeastern Queens make one thing clear: The same communities that were targeted through deceptive lending practices during the housing boom now suffer the damages wrought by distressed mortgages.
As our video series, Fighting Foreclosure (a joint project with the National Coalition for the Civil Right to Counsel produced by Sarah Reynolds) reminds us, these struggling homeowners need lawyers and counselors to navigate the foreclosure process and assert their rights. (The Brennan Center is hosting a panel discussion on these issues -- and the impact of the "robo-signing" settlement and other developments -- on the evening of Wednesday, February 29 in New York City. For more information visit www.brennancenter.org or email nabanita.pal@nyu.edu.)
What, in your view, is the main challenge facing homeowners in foreclosure?
A simple truth has emerged from the mortgage mess: having help makes a difference. The foreclosing bank always has a team of lawyers, loan servicers, and underwriters for every single foreclosure. It's David v. Goliath, every day, in courtrooms across the country. We support efforts to reform the foreclosure process and to protect homeowner rights, but these rights are meaningless if homeowners don't have access to high-quality legal and counseling services.
In New York, one of the most immediate challenges facing homeowners is the imminent defunding of one of the nation's most successful statewide networks of independent non-profit advocates (including QLS) who have been helping homeowners avoid foreclosure since this crisis began. The New York State Foreclosure Prevention Services Program has funded 120 organizations, both housing counselors and legal services offices, in every county in the state. The Program's advocates have assisted tens of thousands of families and have helped avert thousands of foreclosures.
As we look ahead to a new wave of foreclosures on the horizon, the imminent closure of this program is devastating. Not only will homeowners be left with drastically fewer places to turn for quality, free assistance, but a perfect opening will be left for mortgage fraud scammers to prey on homeowners who have nowhere else to turn. We hope New York's politicians will hear the call from homeowners and organizations like QLS and renew this program immediately!
What is one aspect of the foreclosure crisis that has been overlooked by the media?
Too many news stories still invoke the notion that irresponsible homeowners are to blame for the housing crisis, either by purchasing a home beyond their means or borrowing recklessly against their current home. This storyline is unfair to homeowners and distracts from the real cause of the crisis we now face: The mortgage system -- chiefly banks, regulators, the credit rating industry -- failed them. Banks were bent on originating (and then securitizing) as many mortgages as possible, and this business plan required borrowers. Through both subtle and outright predatory means, borrowers were systematically and aggressively induced to take on increasing amounts of debt without being provided with accurate information about affordability or risk. More coverage of these abuses would present a more nuanced and accurate picture of the housing crisis.
By some estimates, we are only halfway through our nation's foreclosure crisis. What is the biggest change we need to make in addressing this problem going forward?
Banks need to start forgiving principal in loan modifications. The lack of principal forgiveness means that many, many homeowners cannot afford to modify their loans, and it leaves homeowners saddled with mortgage debt that far exceeds the values of their homes. Many of our clients were victims of fraudulent appraisals, their homes were never worth the value of the loan. Others were victims of the greed and lack of regulation that resulted in subprime lending boom and subsequent over-inflation of the housing market. Leaving American homeowners to foot the full price of the bill -- by making them wholly and singularly responsible for the fact that they owe far more than their homes are worth -- is one of, if not the, most unfair and disastrous consequences of the foreclosure crisis.
The multistate attorneys general settlement is a hopeful step in the right direction. According to a summary of the settlement terms, 60 percent of the funds going to aid homeowners directly must be put toward principal reduction. We hope this will trigger an industry-wide change in practice.
Do you think homeowners in foreclosure proceedings should have a right to counsel?
When the homeowner lives in the home, absolutely. Foreclosure is a judicial process in New York, and any litigant is at a disadvantage if he or she is forced to appear in court without an attorney. Unlike some proceedings (like small claims court) that courts are able to make fairly accessible to unrepresented parties, foreclosure law is extremely complex. Many homeowners facing foreclosure have valid legal defenses. But these involve complex doctrines and technical procedures that even the savviest homeowner would struggle to present to the court without the assistance of an attorney. A foreclosure case threatens someone's home and their family's greatest asset. The stakes are high enough to justify the right to the assistance of counsel.