This searing photo essay show in stark relief the landscape of the foreclosure crisis, in this case in Florida. By now we all know the details. Foreclosures are continuing at a reord pace, three years after the beginning of the recession. This massive turnover of property has turned entire neighborhoods into ghost towns and continued to be a drag on the economy. While there are higher incidences in “sand states” where the housing bubble inflated larger than elsewhere, this crisis is far from being localized to one region, and is prevalent all over the country. The potential damage over the next few years is even greater, as one out of every three homes in cities like Boise, Idaho are underwater.
We know that banks and loan servicers have massive incentives to foreclose, and then in many cases keep the homes off the market and in shadow inventory, avoiding the realization of a loss on their books. Banks who made crucial errors in the origination and securitization stages don’t want to be held responsible for those mistakes, and think the best way to go about that is by burying the evidence. So they have rushed to foreclose on borrowers who could have handled a loan modification, in many cases illegally so. And the stories keep getting tallied up day by day. Banks are foreclosing on the wrong homes, ones that don’t even have mortgages. Homeowners who are current on their loans are getting thrown out of their homes. Banks are faking summons, faking documents, faking notarizations, even faking lawyers, all in a desperate and chaotic effort to foreclose.
Amidst this chaos, some heroes have really stepped up. There are foreclosure mediation groups and activists, like NACA, who are setting up face-to-face meetings between lenders and borrowers. There are successful advocacy groups like ESOP in Cleveland, also mediating on behalf of homeowners. And there are the lawyers, foreclosure defense attorneys who have uncovered virtually every seedy game the servicers and the banks have been playing, who have effectively represented their clients.
If anything, the government should strongly support these efforts. The status quo is hopelessly broken, and it threatens economic recovery. The Treasury Department should demand that banks stop the rush to foreclose, and having effective representation for borrowers goes a long way toward that. But when given the option to allow TARP funds to be used for legal aid for foreclosure victims, the Treasury blocked it.
…consider the 19 states which are recipients of the Hardest Hit Fund (HHF)–a portion of TARP money set aside to help homeowners in states struggling with the highest unemployment rates and steepest declines in the housing market.
Some of those states, including Ohio, let Treasury Secretary Tim Geithner know as far back as this past spring that they wanted to use some of those funds to assist legal aid groups that help individual homeowners. Seems like a reasonable request–unlike the absurdity of handing over trillions of dollars to robo-signing, foreclosure-mad banks, no questions asked.
Treasury solicited the opinion of an outside law firm, Squire, Sanders & Dempsey. Never mind that the firm’s clients include BB&T Corporation and payday lender CNG Financial Corp. The firm said, in essence–sorry, no can do on the legal aid. Not permitted under the TARP.
You know, because Treasury certainly “played by the rules” of TARP in all other aspects.
As I understand it, the Treasury’s argument is that TARP must go toward financial instruments, and foreclosure legal aid doesn’t apply. This has been a back-and-forth between Treasury and a few hardy members of Congress for at least six months. Mary Jo Kilroy asked Tim Geithner back then if Hardest Hit Fund money can be used to this purpose, as Ohio and other states (like Florida) requested. Treasury said no, arguing that their hands were tied.
Marcy Kaptur dropped a bill, HR 5510, to remove the legal tangles associated with allowing TARP money to go to legal aid. Kaptur and her colleagues are trying to move the bill on the suspension calendar. The Senate obviously offers a roadblock, but Sen. Sherrod Brown has a companion bill, S. 3979, that they are trying to get through on unanimous consent. But obviously getting anything through the Senate is a tall order. Rochard Shelby would have to clear it.
Treasury could have changed their mind on this multiple times. They chose not to. They would rather help block access to the courts, essentially, for victims of foreclosure.
“We talked with Secretary Geithner about this back in June–we had mailed him letters,” said Kaptur. “But of course with the big banks in charge, Treasury is sadly representing them more than the people being affected by this around the country and in places like Ohio. It didn’t have to be this way. And the carnage across the countryside in terms of empty neighborhoods, families destroyed, going into our shelters–it didn’t have to happen.” [...]
“Legal aid lawyers are on the front line of the housing crisis, and their hard work is often the only thing helping homeowners understand their rights in foreclosure,” Senator Brown told me in an e-mail. “Unlike many of the foreclosure prevention programs already in place, providing legal services with adequate resources is a simple, straightforward way of helping families keep their homes without providing a windfall to the banks.” [...]
“The courts–the judicial system of this country–is what is left in terms of gaining fair treatment under the law for homeowners,” said Kaptur.
This is a crime being perpetrated right now. People are having their homes stolen from them, and the judicial branch is practically their last shot. Treasury knows just what they’re doing.