I read the recent op-ed by Maria V. Eyles (“I’m dancing the foreclosure shuffle,” Nov. 17), which laid out, in excruciating detail, her incredibly difficult experience trying to obtain a mortgage modification. For the sake of our community, I wish it were a unique experience, but constituents call my offices on the Central Coast every day with similar stories.
In addition to the stress and disruption these situations have caused far too many of our friends and neighbors, the difficulties in our housing market are a huge impediment to getting our economy back on track. Not only are thousands of people in the construction trade and related industries out of work, but depressed home prices and uncertainty about the future of the housing market is wreaking havoc on families and businesses across the nation.
Though the Obama administration has implemented several programs to help address housing market problems, the efforts have been insufficient to address the immense scale of the problem. That’s why, in October, I joined 31 other California members of the House to urge the administration to take immediate action to alleviate the continuing crisis of foreclosures and housing, including ending the “dual tracking” problem Eyles described, in which a lender continues foreclosure proceedings while the homeowner has applied for a loan modification. The plan we outlined consists of three main tenets, none of which require congressional approval to initiate, because, unfortunately, the new Republican leadership in Congress seems to have little interest in addressing the issue.
First, all underwater homeowners (people whose homes are worth less than they owe) who meet basic eligibility criteria should be given the opportunity to refinance their mortgages. The federal government should use its conservatorship of Fannie Mae and Freddie Mac to allow the mortgages they currently own or guarantee to be refinanced at today’s historically low rates. This bold move would have a widespread impact, significantly lowering monthly payments for homeowners, reducing the number of defaults, and stabilizing home prices.
Second, I called on the administration to create a plan to secure a far greater number of principal reductions for underwater homeowners. According to CoreLogic, a provider of property data, 30 percent of homeowners in California are underwater due to no fault of their own. One promising possibility would be a temporary reduction in the interest rates of certain homeowners who file for Chapter 13 bankruptcy, so that the entirety of their monthly payments would go to paying down their principal balances for five years. Coordination with the bankruptcy process would make these reductions more likely to succeed than other types of loan modifications, while also limiting the program to those who truly need it, and avoiding the administrative failures that have plagued many other initiatives.
Third, it is imperative to institute a “Homeowner’s Bill of Rights” to level the playing field for Central Coast homeowners who feel as though the deck is stacked against them in favor of big banks. A Homeowner’s Bill of Rights would make the mortgage modification process more homeowner friendly, by ending dual tracking, eliminating obstacles to modifications, and ensuring accountability and an appeals process for homeowners who believe their modification has been improperly rejected.
I was encouraged by the recent announcement by the Federal Housing Finance Agency that it will make changes to the Home Affordable Refinance Program (HARP) to make refinancing possible for more homeowners. The most significant of the changes will be removing the current 125 percent loan-to-value cap on mortgages eligible for modifications, which was one of the ideas we suggested in the letter to the Obama administration. Currently, if the value of your mortgage is $200,000 but your home value has fallen to $155,000, you are not eligible for refinancing, even if you’re current in payments. This makes no sense. Much more still needs to be done, of course, but a good step forward is removing the cap, which will help more underwater homeowners refinance and put more money in their pockets.
My district offices have received numerous stories from constituents detailing mistreatment at the hands of the big banks and mortgage servicers. I firmly believe these reports of widespread misconduct and fraud must be fully examined, which is why I have called for full investigations, both at the state and federal levels, and signed onto legislation supporting a strong settlement that does not relieve those institutions of liability for abuses that have not been fully investigated and addressed. California homeowners have been devastated by the housing crisis, and they deserve meaningful relief from any settlement made with those who helped cause the crisis.
I commend Maria Eyles for documenting her experience and shedding light on the problems that far too many homeowners encounter when they attempt to modify their mortgages and keep their homes, and I will continue working to fully address the foreclosure crisis and restore our economy.
Congresswoman Lois Capps represents California’s 23rd District. Send comments via the executive editor at rmiller@santamariasun.com.
This article appears in Jan 5-12, 2012.