California hit hard by foreclosures as
Banks get gov’t bailouts, demand even more
By
Jerry Goldberg
San Francisco
Published Feb 3, 2011 9:34 PM
The foreclosure epidemic is escalating across the U.S. with no end in sight. At
the same time, with virtually every foreclosure, the government continues to
bail out the banks through Fannie Mae and Freddie Mac. Yet the banks want even
more. They have the audacity to push for direct control of these
government-sponsored entities.
Lenders filed a record 3.8 million foreclosures in 2010, up 2 percent from 2009
and an increase of a whopping 23 percent from 2008. These numbers would have
been even higher except for the temporary foreclosure moratoria the major banks
announced last October, when their massive fraud was exposed. (housingwire.com,
Jan. 12) According to RealtyTrac, banks repossessed 1 million homes in 2010,
and 1.2 million more are slated for repossession in 2011. Five million
borrowers are currently at least two months behind on their mortgages.
(Associated Press, Jan. 13)
The state of California has been hit especially hard by the foreclosure
epidemic. That state alone saw 532,200 foreclosures in 2010. It is projected
that between 2009 and 2012, some 1.88 million foreclosures will take place and
that this will bring about a decline of $627 billion in the value of nearby
homes. Altogether, 12.25 million homes — almost all the homes in this
state of 37 million people — will experience foreclosure-related declines
in market value. (Center for Responsible Lending, August 2010)
A study by the Center for Responsible Lending analyzed the causes and impact of
the foreclosure crisis in California. It noted that the vast majority of recent
foreclosures there were on loans that originated between 2004 and 2007, just
prior to the bursting of the bubble in housing prices.
The study pointed out that between 2000 and 2005 wages were flat, but home
prices took off. For example, in Modesto, Merced, Stockton and Riverside-San
Bernardino — all working-class communities devastated by foreclosures
— average median wages during those years increased by roughly 15
percent. By contrast, median home prices rose by about 300 percent. As a
result, homeowners were compelled to take out exotic loan packages with low
introductory payments that they could initially afford, but which escalated out
of range when the interest rates adjusted upward.
The report notes that many Alt-A loans are scheduled to adjust in 2012. These
loans were provided to borrowers with good credit, but they include features
characteristic of subprime loans, such as limited income documentation and
interest-only periods. Therefore, the crisis will only escalate.
California: Nearly half of those losing homes are Latino/a
The study, titled “Dreams Deferred: Impact and Characteristics of the
California Loan Crisis,” noted that people of color have been far
disproportionately impacted by the foreclosure epidemic in the state.
Foreclosure rates for Latino/a and African-American borrowers, respectively,
are 2.3 and 1.9 times that of non-Latinos/as white borrowers. Latinos/as
accounted for 48 percent of all foreclosures filed between September 2006 and
October 2009.
The modification programs announced by the Obama administration continue to be
dismal failures. According to the November “Making Home Affordable
Program Servicer Performance Report,” only 549,620 homeowners have
received permanent loan modifications, out of the 3 million to 4 million who
had been projected to benefit from the program when it was first announced in
March 2008.
The federal Helping Hardest Hit Homeowner program is being sabotaged as the
major banks refuse to sign on. Recently, 23 California congressional
representatives sent letters to Ally Financial (set up by General Motors), Bank
of America, Citigroup, JPMorgan Chase and Wells Fargo asking them to
participate in the California Housing Finance Agency so that $2 billion in
federal funds geared to temporarily aiding primarily unemployed homeowners in
California could be put to use.
As detailed in the Nov. 4 Workers World article, at the root of the
banks’ refusal to work with homeowners in any way is that government
agencies such as Fannie Mae, Freddie Mac and the Department of Housing and
Urban Development have been paying the banks, at foreclosure, full value for
the fraudulent loans they issued. What this means is that taxpayers are making
up the difference between the loan amount and the price the home actually sells
for post-eviction.
The major banks are so greedy that they are now attempting to take control of
the Obama administration’s announced review of Fannie Mae and Freddie
Mac. They have proposed that they directly administer these agencies while the
silent bailout continues. In this way any obligations by the banks to negotiate
with borrowers would effectively be removed. (New York Times, Jan. 20)
It’s time to demand that the government bail out the people, not the
banks.
The government, which now either owns or guarantees the loans, should
immediately
1) implement a two-year moratorium on all foreclosures and
evictions;
2) lower the mortgage principal on all homes to their true value;
and
3) set payments of what people can afford based on their incomes.
The millions of homes that have already been seized by the government
should be rehabilitated as low-cost housing for the homeless — not sold
back to the same financial institutions and investors who caused the
crisis.
And the government should begin a criminal investigation to jail the bankers
who precipitated this crisis with their massive fraud against the people.
Editor’s note: The writer, a Detroit-based attorney and leader in the
Moratorium NOW! Coalition to Stop Foreclosures, Evictions & Utility
Shutoffs, is on a foreclosure-moratorium speaking tour in California from Jan.
30 to Feb. 14. For a list of meetings and other events, see
www.bailoutpeople.org.
Articles copyright 1995-2012 Workers World.
Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.
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