Three years into the mortgage meltdown, California homeowners still have little relief from the foreclosure crisis. Last week, state legislative committees failed to clear three separate bills designed to help struggling homeowners and hold banks more accountable during foreclosure proceedings.
This news comes as the number of foreclosures continues to rise, and national efforts to stem the crisis have only provided relief to a fraction of homeowners needing help. Coupled with the lack of policies to address the foreclosures epidemic, California homeowners are being left to fend for themselves.
Increasingly, homeowners are taking matters into their own hands — stepping up pressure on banks, going after mortgage scammers and educating themselves about how to avoid becoming victims of foreclosure or fraud.
Three-Year Mortgage Fight
Peggy Mears has fought for three years to keep her three-bedroom house in Fontana, California
After the economy tanked, Mears and her husband's income took a hit. Mears, a licensed childcare worker, had fewer clients and her husband, who works in the entertainment industry, saw his contract work dry up. Mears, hoping to lower her monthly mortgage payments, contacted her lender OneWest Bank (formerly IndyMac Bank) to modify the terms of her home loan.
Three years and three loan modifications later, Mears says she is still at risk of losing her home.
During the loan modification process, Mears says the bank requested the same documents from her "over and over again." One trial modification lowered her monthly payment by $50, while another increased it by $300. All the while, Mears' family lived under daily threat of losing their home, because her bank continued with foreclosure proceedings even as they worked with Mears to modify her home loan — a practice banks call "dual track."
"I was stressed out — I couldn't sleep at night and my nerves were on end," Mears told a group of ethnic-media journalists at a news briefing in Los Angeles last Thursday. The press briefing highlighted the skyrocketing number of mortgage scams in the wake of the foreclosure crisis. The event was organized by New America Media and sponsored by the Center for Responsible Lending in Oakland, California
Fed-Up Homeowners Join Forces
Mears eventually got fed-up and joined the Home Defenders League, a group that organizes homeowners under the cloud of foreclosures. The League, part of the Alliance of Californians for Community Empowerment (ACCE), has 2,500 members statewide and is growing, said Peter Kuhns, director of the alliance in Los Angeles.
Last December, Mears and two dozen other homeowners were arrested after holding a sit-in at a JP Morgan Chase Bank branch in downtown Los Angeles. They demanded that the bank halt foreclosures and work more effectively with homeowners to modify their loans.
"We were making a statement: If you refuse to let us live in our homes, we will live in your home," Mears said.
From 2006 through 2009, California saw a whopping 832,000 foreclosures, said Jemahl Amen, outreach director for the Center for Responsible Lending, at last week's briefing.
Despite the tidal wave of foreclosures, few policies at the state or federal level are giving homeowners relief. The federal program created to boost loan modifications — the main policy put forth to staunch the foreclosure crisis — has largely failed, as banks have modifying a mere fraction of the loans of troubled homeowners.
In the last quarter of 2010, more than 5 million homes nationally were at risk of foreclosure (in default for 60 days or longer), and to date the number of permanent modifications through the federal HAMP (Home Affordable Modification Program) hover around 670,000.
"Banks should be required to work with homeowners to make their loans affordable," said Kuhns, noting that just one-sixth of eligible HAMP borrowers are receiving permanent loan assistance under the program. "We know that banks aren't doing what they could be doing to make loans affordable. They could do that and still do business."
In many cases, Kuhns said, struggling homeowners are hardworking, middle-class families, who are victims of the economic crisis, and deserve a chance to stay in their homes, if they can make reasonable payments.
"No one is asking for a handout," Kuhns stressed.
Earlier this month, hundreds of fed-up homeowners, renters, clergy and union organizers rallied in front of Wells Fargo's corporate headquarters in San Francisco to demand the bank halt foreclosures. A half-dozen people confronted the Wells Fargo CEO John Stumpf during a shareholders' meeting, and several protesters were arrested.
Organizers of the Wells Fargo protest plan to hold similar actions this month at shareholder meetings of Bank of America and JP Morgan Chase.
Mears said homeowners facing foreclosure feel ashamed and don't want to speak out about the prospect of losing their homes, which she called "your greatest wealth."
"It is embarrassing to say, 'I'm losing my home,'" she said. "It hurts, especially after you've lived there for 20 years and you've worked hard all your life and done everything that you are supposed to do."
Mears added that becoming more active and vocal about her situation has had a positive outcome.
At a protest, Mears said, she had the chance to speak directly with the president of her lender, One West Bank. After the meeting, Mears says, he asked his staff to review Mears' case. Currently, she has a trial modification.
While she's grateful to still keep her home, for now, she said her monthly payments — higher than amounts under previous trial modifications — are still too high.
With foreclosure victims largely invisible to the media and elected officials, Mears noted, she's calling on struggling homeowners to take action. "It's time to stand up," she stated.
The Home Defenders League has also organized actions against companies and individuals, who perpetrate mortgage fraud. Mears said members have gone to offenders' offices, called them out in public and demanded they pay homeowners' money back. In one case, she said, a scam artist pulled out a wad of money from his pocket and paid a homeowner $3,500.
Kuhns of ACCE acknowledged that more homeowners are turning to do-it-yourself approaches to provide limited relief, but he emphasized that those facing foreclosures need wider policies to deal with the scale and scope of the current foreclosure crisis.
The real goal of the Home Defenders league, he says, is to ultimately, "change policies about how banks are allowed to operate."
Three Bills Failed
Although some California lawmakers hoped to relieve the crisis, three bills were stopped in committees last week.
Senate Bill 729 would have required banks to give homeowners an answer on loan modification application before initiating foreclosure proceedings.
Assembly Bills 935 and 1321 were also halted in committee and will not be heard this year, but could be heard in the next session, according to legislative staff. AB 1321 would cut critical paperwork delays by requiring counties to record foreclosures within 30 days.
Assembly Bill 935 would have required banks to pay a $20,000 fee on every foreclosure to recoup economic losses by local and state governments.
AB 935's sponsor, Assembly member Bob Blumenfield (D-San Fernando Valley) said he would consider an amendment that would waive that fee for banks offering homeowners a principal write-down for the equivalent market value of the home.
Blumenfield said banks would then have an incentive to lower payments for the current homeowner, rather than turning around and selling the property to someone else.
"People are suffering out there. It's important that we all bear a part of that burden, and banks and lenders should share some of the responsibility," said Blumenfield. He emphasized that the economic impact of foreclosures born by communities needs to be a part of the equation.