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Federal Housing Probe On Target But Should Examine Loan Modifications


“Too many of these failing loans relate to the origination of those loans being steeped in fraud, abuse and unsustainable lending.  Regulatory and enforcement officials, many now exorcized over the recent inaccuracies in paperwork and documentation, should delve a little deeper into the more devious and widespread malfeasance that created these unsustainable loans. The Administration’s new probe must look not only at how banks are assisting homeowners but also how banks made the loans in the first place.

“We have been saying since 2007, these loans should be modified or refinanced in a way that places the homeowner in the type of loan they should have received in the first place. Wall Street, servicers and lenders need to take responsibility for adjusting these loans to a reasonable level based on the borrower’s ability to pay. This has been the intent under several foreclosure prevention programs. And it was a normal practice in the financial services sector before the sub-prime lending industry hijacked the mortgage business. This will contribute to homeowners remaining in their homes and reducing, substantially, the number of foreclosures. One issue a federal probe should examine is the extent to which servicers are actually making adequate efforts to make sustainable modifications to loans.

“Only a national freeze on foreclosures would give officials the the ability to do this in a timely manner. A freeze on foreclosures does not mean that abandoned or vacant properties can not be foreclosed on or sold, of course that should happen.  But for those homeowners that are still trying to pay their mortgage, but have fallen behind through no fault of their own, another approach is needed.”

“A freeze would allow servicers to put their shops in order to prevent fraud and abuse. It’s clear that their sloppy practices are pushing many homeowners to foreclosure who could otherwise avoid it. With an addition 11 million foreclosures coming down the pike (according to Amherst Securities), it’s imperative that we fix this process. A six-to-eight month freeze would also allow those working with homeowners, banks and servicers, to address the backlog of homeowners needing counseling, mediation or legal services. Without some type of oversight and verification, allowing servicers to make their own determinations about the integrity of their servicing processes is a bad idea, given what we now know. Who’s to say that their robo-signing, mass-production process won’t continue and will push more people into foreclosure, hurting our economy and the millions of families trying to work their way out of this abyss?

“The government saw the need to rescue the very financial institutions that placed our economy in jeopardy, but has failed to bring the same sense of urgency to help those very families who have been affected by the abusive, fraudulent and unsustainable lending practices by Wall Street and mortgage lenders.  This is like telling a malaria victim that they should fend for themselves because they shouldn’t have been exposed to those spreading the malaria. America’s real moral hazard will be to blame millions of families that trusted the unregulated financial services sector with their life savings and dreams, only to have been taken to the cleaners.”

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For More Information,
Contact: Jesse Van Tol, jvantol@ncrc.org
202-464-2709

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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