On the day after an election wipeout, Treasury Secretary Timothy Geithner sat down with a coalition of homeowner advocates, clergy and people subject to the cruelty of HAMP, the government’s loan modification program. This was the first time, to the best of the knowledge of the activists, that Geithner has ever had a face-to-face meeting with the type of people who had to deal with the program his office designed and managed.
The meeting was the culmination of two years of work by PICO, a national network of 45 faith-based community organizations. They do grassroots organizing in local communities, in association with churches, synagogues and a few mosques. They have been at the forefront of the grassroots organizing on foreclosures which has received little media fanfare over the years. It’s slow, agonizing work, but it’s being done all over the country.
Almost two years ago, PICO members stood outside the Treasury Department building with 180 people, demanding that the Department implement a broad loan modification program. “At that point, the servicers were taking it case by case,” said Tim Lilienthal, a staffer with PICO who attended the meeting with Geithner. They began at that time, in early 2009, demanding a meeting with the Treasury Secretary. In addition, PICO puts durect pressure on the servicers to work with their customers, in particular Bank of America, the largest servicer in the country.
In October of last year, PICO members sat down with Michael Barr and Herbert Allison, top-level Treasury Department officials with control over consumer protection and the TARP. They brought with them a stack of photos and stories of people experiencing problems with HAMP and losing their homes in the process. This shows just how long this program has been faltering. As a result of that meeting, PICO held eight field hearings across the country this spring, to bring attention to the Treasury Department of the horror stories out there. “People who are stuck in DC sometimes are not seeing the direct impact of their policies,” said Lilienthal. Lower-level Treasury officials attended the field hearings, and the coalition continued to ask for a meeting with Geithner, which they got yesterday.
Their basic message to the Treasury Secretary was that it’s time for a new approach to the foreclosure crisis. “What you’re doing is not working,” said Lilienthal. “We’ve demonstrated that.” Prior to the meeting, PICO sent a detailed memo on what they saw as the next steps to fix the broken process. They want a nationwide freeze on foreclosures as the foreclosure fraud scandal is investigated; a senior-level official tasked just with fixing the housing crisis; a reset to the housing market with an “aggressive” principal reduction and forbearance plan, including cram-down, a mandate for Fannie and Freddie to reduce principal on all the loans they own, and making principal write-downs mandatory in HAMP; and actual accountability and penalties for servicers violating HAMP.
“We had a homeowner there who’s been waiting for her modification for over a year while paying trial payments,” Lilienthal said. “That violates the program.”
The attendees believe that Geithner showed sympathy for the plight of homeowners and working people, and shared their frustration with the servicers. “But then, when it came to action, he doesn’t feel they have capacity to compel servicers to do anything,” said Lilienthal. “We were prepared for that, we said we think you have a lot more power than you think. You created the program, you created the guidelines, you enforce it. Let BofA show their true colors.” PICO secured a commitment to get Treasury to respond to their proposal in writing within 30 days.
Michael Hickey from the Center for New York City Neighborhoods, the leader in New York on community-based activism around foreclosures, said that just enforcing HAMP could double loan modifications. To date, there has been no specific action taken to penalize or sanction a single servicer for violating HAMP guidelines. “Even a little bit helps,” said Lilienthal.
This meeting is the continuation of a national effort by groups like PICO, SEIU, National People’s Action and multiple others to end the extend and pretend scheme of HAMP and replace it with a totally new approach. “Historically, we haven’t worked together,” said Lilienthal. “But this problem is so big, and the lack of response such a huge problem, that a powerful movement is brewing.”
In addition to the meeting and working with Treasury, PICO will ramp up their direct pressure on financial institutions. Using the local relationships they have fostered in their communities, PICO has been able to secure major actions against the banks, particularly on promoting a socially responsible investing policy. The city of San Jose recently diverted close to $1 billion dollars from Bank of America because of their unwillingness to modify loans. This could be replicated across the country, a municipal version of “move your money.” Their message is that cities shouldn’t put their money in a bank which undermines the economic security of the city’s residents.
PICO also plans to meet with state Attorneys General, who are investigating servicers over foreclosure fraud. They believe that they’ve been naming the symptoms of the foreclosure fraud for a while, but that this shows the underlying problem, and why banks aren’t dealing with homeowners straight. “Just like the subprime mess, this is another part of that problem that we have not dealt with,” said Lilienthal. “It’s going to keep stunting recovery until we take care of it.”
Arthur Delaney has more on the meeting.
I felt oddly comforted by this meeting. Not because I think Geithner will immediately move to take up their plans, and not because of the psychic benefit to having him sit there and listen to homeowners who he helped screw. It’s because this group took two years to get that audience, and they’re not likely to give up until their constituents get what they need. There are community groups like this all over the country, few of whom get any attention, and their voices need to be amplified. But given their size and their relative power, they’re extraordinarily effective. And now they’re starting to work together. Face-to-face, direct action is the way we’re going to solve this crisis.
The other part of this is that it shows how long Treasury has known about the consequences of their actions. HAMP has been hurting people for a long time, and there are reams of documentation showing people abjectly worse off from exposure to the program. But Treasury has been publicly denying that HAMP puts homeowners into default, or that the program can be negative for borrowers in any way. PICO created eight field hearings to document just that.
Lilienthal saw an opportunity in the foreclosure fraud scandal, in the problems with HAMP, to reset the housing market. That’s the correct goal, and despite the obstacles it’s heartening to see groups actually working on it. As Lilienthal said, “This is an opportunity to clean it up once and for all, and to get our economy working again.”