CRC Joins Americans for Financial Reform, 200+ Orgs. Calling for Changes at Fannie and Freddie
EIGHT YEARS INTO THE CRISIS, POLICY IS STILL HURTING HOMEOWNERS
San Francisco, CA-November 7, 2014–Nearly a year into his tenure as director of the agency that oversees Fannie Mae and Freddie Mac, Mel Watt is being asked to formally end the policy of prohibiting mortgage modifications that reduce the balance of principal.
The California Reinvestment Coalition is one of the more than 200 organizational signers of a letter (link to letter) delivered yesterday, urging Watt to reverse the Federal Housing Finance Agency’s longstanding ban on principal reduction – a policy put in place by his predecessor.
“We urge Director Watt to stop this destructive policy that is stopping families from receiving sustainable loan modifications. This policy pushes families out of their homes and destabilizes communities. It also costs taxpayers money because of unnecessary foreclosures that are more expensive than offering sustainable modifications with principal reductions” comments Kevin Stein, associate director at the California Reinvestment Coalition.
Despite widespread discussion of a housing recovery, about 9.8 million households (one in five of those with mortgages) owe more on their loans than the current value of their properties, according to one recent study. The proportion of negative equity is generally higher in communities of color, and African-Americans and Latinos account for at least half of the residents of most of the hardest-hit ZIP codes around the country.
Five housing counselors and nonprofit advocates from across California shared their perspectives,including how principal reductions (something FHFA currently doesn’t allow) have helped their clients.
“We worked with a 75 year-old widower whose income was greatly reduced when her husband passed away. We were able to secure a principal reduction that allowed her to stay in her family home, keep paying her mortgage,and stay active in her community where she had lived for 19 years. This was a success story, and we know there are thousands of other potential success stories out there-BUT that requires FHFA to act now and allow principal reductions on Fannie and Freddie loans,” explains Elaine Brooks-Cox, a housing counselor at Neighborhood Housing Services of Silicon Valley, located in San Jose, California.
“Regulators sat on the sidelines and watched as millions of homeowners had their homes and dreams foreclosed upon by lenders engaged in discriminatory and predatory lending. For those still struggling to hold on, principal reductions are standing in between the homeowner and the auction block. Mel Watt needs to make a conscious and moral decision to allow principal reductions” comments Sharon Kinlaw, executive director of the Fair Housing Council of San Fernando Valley.
“FHFA’s ongoing refusal to allow principal reductions has very real consequences for families.” explains David Mandel, a public interest attorney with the Sacramento Foreclosure Action Team. “I’m reminded of a family of five, from Woodland, California, who were first-time homeowners and who had a reduction in their income.They lost their home because their lender refused to reduce principal on $268,000 loan. Their lenders later sold the same home to investors for $100,000 less. Many more families throughout California are still at risk unless FHFA and the big banks allow principal reductions now.”
“A husband and wife we worked with struggled to pay their mortgage because the husband was out of work on disability for six months. With a modification that included a principal reduction the homeowners were able to stay in their home with a predictable mortgage payment they could afford. This was incredibly important for the family because it meant their 13 year old was able to stay in his school. Housing counselors know principal reductions work to keep people in their homes and stop foreclosures- now it’s time for Washington DC to act!”comments Carmel Crowther, housing counselor at Neighborhood Housing Services of Silicon Valley in San Jose, California.
“As GSEs it is ironic that Fannie Mae and Freddie Mac were not the forerunners in programs established to preserve homeownership. As GSEs they should have been the leaders of programs designed to promote sustainable home retention” explains Ben Garcia, Community Relations Manager at Inland Fair Housing and Mediation Board.