Losing a home to foreclosure can be a heart-wrenching and economically crippling experience for a family. But when a family loses their home just because the bank or mortgage lender dragged their feet on a modification or even engaged in fraudulent behavior, not only is it financially and emotionally devastating, it is downright unconscionable and we must act to stop it.
For some time, my colleagues and I have received complaints from constituents detailing some very awful experiences dealing with their mortgage lenders. In recent weeks and months, ample information has emerged in the news media and elsewhere that despite good faith efforts by homeowners seeking loan modifications or fighting foreclosure, mortgage servicers have routinely failed to respond in a timely manner, misplaced requested documents, and, in some instances, engaged in fraudulent practices.
It is simply unimaginable that in the wake of these revelations, and in the midst of a continuing housing crisis that banks and the mortgage servicing industry are engaging in misconduct that could cost millions of families across America their homes in addition to exacerbating the crisis faced by states from declining property tax revenue.
That is why I applaud the recent announcement of 40 State Attorneys General across the country calling for an investigation into the foreclosure problems facing millions of American homeowners. Their action is appropriate and timely, but does not go far enough.
The federal government has a responsibility to protect American homeowners, and I have called on President Obama in a letter last week to use his executive authority to institute a national moratorium. It’s the right thing to do.
However, banks and mortgages lenders should not wait for the president to act. It is incumbent on all mortgage lenders to follow the lead of the nation’s largest bank, Bank of America, and halt all foreclosures until this mess can be sorted out.
Due to the rubber stamping of foreclosure documents and the lack of proper notarizing by mortgage lenders, thousands of recent and pending sales may not be legal and will likely be tied up in the courts for years. This is another in a long line of failures by the banks to properly account for and administer home loans. And yet again it is the homeowner who pays the price.
This goes back to the implementation of the Mortgage Electronic Registration System that allowed the bundling of home loans into mortgage bonds in the first place. Bundling mortgages into securities created the wrong incentives for banks. They became accustomed to a high stream of profit from mortgages which was unsustainable. The same issue is present when banks cut corners to hasten foreclosures, namely profits over people. Mortgages are more than a stream of profit for banks. For most people, owning a home is the biggest investment they will ever make. Therefore, homeowners need to know their rights and demand that all of the necessary paperwork and title be presented before any foreclosure is allowed to proceed.
Long before this current housing crisis began many Americans, particularly people of color, were victims of predatory lending practices. In fact, many people were steered toward subprime mortgages with higher interests rate or adjustable rates when they actually qualified for more traditional fixed rate mortgages. I’m all for consumers being informed and acting responsibly, but lenders have the responsibility not to engage in fraudulent or deceptive practices. When that happens, government has a responsibility to protect the American people.
For many years, members of the Congressional Black Caucus have been sounding the alarm about predatory lending. Unfortunately, when Republicans controlled the White House and Congress our calls fell on deaf ears. While Democrats have managed to pass vital reforms that restored the protections and sound regulations that Republicans stripped away, far too many homeowners continue to be trapped by underwater and sub-prime mortgages created during the Bush administration. Banks must be made to make good on promises of permanent modifications and we must all be assured that when a family faces a foreclosure, it is legal, binding and thoroughly and completely documented.
It is morally wrong to allow homeowners to become prey again to financial institutions seeking to continue to profit on the backs of struggling homeowners. It’s time for a national foreclosure moratorium — It’s the right thing to do.