Hitting the Pause on Foreclosures
“In the 30s, there were organized committees all over the country, block by block. The sheriff would come and evict a family. After he left, they moved people back in. The moratorium was won on the streets.”Before she was evicted from her own home, Kendra Washington took a walk around her Detroit neighborhood. She found an empty home and decided to squat with her two children. “I refused to get my kids put out on the street,” said the single mother who moved into a vacant Housing and Urban Development house.
After government officials came knocking at Washington’s door, attorney Jerry Goldberg, a long-time civil rights activist, persuaded them in court that it was in the government’s interest to let Washington and her children stay. He argued that Washington had made improvements to the house and so maintained its value. Without her efforts, he explained, the house would have been vandalized.
Washington got to stay.
In the last year, Goldberg and his staff at Moratorium NOW!, a coalition of activists and union and religious leaders, have brought at least 50 cases to courts in Detroit on behalf of homeowners. They have been fighting to save homes literally one house at a time through picketing at the banks and legal action. Some of the people impacted are senior citizens with fixed incomes and also with medical conditions that have drained their savings. The houses have belonged to them for more than 20 years.
“We believe they have a right to a home and we defend their right to stay,” Goldberg said.
Some politicians agree. A new bill introduced in Michigan’s state legislature would create a two-year moratorium—making it the lengthiest moratorium in the nation.
According to Goldberg, in many of his cases, people have been able to stay in their homes because he showed that the foreclosure was violating federal law like the Housing and Economic Recovery Act of 2008 (HERA), which was approved last July. The law requires financial institutions to modify default mortgages when this will result in a greater recovery of their value than a foreclosure.
“We argued that the loan modification would add a greater value to the property than the foreclosure will,” he said.
In the cases of low-income homes insured by the Federal Housing Administration, Goldberg and his team have shown in court that the government hasn’t played by its own rules.
Homeowners in danger of being evicted are supposed to get the chance to stay in the house through a lease agreement. But many homeowners are finding their requests to stay in the home denied, said Goldberg. Instead, the Federal Housing Administration has been paying the mortgage companies the full value of the house after it foreclosed, he added.
They don’t always win in court though.
“When we don’t have good luck through the courts, we have good luck through the streets,” said Goldberg.
On at least six occasions, the coalition has picketed outside homes or banks just before people were about to be evicted. This is often the last resource when the actions can’t be fought in court because there’s no legal basis, Goldberg said.
On one occasion, a 78-year-old woman was able to get a new loan to stay in her home after the group picketed outside the bank Countrywide. The new loan allows her to stay in her home of 42 years.
Washington made payments on her home of a decade for as long as she could after a foot surgery caused her to lose her $40,000 a year job. The lender wasn’t willing to lower her payment on the $150,000 mortgage. As her savings ran out, Washington watched homes in the neighborhood being sold for as little as $500.
Michigan has been hit by a severe economic downturn for the last decade. It has lost half a million, mostly union, industrial jobs in the last five years. The crisis struck Detroit before it did the rest of the nation, and the sub-prime market of predatory lending completed the job. In Detroit, the average medium sales price for a home these days is $6,237, according to data from Multiple Listing Services. One in every 137 homes in Michigan is facing foreclosure.
“Our business is to sell foreclosed homes,” said Carl Williams, chief executive of the Saturn Group. His real state company has sold at least five houses for $1 with buyers paying the realtor’s commission.
“When the properties get evicted, the homes are immediately stripped and vandalized, losing all their value, tearing down the fabric of the community,” said Goldberg.
That’s exactly what happened with Washington’s 1,625 square foot home when vandals came in, took everything and set the house on fire. The brick home had been remodeled, Washington said. She had put hardwood floors in the kitchen, new cabinets and ceramic tile. “The sad part about it is that [the bank] would have done better working with me; now they’ve got nothing,” she said.
A bill introduced in Michigan (SB 29) by State Sen. Hansen Clarke would approve the longest moratorium in the nation, allowing homeowners to remain in their house for two years while they make a monthly payment set by a trial judge based on their income.
“If you want to stabilize the markets you have to slow down the foreclosure rate, keep people in their homes, occupied and maintained,” said State Sen. Clarke. It’s a more responsible approach than borrowing millions of tax dollars to bail out financial institutions.”
There’s legal precedent for this, too. In 1934, the Supreme Court ruled that a moratorium on foreclosures was constitutional because of the crisis faced by the nation. Twenty-five states were able to institute them.
“In the 30s, there were organized committees all over the country, block by block. The sheriff would come and evict a family. After he left, they moved people back in,” says Goldberg. “The moratorium was won on the streets.”
California currently has a 90-day foreclosure moratorium. Connecticut’s governor M. Jodi Rell supported a bill in progress for a six-month forbearance with a mandatory 60-day mediation period. Last April, Massachusetts passed a law that put in place a 6-month moratorium on mortgage foreclosures if people filed and claimed they were victims of unfair lending practices. Several banks including Citigroup Inc, JPMorgan Chase & Co. and Morgan Stanley placed a moratorium on some foreclosures to give the Obama administration time to set into motion a rescue plan for homeowners.
“There’s logic to these efforts of saying: “Let’s hit the pause,” said attorney Ellen Harnick, senior policy counsel on foreclosure issues at the Center for Responsible Lending. “People close to the crisis have been sounding the alarm for over two years, and there’s an awful lot of sadness and disappointment with the fact that so many homes could have been saved had solutions been implemented earlier”.
Some analysts and advocates though caution that a moratorium won’t work on its own.
“You’re just postponing the inevitable if you don’t have the tools to work on this,” said Jason Reece, senior researcher and expert on regional housing for the Kirwan Institute for the Study of Race & Ethnicity at Ohio State University.
Reece supports similar efforts in Ohio were 80,000 homes went in to foreclosure last year, and 40,000 others are at risk. But he contends a moratorium needs to be tied to system reforms, direct assistance to the communities that are most hit and the possibility of having bankruptcy judges alter the terms of a loan.
Yet, Sen. Clarke hopes the moratorium would prevent the need of families to go into bankruptcy. “I don’t want it to get that bad for a family that they have to go to bankruptcy court,” he says.
While the administrations’ $75 billion modification and assistance program has received a warm reception, housing advocates believe it still has fallen short. Since only banks that receive additional Troubled Asset Relief Program, or TARP, funds are required to participate, there’s a concern on how the government will enforce it industry-wide.
“Why shouldn’t it be mandatory for all the banks that already got the bail out money?” Goldberg complained. He believes the people should come first and need to organize from the grassroots to bring a change.
This is exactly what Take Back the Land, a grassroots volunteer organization in Miami, Florida is inviting people to do on vacant government housing and foreclosed homes.
Max Rameau, the group’s founder, helps homeless families relocate into what he calls “liberated” houses. He makes sure the homes have electricity and water before they move in. “It’s completely illogical and inhumane that you have all these houses and families are looking for homes,” said Rameu.
Those who squat run the risk of getting arrested and charged with trespassing. But Rameu thinks they face a greater danger living in the streets.
“This is a solution coming from the community,” said Rameu. “We value the human rights of housing over the right of a corporation to make a profit.”