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Foreclosure Relief Under the Obama Administration

Foreclosure Relief Under the Obama Administration. April 16, 2010 Goldman School of Public Policy Kevin Stein California Reinvestment Coalition. Outline: Foreclosure Related Issues. Context – surveys, Redlining report HAMP Tenants – PTFA Whats Left/Needed: Judicial Modification

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Foreclosure Relief Under the Obama Administration

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  1. Foreclosure Relief Under the Obama Administration April 16, 2010 Goldman School of Public Policy Kevin Stein California Reinvestment Coalition

  2. Outline: Foreclosure Related Issues • Context – surveys, Redlining report • HAMP • Tenants – PTFA • Whats Left/Needed: • Judicial Modification • Financial Regulatory Reform – CFPA • CRA Modernization • Protest

  3. Banks Not Helping Borrowers: CRC Statewide Survey Findings • Foreclosure most common outcome • Loan modifications - rare, short term • Principal write downs - rare • Obama Plan • Servicers aren’t working w/ borrowers • Disparate outcomes??!!!

  4. From Foreclosure to Re-RedliningCRC Report February 2010

  5. From Foreclosure to Redlining Report: CRC 2010 • Redlining • Steering/Predatory Lending • Concentrated Foreclosures • Inadequate and Uneven Loan Modifications • Re-redlining

  6. Foreclosure Filings by Neighborhood: Oakland 2008

  7. Loan Mods to REO Ratio: Worse in CA Cities Than USCalifornia Reinvestment Coalition: From Foreclosure to Re-Redlining

  8. Prime Loans Shift to White NeighborhoodsCalifornia Reinvestment Coalition: From Foreclosure to Re-Redlining

  9. Making Home Affordable Plan • Home Affordable Refinance • Home Affordable Modifications • GSEs to Lower Interest Rates

  10. Home Affordable Refinance Predicted to help 4 to 5 million Borrowers May have limited impact in CA: • Must have GSE owned or guaranteed loan • Must be current • Must be less than 105%, later 125% LTV • Who fits this category?

  11. Home Affordable Modifications • Predicted to help 3 to 4 Bs • $75 Billion to incent servicers, investors, Bs • For owner occupants and 1st lien loans • Target 31% income for front end ratio • Must pass net present value test • Incentive to work with borrowers at-risk

  12. HAMP #s March 2010Source: The Atlantic ,

  13. HAMP: CRC Critique • Poor performance – 200,000 permanent mods • Not mandatory • Pays servicers to do what they should do • Principal reductions not a part, but.. • Not much help for unemployed, but… • Little transparency – npv test, denials, but… • No meaningful way to appeal, but… • Race data collected, not public, but… • No enforcement, accountability, (no but)

  14. Bankruptcy Cramdown: Judicial Modification • Could have helped 600,000 borrowers directly • Would give borrowers leverage • Passed the House, Killed in Senate • Senator Durbin – • the bankers “frankly own the place (Congress)” • Where was the President? (in his platform)

  15. CFPA • Agency to protect consumers • No regulatory race to the bottom – Ex. OTS • Strong proposal by President • Strong opposition from industry • Key issues • Rule making and enforcement authority • Where does it reside? • Exemptions

  16. Community Reinvestment Act Modernization • CRA is the one law that works! • Paying More for the American Dream III study • CRA lenders more likely to make prime loans • But CRA needs to be strengthened • Include race, not just income • Include all areas where loans are made. Ex: CW • Report data on which banks are helping • Cover mortgage, insurance, Wall Street firms • Don’t dilute public input!

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