Free legal clinic fights foreclosures in Detroit

Attorney Vanessa Fluker gives advice at legal clinic May 2. WW photo: Abayomi Azikiwe

About 200 homeowners attended a free legal clinic May 2 at the Detroit offices of the Moratorium Now! Coalition to Stop Foreclosures, Evictions and Utility Shutoffs. The clinic was organized to inform attendees about how to take advantage of a recent Michigan Court of Appeals decision which held that the federal Mortgage Electronic Registration System has no standing to foreclose in Michigan.

MERS is a “tracking system” organized by the banks to record mortgages on their behalf. According to Jerry Goldberg, an attorney and activist who helped organize the legal clinic, “MERS allows lenders to assign and reassign mortgage notes without ever recording their interests, thus saving them hundreds of millions of dollars in recording fees and preventing homeowners from ever learning who really holds their debt. At one time, MERS recorded 60 million mortgages on behalf of banks.”

Goldberg continued, “The effect of the court ruling is that anyone who was foreclosed on by MERS can have their foreclosure or eviction overturned and remain in their homes.” He and anti-foreclosure attorney Vanessa Fluker were featured on the local ABC affiliate newscast explaining the ruling on April 26. Afterwards, WXYZ-TV 7 posted a notice about the free legal clinic on its website.

During the week before the clinic, Moratorium Now! activists leafleted Detroit’s 36th District Court, where hundreds of foreclosure and eviction hearings take place weekly, to inform people of their rights.

Goldberg told Workers World he received a phone call from a family with six children who had a bailiff knocking at their door to evict them. Goldberg was able to get a judge to use the new court decision to issue an order immediately stopping the family’s eviction from their home.

Moratorium Now! is working with the People Before Banks Coalition on a campaign to demand that Wayne County declare a moratorium on all foreclosures in this hard-hit county, which includes the city of Detroit. The foreclosure epidemic has leveled communities throughout Detroit.

Racism & bank profits

“The necessity for the moratorium was demonstrated by the April 13 release of the U.S. Senate Permanent Subcommittee on Investigations report, ‘Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,’” said Goldberg. The report contains a case study of Washington Mutual, the country’s largest thrift and sixth largest bank, now taken over by JPMorgan Chase.

“It documents how Washington Mutual shifted its mortgage business to where its percentage of high-risk loans rose from 19 percent of loan originations in 2003 to 55 percent in 2006,” continued Goldberg. “These loans included subprime loans with interest rates at least 3 percent above the standard interest rates, directed primarily to low-income families and people of color.

“They included ‘pay-option ARMs’ [adjustable rate mortgages], where families pay a minimum payment that is below the actual interest rate they owe, with the difference between the two amounts added to their principal every month. When the teaser rate is eventually eliminated, families find themselves paying a higher interest rate based on a higher loan amount, resulting in payment shock and massive defaults.

“The study documents how the reason for Washington Mutual’s shift to these high-risk, exotic loans was because the rate of profit was eight times higher than the return on fixed-rate loans when they were ‘securitized.’ It documents how the shift was accompanied by massive fraud, including writing loans based on a family’s ability to pay the minimum payment, knowing full well that when the payments adjusted upward the homeowners would not be able to afford the payments and their loans would go into default.”

The study further exposed how the Office of Thrift Supervision, the government body assigned to monitor Washington Mutual, continued to give the bank solid rankings even as its shady practices grew, as did the ratings services Moody’s and Standard & Poor’s. The study also goes into the role of Fannie Mae and Freddie Mac, now wholly-owned government agencies, which increasingly became the largest investor in these fraudulent loans.

The Moratorium Now! Coalition is planning a one-day conference, “How the Banks Destroyed Detroit and How to Fight Back,” on June 11 at the United Auto Workers Local 22 union hall. For more information, visit www.moratorium-mi.org.