Categorized | Media, National

As the Foreclosure Crisis Drags On…

 

 

…So Does the Flawed Government Response

(VIDEO)

 

by Paul Kiel
ProPublica

 

As the sixth year of the foreclosure crisis comes to an end, the percentage of loans in foreclosure remains a staggering eight times higher than it was in 2005.  About 5.3 million homeowners–  about 11 percent of all borrowers– are behind on their payments.

But 2012 was also the year that home prices hit a bottom and have started to very slowly climb.  The number of new homeowners falling behind on their payments has dropped substantially since the peak.  The government also took a dramatic step: a $25 billion settlement with the five biggest mortgage servicers.

foreclsoureEarlier this year, ProPublica focused on one homeowner– Sheila Ramos, who lost her home in Florida and ended up living in a tent in Hawaii– to pull together all the threads of the crisis and give readers a single story that explains the causes of the crisis, the bumbling response by the big banks and Washington, and the human toll exacted by the whole debacle.  It is also available as a Kindle Single, which includes extra material.

We’ve also been keeping a close watch on whether the government is keeping its promises about compensating victims of the crisis.

The largest program is a review overseen by federal regulators covering more than 4 million loans.  It launched back in 2011, but as of mid-December, no homeowner had received any compensation.  Office of the Comptroller of the Currency spokesman Bryan Hubbard said regulators had been “working toward beginning compensation for a limited number of people this month with reviews and remediation continuing through 2013.”

The program– called the Independent Foreclosure Review– has been beset with questions about its fairness, transparency and integrity since it launched.  At least partly due to those problems, many borrowers aren’t even bothering to apply for compensation.

foreclosure4As of November, only 315,000 borrowers have sent in forms requesting to be reviewed, according to the OCC’s Hubbard, about seven percent of people eligible to apply.  The final deadline to apply was at the end of 2012.

Federal regulators designed the program to work like this:  Each of the banks would hire an “independent consultant” (approved by the regulator) to conduct reviews of the bank’s foreclosure cases.  The bank was supposed to foot the bill, but the consultant, not the bank, was supposed to decide which of the bank’s customers deserved compensation and how much.

foreclosure3But ProPublica has revealed evidence that the banks themselves are heavily involved in the reviews, calling their independence and integrity into question.After our story about Bank of America’s involvement in its review, the bank and its consultant changed their review process.  Bank of America also engineered a de facto appeals process;  if the consultant decided a BofA customer deserved compensation, the bank could provide more information that it wasn’t at fault.  Borrowers have no such ability to appeal.

To lead its role in the review, JPMorgan Chase installed an executive named by the Justice Department for allegedly facilitating a scheme to defraud Fannie Mae and Freddie Mac.  She declined to comment for our story.

stoogesIn a telling irony, it seems likely the review will end up steering far more money toward the consulting companies hired by the banks than will go to harmed homeowners.

Finally, some banks have been shockingly slow to begin their reviews.  Regulators have ordered Goldman Sachs and Morgan Stanley to conduct reviews of their former mortgage servicing subsidiaries, for instance, but
they still haven’t begun.  The process covers loans that were in foreclosure in 2009 or 2010, but the review won’t get going until at least 2013.  That seems likely to further deter harmed borrowers from applying for compensation.

A Federal Reserve spokesperson said a company, Navigant Consulting, had been selected to conduct the review for both servicers, but the contracts had not been finalized.  It’s unclear when the review would begin.

foreclosure2The government’s other big reaction to the foreclosure crisis, the National Mortgage Settlement, has also had its disappointments.  The deal involved 49 states, the federal government, and the five largest mortgage servicers.  The headline number was $25 billion, but only $5 billion of that is actually cash that the big banks would pay out.  The other $20 billion is composed of “credits,” awarded when the banks take steps to avoid foreclosures, for instance by offering loan modifications that cut the amount homeowners owe.

Of the cash, half– $2.5 billion– was to go to states to address the foreclosure crisis.  But as we’ve reported, almost $1 billion of that is actually being used to patch state’s ailing budgets. (See our state-by-state breakdown here.)

$1.5 billion will be sent to borrowers who lost their homes to foreclosure, with each borrower receiving only about $1,000-$2,000.  That process has finally gotten underway, and the deadline for borrowers to make a claim to receive that payment is early next year.  (See more info about this in our FAQ.)

foreclosure5As for the $20 billion in credits, the banks appear to be in the process of fulfilling those obligations, but there are plenty of questions about how much good it’s doing.

Some credits are for actions banks were taking already (like demolishing abandoned homes).  And although government officials touted the agreement as a way to boost the number of modifications that reduced borrowers’ debts, much of the banks’ activity hasn’t focused on keeping borrowers in their homes.  Rather, the number of short sales– an agreement by the bank
to sell the home for less than the amount owed–
has been far higher.

As the foreclosure crisis and the government’s sputtering response enter their seventh year, ProPublica will be keeping watch.

* * * * * * * *

As Foreclosure Crisis Drags On, So Does Flawed Government Response” courtesy of Paul Kiel and ProPublica News.

(Images by the Humboldt Sentinel.  Posted by Skippy Massey)

Leave a Reply

HumSentinel on Twitter

RSS Progressive Review

  • Academia's abuse of adjunct professors
    Salon - Over three quarters of college professors are adjunct. Legally, adjunct positions are part-time, at-will employment. Universities pay adjunct professors by the course, anywhere between $1,000 to $5,000. So if a professor teaches three courses in both the fall and spring semesters at a rate of $3000 per course, they’ll make $18,000 dollars. The averag […]
  • Snowden: NSA routinely passed communications of Palestinian-Americans to Israel
    Daily Mail, UK - Former U.S. intelligence analyst Edward Snowden has accused the U.S. National Security Agency of routinely passing private, unedited communications of Americans to Israel, an expert on the intelligence agency said Wednesday.James Bamford, writing in the New York Times, said Snowden told him the intercepts included communications of Arab- and […]
  • What the Christian right forgets about the Bible
    From 50 years of the our overstocked archives. This was written during the Reagan yearsSam Smith - Our text for today is found in the eighth chapter of 1 Samuel. When Samuel got old he appointed his sons as judges over Israel. As so often occurs with nepotism this didn't work out: the offspring taking dishonest gain and bribes and perverting justice. So […]
  • What's happening
    Men for ChoiceSpend a weekend with Ralph Nader Chad becomes 37th African state to seek ban on homosexualityFewer than four in 10 Americans can identify which political party controls the Senate and which controls the House, according to a Gallup poll   Moral Mondays spread to IndianaAnd AlabamaAction news How to plan your own Moral Monday Building peace team […]
  • Department of Good Stuff: Politicians
    Bernie Sanders Jill Stein Elizabeth Warren Sherrod Brown John Conyers Al Franken Sheldon Whitehouse Ron Wyden […]
  • Another way the Fed could have handled the recession
    Fiscal Times - The Federal Reserve has been conducting a grand experiment since the U.S. economy tumbled into the Great Recession. After the housing market collapsed in 2008, the Federal Reserve lowered interest rates to rock bottom levels in hopes of boosting borrowing and spending. It also went a step further, buying trillions of dollars in Treasury bonds […]
  • Great moments in book publishing
    Futility Closet - Shortly after his travel book Alexandria appeared in December 1922, E.M. Forster received a regretful letter from the publisher, Whitehead Morris & Co. There had been a fire in the warehouse and the entire edition had been burned. Fortunately, it had been insured, and they enclosed a substantial check in compensation.“A few weeks later […]
  • More evidence school test tyrants are hurting our kids
    NPR - When it comes to brain development, time in the classroom may be less important than time on the playground."The experience of play changes the connections of the neurons at the front end of your brain," says Sergio Pellis, a researcher at the University of Lethbridge in Alberta, Canada. "And without play experience, those neurons aren […]
  • Great moments in grafitti
    Artfido - Street artist DS recently added a couple of paste-ups to a wall in London. It didn’t take too long before a graffiti removal guy removed the paste-ups.  Shortly after that, DS was back with a paste up of the graffiti removal guy removing the graffiti. Art imitates removal of art! […]
  • How imprisonment in US has soared
     Sentencing Project […]
  • Anti-union corporate staff meetings recorded
    One example from a Popular Resistance story:These Staples meetings were held at one of the company’s distribution centers in Atlanta. As is common in such meetings, one of the managers leading it starts by noting that anyone in the room is free to unionize.“The choice on whether to have a union or not is yours,” he says.And yet he paints unionization as an a […]
  • Why basic income should be a key issue
    Vox 1) What is basic income?"Basic income" is shorthand for a range of proposals that share the idea of giving everyone in a given polity a certain amount of money on a regular basis. A basic income comes with no categorical eligibility requirements; you don't have to be blind or disabled or unemployed to get it. Everyone gets the same amount […]
  • Pocket paradigm
    Lying often has little to do with court-defined perjury. It more typically involves hyperbolic hoodwinking, unsubstantiated analogy, cynical incitement of fear, deceitful distortion, slippery untruths, gossamer falsehoods, disingenuous anecdote, artful agitprop, and the relentless repetition of all the foregoing in an atmosphere in which facts are trampled u […]
  • License plate locations being scanned by the millions across the U.S.
    Associated Press […]
  • Tom Hayden making his archives public, including 22,000 pages of FBI files
    Aljazeera America - The man regarded as the intellectual father of the 1960s is opening up his archives in what historians of modern America regard as one of the most important document dumps in recent times, and one that breaks a tradition in which monumental public figures wait until they are dead to show the world the personal papers, diaries and mementos […]