Information about the Obama administration's Homeowner Affordability and Stability Plan has been released.
The plan provides for lower-cost refinancing loans through Fannie Mae and Freddie Mac, and a better loan modification program. However, while the plan will create incentives for lenders and servicers to cooperate with borrowers to arrive at loan modifications, it will still be voluntary.
The best part of the plan will require action by Congress- to amend the bankruptcy code to allow judicial modification of mortgages on a borrower's primary residence.
Monday, February 23, 2009
Wednesday, February 11, 2009
2.4 Million Foreclosures in 2009?
The Center for Responsible Lending estimates that over 279,000 mortgages have foreclosed in 2009 and that the number will reach 2.4 million.
Their website allows you to view foreclosure rates by state.
Happily, the Office of Thrift Supervision (OTS) has apparently asked for a moratorium on foreclosures until the government can implement a loan modification program.
CRL recommends policies that will allow courts to modify mortgage loans.
Currently, the bankruptcy code does not permit judges to modify loans secured by a debtor's principal residence. Though judges do have the discretion to modify or "cram down" a loan secured by a car- or, say, a summer home.
Their website allows you to view foreclosure rates by state.
Happily, the Office of Thrift Supervision (OTS) has apparently asked for a moratorium on foreclosures until the government can implement a loan modification program.
CRL recommends policies that will allow courts to modify mortgage loans.
Currently, the bankruptcy code does not permit judges to modify loans secured by a debtor's principal residence. Though judges do have the discretion to modify or "cram down" a loan secured by a car- or, say, a summer home.
Saturday, February 7, 2009
Wayne County Michigan Sheriff Refuses to Foreclose Homes
The Detroit Free Press reports that Warren Evans, the Sheriff of Wayne County Michigan (home to Detroit) has refused to conduct any more foreclosures until the Federal Government does all that they can to help keep people in their homes.
Sheriff Evans argues that Michigan foreclosure law is preempted by the federal Troubled Assets Relief Program (created by the bailout bill), which requires the Secretary of the Treasury to implement a program to encourage loan modifications. He says:
Sheriff Evans has encouraged his fellow sheriffs in distressed communities around the country to follow suit. If sheriffs around the country refused to conduct a foreclosure sale or evict a homeowner until ordered to do so by a court, maybe lenders would start to ask whether it is worth the trouble and might actually start negotiating with borrowers.
Sheriff Evans argues that Michigan foreclosure law is preempted by the federal Troubled Assets Relief Program (created by the bailout bill), which requires the Secretary of the Treasury to implement a program to encourage loan modifications. He says:
"I cannot in clear conscience allow any more families to lose their homes through foreclosure sale until I'm satisfied they have been afforded every option they are entitled to under the law to avoid foreclosure," he said.
Sheriff Evans has encouraged his fellow sheriffs in distressed communities around the country to follow suit. If sheriffs around the country refused to conduct a foreclosure sale or evict a homeowner until ordered to do so by a court, maybe lenders would start to ask whether it is worth the trouble and might actually start negotiating with borrowers.
Tuesday, February 3, 2009
Big Surpise
The bailout bill's halfhearted attempt to address the consumer side of the economic crisis- the "Hope for Homeowners" program- hasn't actually helped many homeowners. NPR reports that only 25 loans through the program have closed since October. Meanwhile...
Sunday, February 1, 2009
National Community Reinvestment Coalition files complaint against Standard & Poor's
The National Community Reinvestment Coalition recently filed a complaint with HUD's office of Fair Housing and Equal Opportunity against credit rating agency Standard & Poor's. You can find the press release, along with NCRC's complaint and exhibits, here
NCRC's complaint alleges violations of sections 804 and 805 of the Fair Housing Act, which have both been interpreted by courts to forbid discrimination in mortgage lending. NCRC Complaint at 3, 6-7 (Jan, 2008). S&P and other credit rating agencies have come under fire for inflating the ratings of securities backed by subprime loans. Investors purchased mortgage-backed securities based on these inflated ratings, which created an incentive for mortgage originators to sell more subprime loans. Studies show that subprime loans were disproportionately targeted towards Borrowers of Color, including those who would have qualified for prime credit. See Debbie Gruenstein et al, Center for Responsible Lending, Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages 10-12, 16 (2006); Institute on Race and Poverty (IRP), Draft Report, Communities in Crisis: Race and Mortgage Lending in the Twin Cities 2 (2008). Credit rating agencies like S&P are potentially liable under the Fair Housing Act for the role that they play in creating financial incentives for lending discrimination.
It will be interesting to see how aggressively the new HUD will enforce fair lending complaints. The Fair Housing Act provides the agency with a wide range of enforcement tools to remedy the effects of past discrimination. It would be a nice change if they ask for more than a court order telling S&P to stop breaking the law.
NCRC's complaint alleges violations of sections 804 and 805 of the Fair Housing Act, which have both been interpreted by courts to forbid discrimination in mortgage lending. NCRC Complaint at 3, 6-7 (Jan, 2008). S&P and other credit rating agencies have come under fire for inflating the ratings of securities backed by subprime loans. Investors purchased mortgage-backed securities based on these inflated ratings, which created an incentive for mortgage originators to sell more subprime loans. Studies show that subprime loans were disproportionately targeted towards Borrowers of Color, including those who would have qualified for prime credit. See Debbie Gruenstein et al, Center for Responsible Lending, Unfair Lending: The Effect of Race and Ethnicity on the Price of Subprime Mortgages 10-12, 16 (2006); Institute on Race and Poverty (IRP), Draft Report, Communities in Crisis: Race and Mortgage Lending in the Twin Cities 2 (2008). Credit rating agencies like S&P are potentially liable under the Fair Housing Act for the role that they play in creating financial incentives for lending discrimination.
It will be interesting to see how aggressively the new HUD will enforce fair lending complaints. The Fair Housing Act provides the agency with a wide range of enforcement tools to remedy the effects of past discrimination. It would be a nice change if they ask for more than a court order telling S&P to stop breaking the law.
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