Foreclosure Relief Under the Obama Administration
April 16, 2010Goldman School of Public Policy
Kevin SteinCalifornia Reinvestment Coalition
Outline: Foreclosure Related Issues• Context – surveys, Redlining report• HAMP• Tenants – PTFA• Whats Left/Needed:–Judicial Modification–Financial Regulatory Reform – CFPA–CRA Modernization–Protest
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??!!!
From Foreclosure to Re-RedliningCRC Report February 2010
From Foreclosure to Redlining Report: CRC 2010
• Redlining • Steering/Predatory Lending• Concentrated Foreclosures• Inadequate and Uneven Loan Modifications• Re-redlining
Foreclosure Filings by Neighborhood: Oakland 2008
Loan Mods to REO Ratio: Worse in CA Cities Than US
California Reinvestment Coalition: From Foreclosure to Re-Redlining
Monthly E mpty Homes v s . L oans Modified: S ample S ec uritiz ed L oan P ools Dec 2008-Nov 2009
0
5
10
15
20
25
R E O per Mod 6.77 21.87 11.38 15.69 9.38 8.19
US Oakland S ac S tockton L os A ngeles
S an Diego
Prime Loans Shift to White NeighborhoodsCalifornia Reinvestment Coalition: From Foreclosure to Re-Redlining
C hang es in the Dis tribution of P rime L oans in Oakland Neig hborhoods : All L enders 2006-
2008
0
10
20
30
40
50
80% or moreP OC
79.9% -50%P OC
49.9% -20%P OC
19.9% -10%P OC
% P
rim
e Ln
s
2006
2008
Making Home Affordable Plan
1. Home Affordable Refinance2. Home Affordable
Modifications3. GSEs to Lower Interest Rates
Home Affordable Refinance
Predicted to help 4 to 5 million BorrowersMay 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?
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
HAMP #s March 2010Source: The Atlantic
,
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)
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)
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
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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