Various media reports suggest that Bank of America and the US Justice Department are in discussions for a deal over soured mortgage backed securities, and the figure of $5 billion in homeowner relief has been cited as part of the deal.
Today, the California Reinvestment Coalition is calling on the US Department of Justice to inject a transparency provision into a potential Bank of America settlement, and any other large mortgage settlements the Department may agree to in the future.
1. Question: What exactly are you asking for?
CRC is requesting that Bank of America report the race, ethnicity, and census tract level data for homeowners who seek relief under this potential settlement. We aren’t asking for any personally identifiable information- only the data at an aggregate level.
2. Question: What’s the point of asking for this data?
We believe that if banks have to publicize this data, then regulators, Congress, advocates, and the general public will have a better understanding of whether or not the relief is getting to all communities equally.
Since the start of the foreclosure crisis, we have been concerned that the help provided by banks and servicers is not reaching all communities equally. In other words, some of the communities that were targeted for the worst loans are the least likely to get the help they need (including sustainable, affordable modifications that keep them in their homes) when they request it. This may be due in part to banks and servicers not translating written materials they send the homeowners. Homeowners have also shared with us that some servicers lack adequate and competent translators when homeowners call to speak to their servicer.
These concerns are based on our work with housing counselors across California including 10 surveys we’ve conducted with them about their first-hand experience trying to help people to avoid foreclosure. In our most recent survey, published in May, over half of the housing counselors and legal aid attorneys who responded said they believe that communities of color and homeowners who aren’t proficient in English are receiving worse outcomes when they seek help.
Our concerns were reaffirmed when the GAO released a report in February 2014 that analyzed data from the government’s main anti-foreclosure program, the Home Affordable Modification Program (HAMP). The GAO found statistically significant differences in the rate of denials and cancellations of trial modifications and in the potential for re-default for homeowners who are protected by fair lending laws. Unfortunately, the GAO did not report which four banks provided data that the GAO analyzed to reach these troubling conclusions. So, we’re also filing a Freedom of Information Act request to the US Department of the Treasury to find out which four banks were included. We’re also asking if the US Department of Treasury took any action to address the potential fair lending violations identified in the GAO report.
3. Isn’t this a lot of extra work for the bank?
Not necessarily- Bank of America has already demonstrated its ability to provide this data when it responded to a Request for Proposal from the City of San Francisco for a banking services contract. Click here to view BOA’s responses, which include demographic data for homeowners who sought help from the bank.
4. Why hasn’t this been done before?
In March 2013, CRC, Americans for Financial Reform, and about 100 other organizations asked Joseph Smith, the National Mortgage Settlement Monitor, to provide this data. However, he declined, stating that he didn’t believe he had the authority. (See letter here).
5. Do you have any other suggestions for this settlement, or any others that are in the works?
We’re glad you asked! In October 2013, CRC and 17 other organizations urged the Department of Justice to incorporate “lessons learned” from previous mortgage settlements. We’re pasting them in below:
1. Relief commensurate with harm caused. Financial institutions have yet to be forced to pay for the total harm caused by predatory mortgage lending and improper foreclosure practices that have drained wealth from working families and their neighborhoods. Only counting 2012, over $192 billion in housing wealth was lost due to foreclosures, with the highest concentration of losses in pre-dominantly minority communities, according to a report by the Alliance for a Just Society.
2. A priority on keeping people in their homes and first lien principal reduction.Countless predatory and unsustainable mortgage loans were made over the last several years, leading to hundreds of thousands of unnecessary foreclosures as servicers failed to follow federal and state rules designed to encourage loan modifications. Banks entering into settlement agreements must halt all foreclosure activity to ensure that no improper foreclosure is processed before impacted borrowers can claim settlement relief or servicing protections to which they are entitled. Likewise, Californians need first-lien principal reduction loan modifications so they can return to being above water and sustain homeownership. While the National Mortgage Settlement (NMS) provides significant first-lien principal reduction relief, a greater amount of relief was provided via short sales where homeowners must leave their homes.
Maeve Elise Brown, Executive Director of Housing and Economic Rights Advocates, explained, “In designing this settlement, the Department of Justice should remember the Independent Foreclosure Review with its $2 billion consultant price-tag but only $300 or $500 for homeowners. The Department of Justice must prioritize reducing principal on first-lien mortgages, a strategy that is most effective at keeping people in their homes.”
3. Support for housing counselors and legal service lawyers. Nonprofit advocates have helped California families navigate a Byzantine loan modification process and keep their homes. But funding for these groups is dwindling and consequently they can serve fewer people. These groups, whose sole focus is on their clients, are the only real competition for the steady stream of loan modification scam artists who gladly charge families thousands of dollars while doing nothing to save their homes. The National Mortgage Settlement was scheduled to deliver over $400 million to the state of California, much of that potentially going to support nonprofit housing counselors. But, almost all of these funds were taken by the Legislature and Governor to back-fill a budget deficit.
4. Best practices and strong standards going forward. Stronger servicing standards have been put in place by the California Homeowner Bill of Rights (HBOR), the National Mortgage Settlement, and the soon to be effective rules of the Consumer Financial Protection Bureau. But an April 2013 CRC survey of over 80 housing counselors in California found that large servicers were routinely violating key provisions of HBOR and NMS. The NMS Monitor found some of the same issues; almost half of the nearly 90,000 complaints made to his office were related to problems with a bank not providing a responsive, capable Single-Point-of-Contact or apparent dual track violations. Besides compensating victims, settlements must end harmful practices.
5. Support for affordable housing. The foreclosure crisis has not only harmed homeowners, it has exacerbated an already desperate affordable housing crisis. Families displaced from their homes by foreclosure are now competing for housing with tenants in a heated rental housing market. These families are also competing with Wall Street investors who pay all-cash for homes, beating out first-time homebuyers and then renting the houses back to some of the same people originally displaced by the Wall Street-generated economic crisis.
During the Savings and Loan crisis, banks were required to support the development of affordable housing through programs such as the Affordable Housing Program (AHP). Tying a percentage of settlement dollars to providing a source of funding for affordable housing is a logical mechanism to help mitigate the broader harm caused by improper mortgage and foreclosure practices, and can begin to address a growing need as the loss of redevelopment agencies in California and other factors have created a new crisis in affordable housing finance.
Amie Fishman, Executive Director of the East Bay Housing Organizations explains, “We’ve had a triple whammy in California of the foreclosure crisis which contributed to pushing rents sky high, alongside the draconian cuts to funding for affordable housing with the elimination of redevelopment agencies and federal sequestration cuts. As a result, too many California families are doubling up with relatives and using half or more of their paychecks to try and keep a roof over their heads. Targeting some of this funding to affordable housing would be a necessary step to addressing this crisis.”
6. Transparency and data reporting to ensure relief is distributed fairly. Most of the recent settlement agreements have for the most part allowed the offending parties to determine how to distribute relief. This has contributed to a feeling that the hardest hit communities have been ignored. The California Attorney General did well to negotiate a separate California agreement as part of the NMS that created incentives for servicers to provide relief in hard hit counties. But even this provision didn’t ensure that relief reached the hardest hit communities. And the National Mortgage Settlement agreement did not require that servicers report the race, ethnicity, gender and income of borrowers and neighborhoods where relief was provided. All future agreements must require this level of transparency to ensure fair housing and fair lending laws are honored.
7. Strong enforcement and monitoring. A settlement agreement is not worth the paper it is written on if the terms are not clear and meaningful, and if the oversight and enforcement is lax to the point of inviting banks to ignore their obligations. The California Monitor (oversees the National Mortgage Settlement in CA) has been a positive force in resolving homeowner complaints and changing servicer behavior, but subsequent reports from the Monitor indicate there is still room for improvement.
Similarly, the ability for victimized homeowners to sue their bank, included in California’s Homeowner Bill of Rights, is a good step forward, but more needs to be done to protect homeowners from unnecessary foreclosures and to protect tenants from illegal evictions. Any settlement agreement must put in place both a credible and strong monitor empowered to ensure banks honor the settlement, as well as a mechanism for affected families to secure relief and assert their rights.
Link to PDF of CRC Freedom of Information Act Request to Dept. of Justice
Link to New CRC Counselor Survey Report (Published May 2014)
Link to Bank of America’s homeowner data disclosure for San Francisco Banking RFP
Link to GAO Report (TROUBLED ASSET RELIEF PROGRAM: More Efforts Needed on Fair Lending Controls and Access for Non-English Speakers in Housing Programs) (February 2014)
To stay up to date on financial justice issues in California, especially as they relate to low income communities, and communities of color, you can follow the California Reinvestment Coalition on our Facebook page, via Twitter, Google+, watch our movies on our YouTube Channel, sign up to receive our newsletter and action alerts, and of course, visit our website.