Housing Solutions: Principal Reduction And DeMarco Removal

The housing crisis remains one of the biggest drags on the economic recovery.  Nearly 12 million Americans live in homes financed through Fannie Mae or Freddie Mac who owe more on their mortgage than their homes are worth. 

The solution is Principal Reduction, which would reduce mortgages to their fair market value.

The primary obstacle is Edward DeMarco, the Acting Director of the Federal Housing Finance Agency, who, as Isaiah Poole explains, "is a Bush administration holdover who is still in his position because Republicans in the Senate blocked the person President Obama nominated as his replacement."

DeMarco remains stubbornly resistant in the face of increasing demands for him to help end the housing crisis by allowing principal to be reduced for struggling homeowners with Fannie Mae and Freddie Mac mortgages.

The Congressional Progressive Caucus has urged DeMarco to act or be removed, backed up by the new America Underwater partnership between progressive grassroots groups Rebuild the Dream and the New Bottom Line.

But it isn't only progressives.  As Bill Scher writes, "Mortgage Bankers Association CEO David Stevens last week lent his support for principal reductions, saying they would put "cash flow into the hands of families." He joins other Wall Street voices such as famed hedge fund manager Greg Lippman, the world's largest bond fund, Pimco and the mortgage analysts at Amherst Securities."

 An article in The Atlantic authored by analysts from the Center for American Progress noted  the "growing consensus among economists, investors, academics, and consumer advocates that more 'principal reduction' -- writing off a portion of a mortgage that exceeds a home's value in exchange for a higher likelihood of repayment -- can help avoid another wave of costly and economy-crushing foreclosures."  As they write, that's "good for homeowners and lenders, and because millions of underwater mortgages are controlled by the government, it's also good public policy."

Still DeMarco won't budge.  And since, he won't move, it is time for the President to remove him and use a recess appointment to replace him.  As Robert Borosage urges:

The President has the power to right this wrong. He has used recess appointments before to stand up to obstructionist conservatives. Now he needs to act again. And he needs to hear from us. It is time to move.

Click here to tell President Obama: Fire Edward DeMarco and replace him with a recess appointment.

The Ongoing Housing Crisis And The End Of An Era

By Robert Reich, cross-posted from his website

Economic cheerleaders on Wall Street and in the White House are taking heart. The US has had three straight months of faster job growth. The number of Americans each week filing new claims for unemployment benefits is down by more than 50,000 since early January. Corporate profits are healthy. The S&P 500 on Friday closed at a post-financial crisis high.

Has the American recovery finally entered the sweet virtuous cycle in which more spending generates more jobs, more jobs make consumers more confident, and the confidence creates more spending? > On the surface it would appear so.

American consumers in recent months have let loose their pent-up demand for cars and appliances. Businesses have been replacing low inventories and worn equipment. The richest 10 per cent, owners of approximately 90 per cent of the nation’s financial capital, have felt freer to splurge. Consumer confidence is at a one-year high, according to data released on Friday.

The U.S. government has not succumbed entirely to the lunacy of austerity. Republicans in Congress have just agreed to extend both a payroll tax cut and extra unemployment benefits, and the US Federal Reserve is resolutely keeping interest rates near zero.

Yet the US economy has been down so long that it needs substantial growth to get back on track – far faster than the 2.2 - 2.7 per cent projected by the Federal Reserve for this year (a projection which itself is likely to be far too optimistic).

A strong recovery can’t rely on pent-up demand for replacements or on the spending of the richest 10 per cent. Consumer spending is 70 per cent of the US economy, so a buoyant recovery must involve the vast middle class.

But America’s middle class is still hobbled by net job losses and shrinking wages and benefits. Although the US population is much larger than it was 10 years ago, the total number of jobs today is no more than it was then. A significant portion of the working population has been sidelined – many for good. And the median wage continues to drop, adjusted for inflation. On top of all that, rising gas prices are squeezing home budgets even more.

Yet the biggest continuing problem for most Americans is their homes.

The Bank Deal: Ante Before The Cards Are Played

By Robert Borosage, cross-posted from Campaign for America's Future

The bank settlement of $25 billion over three years from five major banks for robo-signing forgeries is being hailed in Washington and scoured by leading bank critics.

It is hard not to be suspicious of any settlement that the banks would agree to. I’m reminded of Groucho Marx who said upon being invited to join a country club: “I wouldn’t want to belong to any club that would have me.”

But the deal should be seen for what it is – a relatively small ante by the banks handed out before the real cards are seen.

What’s clear is that the banks trampled the law in their wilding while blowing up the housing bubble. They abused homeowners, committed routine forgery and perjury before the courts, and defrauded investors. When the bubble burst and the housing market collapsed, homeowners were left about $700 billion underwater (owing that much more on their mortgages than their houses are worth).

The banks are looking for a deal that will relieve them of untold criminal and civil liabilities. Untold is the right word because, outrageously, there has been no real investigation into the scope of their crimes. The state attorneys general simply don’t have the resources. The federal government does, but once the administration decided to continue Bush’s policies of bailing out the banks without reorganizing them, it has been committed to keeping insolvent banks afloat, not holding them accountable.

So the administration and some state attorneys general started pushing a deal that would relieve the banks of immunity. Some courageous attorneys general – Eric Schneiderman of New York, Beau Biden of Delaware, Catherine Cortez-Masto of Nevada, Martha Coakley of Massachusetts, Kamala Harris of California and others – held out. Schneiderman led the effort to limit the scope of immunity offered the banks, expand the settlement, and force the administration to launch a real investigation at the federal level.

So this deal results. It gets a relatively small sum from the banks in exchange for circumscribed immunity on their flagrantly illegal robo-signing – or forgery – of mortgage documents. The money will provide homeowners with the possibility of real legal assistance and small amounts of relief. No private rights of action have been waived. The suit brought by Schneiderman against Mortgage Electronic Registration Systems, or MERS – the bank creation that simply trampled hundreds of years of property laws – continues, and other state AGs should follow suit. Schneiderman now co-chairs a federal task force charged with doing a real investigation that could result in a serious settlement. That's not part of the settlement, but it is the most important part of the deal.

The deal has been cut before the investigation so it is suspect on its face, but limited in its scope. Whether it will be enforced adequately remains to be seen. How homeowners benefit will differ from state to state.

But the real question remains whether the federal investigation will finally turn over all the cards so we know just how bad a hand the banks are holding. Only then is there a possibility for real accountability – and real relief for homeowners.

So this settlement must be the beginning, not the end. We have to sustain pressure on the administration for an aggressive investigation. State criminal and civil suits, individual and investor relief have to continue. We are a far remove from achieving the justice and accountability that is due.

Make Banks Re-Lend Subsidy Billions To The 99%

By Mark Hertsgaard, cross-posted from his blog. 

[Tuesday], the Occupy movement began occupying foreclosed homes to save fellow members of the 99 percent from economic ruin, not to mention homelessness–good for them. But it’s important to add that many of the millions of pending foreclosures in the United States could have been prevented–and still could be–if the federal government so orders. In fact, such a move would be one of the strongest steps the Obama administration could take to reduce human suffering and revive the economy.

When Washington pumped billions of dollars into the nation’s banks in 2008 and 2009, there was good reason to do so: It kept the US and arguably the global financial system from outright crashing, which would have brought even greater human and economic suffering than was experienced otherwise. But federal officials made an inexcusable error: they didn’t impose any conditions on the huge public subsidies that were provided to private banks.

Specifically, Washington could have made banks use the bailout money to modify the mortgages of people who were having trouble paying. This would have been fair–the banks had tricked many people into signing misleading mortgages in the first place–and it also would have been economically stimulative: it would have buoyed the housing market and boosted overall demand and therefore hiring.

President Obama has never publicly explained why he chose not to attach such conditions to the massive amounts of public money used to bail out the banks (but I’d bet that advice from Tim Geitner and Larry Summers played a big role). Now that Obama’s out running for re-election, he should be asked about this repeatedly on the campaign trail, by citizens as well as reporters, and urged to do better.

Because it’s not too late to do the right thing. As former New York governor and attorney general Elliot Spitzer explained recently in Slate, requiring banks to re-loan the billions in subsidy money they received to homeowners struggling with mortgage payments is a key step toward righting our economy and restoring justice for the 99 percent.
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Why not combine the Occupy movement’s feet-on-the-street activism with Spitzer’s policy advice? Strikes me as a recipe for real change.

Day Of Action For Occupy Our Homes

I recently posted a piece about the Occupy movement's focus on foreclosures.  Today is the Occupy Our Homes National Day of Action to Stop and Reverse Foreclosures, organized by OccupyOurHomes.org. 

Meteor Blades writes at Daily Kos that what has been a local tactic, "a showdown with banks to disrupt foreclosure auctions and evictions," is spreading nationwide.  Here is a list of the actions happening in more than 25 cities today. 

Click here to sign a pledge to "support the movement to Defend our Homes and our Neighborhoods."

Occupy Our Homes

The Occupy Movement Focuses On Foreclosures

By Alan Jenkins, cross-posted from Campaign for America's Future

As the Occupy movement enters its third month, it is moving into a new phase. Colder weather in the north, combined with aggressive push back from city officials around the country, is requiring the movement to adopt new, innovative approaches that include, but transcend, public presence as protest.

Pundits are wondering aloud whether Occupy is through. But this young movement is just getting started. An exciting piece of evidence to that effect is a new focus on foreclosures.

Alongside its call for job creation, corporate accountability, and relief from crushing student loan debt is a growing demand that Wall Street and Washington make right the disaster that their greed and neglect respectively caused. The movement has deemed December 6th a National Day of Action to Stop and Reverse Foreclosures.

The new “OccupyOurHomes.org” website describes the stakes and the problem well:

“Everyone deserves to have a roof over their head and a place to call home. Millions of Americans have worked hard for years for the opportunity to own their home; for others, it remains a distant goal. For all of us, having a decent place to live for ourselves and our families is the most fundamental part of the American dream, a source of security and pride.

In 2008, we discovered bankers and speculators had been gambling with our most valuable asset, our homes—betting against us and destroying trillions of dollars of our wealth. Now, because of the foreclosure crisis Wall Street banks created with their lies and greed, millions of Americans have lost their homes, and one in four homeowners are currently underwater on their mortgage.”

These Americans are joining many others, particularly in communities of color, who were victimized by predatory lending and lax enforcement for decades. A new report by the Center for Responsible Lending, for example, shows that African Americans and Latinos were consistently more likely than whites to receive high-risk loans. While an unacceptable 12 percent of White Americans have lost their homes to foreclosure or are delinquent, a staggering one-quarter of Latinos and African-American borrowers are in the same position.

Fortunately, there are a range of solutions that can save homes, restore communities, and rebuild the American Dream of fair and sustainable homeownership. They range from mandatory mediation of foreclosure proceedings, to pre- and post-purchase counseling, to principal reduction and bankruptcy reform. Also important are approaches like own-to-rent programs, community land trusts, and improved fair housing enforcement. And when Congress again takes up the future of Fannie Mae and Freddie Mac, it will be crucial to maintain a government role that keeps homeownership accessible and sustainable for working Americans.

The Occupy movement and its allies have been criticized, unfairly in my view, for failing to articulate solutions. As their attention turns to addressing foreclosures, it is clear what they are working for.