Foreclosure failures

ProPublica has a piece up today that updates its fine reporting on the foreclosure crisis and the federal and state governments’ lagging response.

As the piece points out, we are in the sixth year of the crisis and

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.

The government’s response so far has been lacking.

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. As 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 is at the end of this month.

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.

The money, however, is not going to homeowners. Rather, it has been going to banking consultants — when it has been distributed at all.

The 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.

That is the case here in New Jersey, which has a mortgage delinquency rate of 9.87 percent — almost two percentage points above the national average of 8.06 percent. The state received $72.1 million in settlement money, none of which is going to programs for homeowners. Instead, it is being used to balance the state budget — which benefits the politicians, but does nothing for troubled homeowners.

Housing money for storm victims underscores lack of commitment to low-income housing

From The Tent City Project blog:

The state is providing 1,000 housing vouchers to low-income people displaced by Hurricane Sandy. According to a press release from the New Jersey Department of Community Affairs, the Christie administration “will set aside 1,000 vouchers from the state-administered Section 8 Housing Choice Voucher (HCV) program to assist low-income households that were displaced by the storm in moving into permanent housing.” The program, funded by the U.S. Department of Housing and Urban Development, “will provide vouchers that will be used as ‘Special Admissions’ for households that cannot return to their homes. The vouchers, which average approximately $9,840 per year per household, will total $9.84 million.”

To read more go to The Tent City Project blog.

Housing must be a priority

As far as priorities go, housing is pretty far down on the federal government’s wish list, though wish list is probably not the correct way to describe it. Housing money doesn’t even make the list.

That’s the gist of today’s editorial in The New York Times, accurately titled “The Affordable Housing Crisis.” As the paper notes,

The precious few federal programs that provide rental assistance to the nation’s poorest and most vulnerable families are already underfinanced. These programs provide decent housing for about only a quarter of the low-income families who qualify for them. And with nearly nine million households teetering on the verge of homelessness, the country clearly needs more support for affordable housing, not less.

And yet, we are unlikely to see added federal support. As we know from our experience here in New Jersey, subsidized housing can be a non-starter when it is forced to battle for attention with the kinds of programs middle- and upper-class voters tend to appreciate.

The sad truth, however, is that the “number of families eligible” for housing is growing.

Last year, for example, 8.5 million very-low-income families without housing assistance paid more than half their incomes for housing — an increase of 43 percent from 2007.

These families skimp on food and medical care to make the rent and tend to move often, making it difficult for their children to be successful at school. They are also more prone to homelessness, which is traumatic for them and extremely costly for the municipalities that run shelters.

Yet even as the need for affordable housing has grown, such units have disappeared. Over the last two decades, for example, private landlords have removed more than 200,000 apartments from subsidy programs so that they could raise rents. And, faced with weak federal support and no money for repairs, the local housing authorities that manage federally supported developments have boarded up or torn down more than 150,000 units.

According to an analysis by the Department of Housing and Urban Development, it would take about $26 billion to repair the public housing developments that shelter more than two million of the nation’s most vulnerable people. The department is currently engaged in a pilot project under which a small subset of public housing authorities will be allowed to leverage private capital to make the needed repairs on their properties.

In New Jersey, an affordable housing program that had been among the most forward-looking in the country is now mired in a series of court challenges and under attack by a hostile governor who already has vetoed an attempt to convert abandoned, foreclosed homes into affordable housing. The legislation has the support not only of housing advocates and builders, but realtors and municipal officials. That makes it rare among affordable housing proposals, which tend to pit towns and housing advocates against each other.

So, while there is an obvious need for more money for housing and a bigger commitment rhetorically and politically, it is not likely to happen anytime soon — at least not without some push from the grassroots.

The middle class always pays

The fix is in — and the middle class pays. That is the point of this column by Richard Parker, from the McClatchy-Tribune news service. The banks and the government — with collusion from both political parties — have created a system in which financial institutions can do what they want without consequences. When the banks and investment firms make bad decisions — which is often — they get bailed out by the government, which means we clean up their mess.

National foreclosure crisis could get worse

Negative equity remains a problem for the nation’s homeowners, according to a U.S. News and World Report story:

Loans currently in the foreclosure process amount to about $45 billion in negative equity, according to RealtyTrac CEO Brandon Moore. But that figure balloons to $1.2 trillion when you add in the more than 12 million underwater mortgages that haven’t started the foreclosure process—26 times the negative equity currently associated with troubled loans.

Home prices rise again in May

According to a report issued by S&P Dow Jones Indices this morning, home prices rose in May — the second straight month they did so. The national increase averaged 2.2 percent, May over April, following a 1.3 percent increase, April over March.

In the New York area, which includes much of northern New Jersey, the numbers are 1.4 percent and 0.2 percent.

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