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The Son of the Housing Bubble: First-Time Homebuyers Tax Credit
Dean Baker
Co-director, CEPR
author, ‘The End of Loser Liberalism: Making Markets Progressive’
Posted: 04/18/2012 9:04 pm
It’s often said that the difference between the powerful and the powerless is that the powerful get to walk away from their mistakes while the powerless suffer the consequences. The first-time homebuyers’ tax credit provides an excellent example of the privilege of the powerful.
The first-time homebuyers tax credit was added to President Obama’s original 2009 stimulus package. It was introduced by Senator Johnny Isakson, a Republican from Georgia, but the proposal quickly gained support from both parties. The bill gave a tax credit equal to 10 percent of a home’s purchase price, up to $8,000, to first time buyers or people who had not owned a home for more than three years. To qualify for the credit, buyers had to close on their purchase by the end of November, 2009, however the credit was extended to buyers who signed a contract by the end of April, 2010.
The ostensible intention of the bill was to stabilize the housing market. At least initially it had this effect. There was a spike in home purchases that showed up clearly in the data by June of 2009. House prices, which had been falling at a rate of close to 2.0 percent a month stabilized and actually began to rise by the late summer of 2009, as buyers tried to close on a house before the deadline for the initial credit. There was a further rise in prices around the end of the extended credit in the spring of 2010.
However once the credit ended, prices resumed their fall. By the end of 2011 they were 8.4 percent below the tax credit induced peak in the spring of 2010. Adjusting for inflation, the decline was more than 12.0 percent.
The problem was that the credit did not lead more people to buy homes, it just caused people who would have bought homes in the second half of 2010 or 2011 to buy their homes earlier. This meant that the price decline that was in process in 2007-2009 was just delayed for a bit more than a year by the tax credit.
This delay allowed homeowners to sell their homes for higher prices than would otherwise have been the case. It also allowed lenders to get back more money on loans that might have otherwise ended with short sales or even defaults. The losers were the people who paid too much for homes, persuaded to get into the market by the tax credit.
This was the same story as the in the original bubble, but then the pushers were the subprime peddlers. In this case the pusher was Congress with its first-time buyer credit.
According to my calculations, the temporary reversal of the price decline transferred between $200 and $350 billion (in 2009 dollars) from buyers to sellers and lenders. Another $15-25 billion went from homebuyers to builders selling new homes for higher prices than would otherwise have been possible.
While this might look like bad policy on its face, it gets worse. The tax credit had the biggest impact on the bottom end of the market, both because this is where first-time buyers are most likely to be buying homes and also an $8,000 credit will have much more impact in the market for $100,000 homes than the market for $500,000 homes.
The price of houses in the bottom third of the market rose substantially in response to the credit, only to plunge later. To take some of the most extreme cases, in Chicago prices of bottom tier homes fell by close to 30 percent from June 2010 to December of 2011, leading to a lose of $50,000 for a buyer at the cutoff of the bottom tier of the market. The drop in Minneapolis was more than 20 percent or more than $30,000. First-time buyers in Atlanta got the biggest hit. House prices for homes in the bottom tier have fallen by close to 50 percent since June of 2010. That is a loss of $70,000 for a house at the cutoff of the bottom tier.
Many of the 11 million underwater homeowners in the country can blame the incentives created by the first-time homebuyers credit for their plight. This was really bad policy, which should have been apparent at the time. Unfortunately, it is only the victims who are suffering, not the promulgators of the policy. Welcome to Washington.
Follow Dean Baker on Twitter: www.twitter.com/DeanBaker13
Negative equity is disproportionately concentrated in the Chicago region’s communities of color, Woodstock Institute report shows
Tom Feltner | Vice President
Woodstock Institute
Homeowners with mortgages in African American communities more than twice as likely to be underwater as homeowners in white communities
CHICAGO–Negative equity is disproportionately concentrated in the Chicago region’s African American, Latino, and majority minority neighborhoods, a new report from Woodstock Institute found. The report also found that borrowers in communities of color have much less equity on average than do borrowers in predominantly white communities.
View the full report here: http://bit.ly/strugglingtostayafloat
Join us for a telephone briefing Tuesday March 27 at 10am CT: http://stayingafloat.eventbrite.com/
The report, “Struggling to Stay Afloat: Negative Equity in Communities of Color in the Chicago Six County Region,” used data from a major provider of mortgage and home value data to examine patterns of underwater homes in communities of various racial and ethnic compositions in the Chicago six county region in 2011. It found that:
- Nearly one in four residential properties in the Chicago six county region is underwater, with just under $25 billion of negative equity. The average underwater property has 31.8 percent more outstanding mortgage debt than the property is worth.
- Borrowers in communities of color are much more likely to be underwater than are borrowers in white communities.
- Borrowers in communities of color are more than twice as likely as are borrowers in white communities to have little to no equity in their homes. In highly African American communities in the Chicago six county region, 40.5 percent of borrowers are underwater, while another 5.4 percent are nearly underwater. Similarly, 40.3 percent of properties are underwater in predominantly Latino communities and 5.3 percent are nearly underwater. In contrast, only 16.7 percent of properties in predominantly white communities are underwater, with another 4.4 percent nearly underwater.
- Almost three times as many properties in communities of color are severely underwater compared to properties in white communities. In predominantly African American communities, 30.1 percent of properties have loan-to-value (LTV) ratios—a comparison of outstanding mortgage debt to home value—exceeding 110 percent, while that figure is 30 percent in predominantly Latino communities. In contrast, just 10.1 percent of the properties in predominantly white communities have LTVs exceeding 110 percent.
- Borrowers in communities of color have much less equity in their homes than do borrowers in white communities, resulting in a significant wealth gap.
- Only about one-third of homeowners in communities of color have significant equity in their homes. In predominantly African American communities, 34.5 percent of borrowers have more than 25 percent equity in their homes, while 33.1 percent of borrowers in Latino communities have more than 25 percent equity in their homes. Fifty-five percent of borrowers in predominantly white communities have more than 25 percent equity.
- Borrowers in communities of color have much higher average loan-to-value ratios than do borrowers in predominantly white communities. The average LTV ratio is 92.1 in predominantly African American communities and 87.4 in Latino communities, compared with an average LTV ratio of 67.7 in predominantly white communities.
Negative equity contributes to community decline by potentially leading to increased foreclosure activity, threatening the success of foreclosure prevention programs, and draining neighborhood wealth. In addition, the destruction of assets caused by negative home equity may disproportionately threaten the economic security of people of color because home equity is a larger proportion of their net worth than it is for white people.
View the full report here: http://bit.ly/strugglingtostayafloat
The report concluded with a number of policy recommendations to reduce the negative impacts of concentrated negative equity, including:
- Servicers should use principal reduction as a foreclosure prevention tool more broadly.
- The Federal Housing Finance Authority should permit loans backed by Fannie Mae and Freddie Mac to be eligible for principal reductions.
- Servicers should streamline processes for short sales.
—
Tom Feltner | Vice President
Woodstock Institute
29 E Madison Suite 1710 | Chicago, Illinois 60602
T 312/368-0310 x2028 | F 312/368-0316 | M 312/927-0391
www.woodstockinst.org | tfeltner@woodstockinst.org | @tfeltner
Related articles
- A good credit score did not protect Latino and black borrowers (scoppcanton.wordpress.com)
- Negative Equity Increasing Around US; but Not Oro Valley (finehomesdigest.wordpress.com)
- Housing Still Drowning in Underwater Mortgages (blogs.wsj.com)
How I Remember Patty Rouse
March 15, 2012
By Bart Harvey, Former Enterprise Chairman and CEO
When I heard about Patty’s condition, I went in to see her two Saturdays ago, expecting the worst.
When I got to Vantage House, she was alone, sitting in a chair in her room with perfect posture, perfectly coiffed, primly dressed and totally alert. I was quite surprised, and said, “Hi there Patty,” and in that sweet Norfolk drawl she answered back, “Well, hi there.”
I couldn’t tell whether she knew who I was, but she covered it perfectly. Then, suddenly, a Catholic priest entered, saying he was covering for the Episcopal minister who was out of town, and with great solemnity asked how she was doing. She answered back that she was doing just fine – but how was the priest doing? Was he feeling okay?
I nearly burst out laughing, shaking my head and saying to myself, “They just don’t make them like Patty anymore.” And I heard in the background her saying to the priest, “It was nice of you to stop by, and if I can help you at all, let me know.”
Patty sitting there in her nicely patterned wool suit and her lovely Southern manner and pattern of conversation brought a flood of memories back to me – of her and Jim, of many trips together, of the start of Enterprise 30 years ago, of all the wonderful people at Enterprise who cared so well for her and her appreciation of her Enterprise family, of her own family and all the Rouses, of the remarkable journey she took and the people she helped as part of a duo and in her own right.
I marveled at the journey Patty Rouse had taken. An independent Southern girl who won a sailing contest as a teenager, the first woman Commissioner of the Norfolk Public Housing Authority, a divorcee who struck out on her own and let a tennis match and Jim Rouse bring her north and into the maelstrom of real estate development and Enterprise and poor neighborhoods.
She adapted to her new life and became deeply involved at Enterprise as vice president and secretary and served on its various boards. She was always looking out for her Enterprise family, attending functions, giving Jim the high sign when his speeches went on too long, tending to the details, lending her support.
She never took credit herself, always saying “Jim did that,” but he couldn’t have and wouldn’t have done it without her support, help, encouragement and devotion. People at Enterprise understood that, I understood that, her family understood that.
Outside of Enterprise, she sat on a number of commissions, tasks forces and boards, but her heart was always with Jim Rouse, Enterprise and much of the mission work of Church of the Saviour in Washington, D.C.
She took quite a journey and quite a risk, and after Jim died, she continued on and I was grateful that she was carrying on a legacy and living it every day, until she couldn’t anymore.
Enterprise has lost its other co-founder, but I believe, and I know Patty does too, what Patty and Jim Rouse did deserves to not only continue but to be multiplied many times. They weren’t casual about the importance of what they were doing and they gave up a lot to carry out their beliefs. They believed that those at Enterprise would be up to the task and do even more than they could imagine.
Art, Culture, and Community Development Collaboratory Begins Research in New Orleans
Reposted from: Imagining America: Artist and Scholars in Public Life
Posted on March 5, 2012 by Jeremy Lane
By Micah Salkind, Doctoral Student in American Studies, Brown University, Catherine Michna, PhD, Instructor, University of Massachusetts, Boston, and Ruth Janisch Lake, Assistant Director, Civic Engagement Center, Macalester College
IA’s Art, Culture, and Community Development Collaboratory spent Martin Luther King, Jr. Day weekend in New Orleans working on the first phase of our participatory action research. We documented and interviewed participants from several IA member institutions’ civic engagement programs and cultural partnerships in that city. We began at Xavier University, where longtime professor (and IA board member) Ron Bechet explained how the Xavier Art Department’s longstanding cultural partnerships with artists and community organizers shape his institution, affect his collaborators, and contribute to cultural life in the city.
Bechet introduced us to Big Chief Darryl Montana of the Yellow Pocahontas Mardi Gras Indians, who has been working with the Community Arts Program at Xavier since 1997, developing Mardi Gras Indian Arts (MGIA) education and youth programming for middle-school children. According to Montana, the longstanding partnership between Mardi Gras Indian practitioners and Visual Arts Professors Bechet and MaPó Kinnord-Payton has helped to facilitate a growing recognition of Mardi Gras Indian art and performance as the “heartbeat” of New Orleans’ cultural landscape.
In 2007, the three created an intensive hands-on cultural immersion and training program for middle school age children from Xavier’s Gert Town neighborhood and greater New Orleans. Each summer since 1997, youth have learned how Mardi Gras Indian traditions developed while acquiring costume-making skills. Beginning this year, the program will take place year-round since Xavier has expanded its support for MGIA into a continuous component of its community arts curriculum.
For Montana and the Yellow Pocahontas tribe, MGIA is a platform to develop organizing and pedagogical strategies around intellectual property issues that affect their artist communities and city. Cultivating long-term engagement through MGIA is part of Xavier’s complementary commitment to educating its own students and Gert Town youth, about ways that elites, throughout the city’s history, have profited in unethical ways from black working class culture. The MGIA program is itself an ethical practice that models ways of acknowledging and supporting black cultural production by supporting the communities that cultivate and share it.
Reflecting on the role of the MGIA and similar programs at Xavier, Bechet noted the importance of university/community cultural partnerships to New Orleans’s recovery from Hurricane Katrina: “You can see it one individual at a time.” For example, when Xavier contributed financially so Darryl Montana could come home and rebuild his house, “he had an ability to help the next generation … individuals [like him] have taken on the responsibility of passing on the values of this place and what’s important about it to them.” We saw an example of such locally-grounded, collective-minded values first hand when we visited Xavier’s newest partner, Jenga Mwendo, founder of the Backyard Gardener’s Network (BGN). BGN’s “Guerrilla Gardeners” project in the Lower Ninth Ward not only directly works to address the problem of “food deserts” in African American neighborhoods, but also facilitates discussions between community members, city leaders, and student volunteers about the role that gardening plays in community building and neighborhood revitalization in the post-Katrina city.
On Saturday, led by University of Wisconsin-Milwaukee Associate Professor and Interim Associate Vice Chancellor Cheryl Ajirotutu, we participated in UMW’s annual reception for their New Orleanian community partners at the U.S. Mint Museum. We met UWM students and administrators and had the chance to interview a wide range of UWM’s local partners, who have been collaborating on the University’s winter term course in New Orleans since 2005. We also enjoyed zydeco piano playing by UWM partner, Bruce “Sunpie” Barnes.
Later in the weekend, we joined Barnes and UWM, Xavier, and Macalester groups at the Vietnamese Initiatives in Economic Training (VIET) Center in New Orleans East where we participated in VIET’s annual Martin Luther King Day of Service. There we met Cyndi Nguyen, VIET’s Executive Director, and saw and heard about VIET’s thriving community health and cultural/economic development programs for youth and elders. Both the Macalester College students enrolled in the New Orleans and the Performance of Urban Renewal course and the UMW students working towards degrees in social work, as well as those who are taking Professor Ajirotutu’s cultural history course in New Orleans, prepared for their service at VIET by viewing and discussing the film “A Village Called Versailles,” a documentary on the inter-generational, faith-based community organizing of New Olreans’ Vietnamese community, which was not only affected by Hurricane Katrina in 2005, but also by a new government-imposed toxic landfill.
The group from Macalester College included 12 first year Bonner Community Scholars enrolled in a course titled, “New Orleans and the Performance of Urban Renewal,” which was co-taught by Ruth Janisch Lake (collaboratory member) and Molly Olsen. This intensive J-term (January interim) course assumed a human-centered, arts-based urban studies perspective on the continued efforts of New Orleans to restructure and redefine itself in the 21st century amidst various ecological, economic and political challenges. The course provided students with the essential critical, historical, and cultural framework through which to interpret various site visits and civic engagement projects with local artists, activists, and scholars in New Orleans. This was the seventh Macalester group that Civic Engagement Center staff member Ruth Janisch Lake has brought to New Orleans since January 2006.
Our team members interviewed several Macalester Bonner Community Scholars about their program’s practices of community-based learning and civic engagement. During their seven days in the city, the Macalester group connected with a Community Arts class with Ron Bechet and also learned more about New Orleans historical and ethnic geography with Tulane University Professor Richard Campanella. They visited Backstreet Cultural Museum in Tremé and this year participated in a second line parade with the Undefeated Divas in Central City. They also meet with a range of non-profit organizations and community leaders as they discussed issues of race and class in the city’s uneven recovery from Hurricane Katrina. As one Bonner student noted:
The course definitely expanded my awareness and deepened my knowledge about the communities performing urban renewal in New Orleans. I loved the way the week was laid out and thought it was conducive to experiential, meaningful learning. We started the week off with a fascinating tour with Tulane Professor Rich Campanella and really appreciated the information he shared with us about NOLA’s ethnic and physical geography. Participating in the second-line parade gave me a powerful sense of the importance of having cultural traditions to return to when tragedies strike. Visiting Robert Green in the Ninth Ward was another influential experience, hearing about the ways in which he has advocated for and helped to rebuild his community post-Katrina. I also appreciated getting to visit the Vietnamese community in New Orleans East, and seeing how incredibly organized and resilient this largely youth-led community was in working towards positive change. Finally, I valued interacting with families whose homes we installed CFL light bulbs in through Project Green.
To round out our weekend of research and conversation, IA team members visited the Ashé Cultural Arts Center in Central City to participate in a night of singing celebration of Martin Luther King, Jr.’s birthday and to meet with students and faculty at Ashé’s new alternative college program—Ashé College Unbound (ACU). College Unbound began in Providence, RI, where IA Page Program Director Adam Bush worked with Big Picture Learning, a non-profit focused on developing internship-based curricula, and Roger Williams University’s School of Continuing Studies to create a student-centered bachelors degree program. In its first year, ACU has enrolled eleven students, primarily adult learners and longstanding community leaders, with a wide range of work experience and cultural development skills under their belts. The ACU student body works collaboratively with the organization’s advisory board and academic and community arts mentors towards a degree while matriculating in, and helping to create, semester-long workshops on housing, economics, culture, and education policy.
This spring, our collaboratory will produce a short video that will explore how these and other university projects have, in fact, become part of New Orleans’ cultural history by not only addressing historical inequity, but also by helping to create a new paradigm of the struggle for justice in the city. We also plan to create a white paper outlining some of the promising practices we see enacted in university/community cultural partnerships. Foregrounding how students have become more engaged, civic actors, as a result of their participation in these projects, we will also listen for different and surprising effects of their participation. We hope that the archival materials we create will be useful as scholars around the globe try to make sense of post-Katrina New Orleans.
New Orleans is an amazing first case study, which we hope to complement with work in other cities and with other institutions affiliated with our working group. Current members hail from Holyoke, Baltimore, Minneapolis/St. Paul, Providence, Syracuse, and Milwaukee. This is just the beginning!
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Photo credits: 1) University of Wisconsin-Milwaukee, Xavier University, and Macalester University students and the AC&CD collaboratory team at VIET’s Martin Luther King Jr. Day of Service, by Ruth Janisch Lake; 2) Jenga Mwengo, Backyard Gardener’s Network; 3) Ron Bechet, Micah Salkind, and Catherine Michna at the University of Wisconsin Madison’s Thank You reception for their local partners, by Ruth Janisch Lake; 4) Macalester College Bonner Community Scholars learning more about the environmental and human geography of NOLA at the Irish Channel stop on the city tour with Professor Rich Campanella; and 5) Dr. Cheryl Ajirotutu with AC&CD videographers, Hubie Vigreux and Alejandra Tovar, by Ruth Janisch Lake
States with highest foreclosure rates shift
Posted 02/17/2012
December, 2011 unemployment: 9.9% (6th highest)
Home price change (2006Q3-2011Q3): -49% (3rd largest decline)
Processing period: 135 days
2. New Jersey—
2011 foreclosure rate: 6.4%
December, 2011 unemployment: 9% (13th highest)
Home price change (2006Q3-2011Q3): -22.6% (14th largest decline)
Processing period: 270 days
3. Illinois—
2011 foreclosure rate: 5.4%
December, 2011 unemployment: 9.8% (7th highest)
Home price change (2006Q3-2011Q3): -29% (7th largest decline)
Processing period: 300 days
4. Nevada—
2011 foreclosure rate: 5.3%
December, 2011 unemployment: 12.6% (the highest)
Home price change (2006Q3-2011Q3): -59.3% (the largest decline)
Processing period: 116 days
5. New York—
2011 foreclosure rate: 4.6%
December, 2011 unemployment: 8% (23rd highest)
Home price change (2006Q3-2011Q3): -13.6% (23rd largest decline)
Processing period: 445 days
Related articles
- Foreclosure activity edges higher in January (usatoday.com)
- Foreclosures and a Small Sign of Housing Recovery (247wallst.com)
- Foreclosures climbed in January (money.cnn.com)
- Chicago Foreclosure Activity in 2011 Indicates Hot Foreclosure Market in 2012 (prweb.com)
Is There a Wikipedia to Go Dark for Homeowners?
David M. Abromowitz
Senior Fellow at the Center for American Progress
Posted: 02/ 6/2012 5:44 pm
When Congress was on the brink of pushing through legislation that Internet advocates opposed, over four million online signatures were gathered quickly. Congress relented.
Today, millions of American households are poised to benefit directly from the opportunity to reduce mortgage payments, avoid foreclosure, build up some savings, or have a few thousand dollars to spend a little more freely. Yet while even conservative economists believe that easier refinancings will boost the economy and help millions more families — a major part of Congress is ready to say a big, “No, let’s not even try.”
Not a day elapsed after President Obama outlined a more ambitious set of proposals to let average families take advantage of the same low interest rates that have benefited upper income households and large corporations before Speaker Boehner among others declared the idea dead on arrival.
“All [the refinancing plan] does is delay the clearing of the market,” Speaker Boehner told reporters. “As soon as the market clears and we understand where the prices really are — [that] will be the most important thing we can do in order to improve home values around the country.”
Saying millions of families should wait until the “market clears” is the modern equivalent of “let them eat cake.” Clearing the market is an economist’s term for letting the tidal wave of foreclosures continue. But unchecked foreclosures drag down everyone’s home values, let vacant homes pile up in neighborhoods, and force families to choose between struggling to make needlessly high mortgage payments or become another default statistic with ruined credit.
It is time to ask lenders and investors to shoulder some of the burden, and Congress should be taking the lead on this, not finding objections. As my colleagues at the Center for American Progress and I explain in detail, the principles of accountability to avoid more foreclosures — especially for families who haven’t missed payments — is at the core of the administration’s expanded proposal for making refinancing easier.
Families with mortgages, however, are not an easily organized constituency. Unlike the protesters most engaged in social media who were the bulwark of those moved to criticize SOPA and PIPA, borrowers are not necessarily the internet generation nor an easily reached interest group.
But given the politics of “embrace the opposite of what Obama proposes,” homeowners struggling to keep making payments could use a Wiki dark day of their own. And so could the tens of millions of others who live next door, as no neighborhood really wants another foreclosure.
Related articles
- From Bad To Worse: Nevada Foreclosures Only Half Way Done (scoppcanton.wordpress.com)
- Should the Government Help Homeowners With Underwater Mortgages? (usnews.com)
Innovative Projects Integrate Affordable Housing into Asset-Building Strategies
CFED Newsletter: February 2012
There is growing interest across the country from innovative affordable housing providers in integrating asset building and other financial services into their affordable housing programs. As a pioneer and leader in asset building, CFED is being tapped to help structure financial programs and services in affordable housing programs that encourage low-income families to increase their level of financial literacy, improve their access to financial services and build assets.
CFED has long been engaged in one particular niche in the affordable housing marketplace – helping owners of manufactured housing take advantage of factory-built housing’s affordability, while also accessing the opportunity to build wealth in a way that more closely resembles the experience of owners of site-built housing. CFED began broadening its engagement in the housing field in 2011 through outreach and discussion with a number of housing organizations, including several innovative public housing authorities, a HUD Choice Neighborhoods Implementation Grant Awardee and the largest community development intermediary in the U.S.:
- The Cambridge Housing Authority in Massachusetts and the Tacoma Housing Authority in Washington State are both Moving to Work (MTW) participants and national leaders in affordable housing innovation. MTW gives unprecedented flexibility to public housing authorities to innovate. In 2012, CFED will be assisting both organizations with their efforts to integrate financial security programs within their housing programs. Exciting new ideas include efforts to get public housing residents banked, as well as the creation of a student Individual Development Account (IDA) – a special savings account that allows young residents to earn deposits by achieving personal and/or academic goals.
- The Boston-based organization – Preservation of Affordable Housing (POAH) – recently was granted a HUD Choice Neighborhoods Implementation grant for their work in the Woodlawn public housing development in Chicago. CFED is currently exploring numerous ways to assist POAH as they seek to fulfill the promise of the Choice Neighborhoods Initiative. Building on HOPE VI, Choice Neighborhoods seeks to provide support for the preservation and rehabilitation of public and HUD-assisted housing within the context of a broader approach to concentrated poverty that addresses basic services, schools, public assets, transportation and access to jobs.
- CFED continues our engagement with Enterprise Community Partners and is exploring new areas of partnership. Through a recent contract with HUD, Enterprise is working with a wide range of housing authorities on troubled projects, institutions and initiatives. CFED looks forward to working with Enterprise on embedding asset building as part of proposed turnaround strategies.
CFED believes that using housing as a platform for delivering financial security programs and systems has the power to change the trajectory of the lives of low-income families and children. We’re excited about working with such innovative partners in 2012 and are encouraged by the growing acceptance of a more holistic and integrated approach that has implications for a variety of platforms beyond housing.
To learn more about CFED’s affordable housing initiatives, click here.
Related articles
- Assets and the Poor: Twenty Years Later (scoppcanton.wordpress.com)
From Bad To Worse: Nevada Foreclosures Only Half Way Done
Timothy Pratt – Timothy Pratt writes on employment, economic and immigration issues out of Las Vegas, Nevada,
January 31, 2012
Nearly 1 in 7 Nevadans who bought homes between 2004 and 2008 are at least 60 days behind in their mortgage payments or entering foreclosure, according to a new report. That’s almost the same amount that have already been foreclosed on, meaning the state may only be halfway through its housing crisis.
What’s more, only Florida has a higher share of mortgages that are “seriously delinquent” or in foreclosure, meaning Nevada’s unfortunate status as ground zero for the issue may last a while.
Due to the complex relationship between underwater and foreclosed homes and unemployment, this issue goes beyond homeownership itself and is a drag on the overall economy.
The report, “Lost Ground, 2011,” was prepared by the Center for Responsible Lending. It includes state-by-state analyses of mortgages taken on during the height of the nation’s real estate boom and not only looks at their current status, but breaks them down by race, ethnicity and income.
It concludes that “the nation is not even halfway through the foreclosure crisis,” considering that 2.7 million homes have been foreclosed on, but 4 million more are inches from the same end.
In that sense, Nevada is like the rest of the nation; the difference is in the share of mortgages.
According to the report’s interactive map, the top five states in their share of mortgages at risk of foreclosure, are Florida, with 17.4%; Nevada with 13.4%; New York with 9.8%; New Jersey with 9.7%; and Mississippi with 9.6%.
The map allows you to see where the problem might be heading, which isn’t necessarily where it’s been in all cases, as with Michigan, which has been near the top until now, but may fall into the middle in the near future. Nevada has led the nation in foreclosures for some time, so that may remain the case.
Other findings include:
– middle- to upper middle class homeowners are more affected by the housing crisis in boom areas like the Las Vegas Valley; and
– Hispanics and blacks, particularly the former, are more likely to fall behind in payments and face foreclosure.
The center also makes a series of policy recommendations aimed at regulating the mortgage industry and protecting consumers. It seems these ideas may be lost in the months leading up to the elections, as debt and jobs fight for the spotlight and members of Congress fight each other.
Timothy Pratt writes from Las Vegas, Nevada. This story was originally published in his blog, Back to Work. If you would like to contribute as a citizen journalist to The Huffington Post‘s coverage of American political life, please contact us at www.offthebus.org.
Related articles
- Nevada court enforces rule that lenders must have all foreclosure papers (alialawgroupforeclosurenews.com)
- Nevada Foreclosure Filings Drop After Anti-Fraud Law Takes Effect (huffingtonpost.com)
- California, Nevada form alliance to crack down on foreclosure fraud (cnn.com)
U.S. AG Eric Holder, DoJ Head Lanny Breuer Linked To Banks Accused Of Foreclosure Fraud
Image via Wikipedia
(For related Special Report, see )
By Scot J. Paltrow
Jan 19 (Reuters) – U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.
The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.
Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.
Reuters reported in December that under Holder and Breuer, the Justice Department hasn’t brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.
The evidence, including records from federal and state courts and local clerks’ offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.
In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners’ lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven’t responded publicly to any of the requests.
While Holder and Breuer were partners at Covington, the firm’s clients included the four largest U.S. banks – Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co – as well as at least one other bank that is among the 10 largest mortgage servicers.
DEFENDER OF FREDDIE
Servicers perform routine mortgage maintenance tasks, including filing foreclosures, on behalf of mortgage owners, usually groups of investors who bought mortgage-backed securities.
Covington represented Freddie Mac, one of the nation’s biggest issuers of mortgage backed securities, in enforcement investigations by federal financial regulators.
A particular concern by those pressing for an investigation is Covington’s involvement with Virginia-based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been at the center of complaints about false or erroneous mortgage documents.
Court records show that Covington, in the late 1990s, provided legal opinion letters needed to create MERS on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase and several other large banks. It was meant to speed up registration and transfers of mortgages. By 2010, MERS claimed to own about half of all mortgages in the U.S. — roughly 60 million loans.
But evidence in numerous state and federal court cases around the country has shown that MERS authorized thousands of bank employees to sign their names as MERS officials. The banks allegedly drew up fake mortgage assignments, making it appear falsely that they had standing to file foreclosures, and then had their own employees sign the documents as MERS “vice presidents” or “assistant secretaries.”
Covington in 2004 also wrote a crucial opinion letter commissioned by MERS, providing legal justification for its electronic registry. MERS spokeswoman Karmela Lejarde declined to comment on Covington legal work done for MERS.
It isn’t known to what extent if any Covington has continued to represent the banks and other mortgage firms since Holder and Breuer left. Covington declined to respond to questions from Reuters. A Covington spokeswoman said the firm had no comment.
Several lawyers for homeowners have said that even if Holder and Breuer haven’t violated any ethics rules, their ties to Covington create an impression of bias toward the firms’ clients, especially in the absence of any prosecutions by the Justice Department.
O. Max Gardner III, a lawyer who trains other attorneys to represent homeowners in bankruptcy court foreclosure actions, said he attributes the Justice Department’s reluctance to prosecute the banks or their executives to the Obama White House‘s view that it might harm the economy.
But he said that the background of Holder and Breuer at Covington — and their failure to act on foreclosure fraud or publicly recuse themselves — “doesn’t pass the smell test.”
Federal ethics regulations generally require new government officials to recuse themselves for one year from involvement in matters involving clients they personally had represented at their former law firms.
President Obama imposed additional restrictions on appointees that essentially extended the ban to two years. For Holder, that ban would have expired in February 2011, and in April for Breuer. Rules also require officials to avoid creating the appearance of a conflict.
Schmaler, the Justice Department spokeswoman, said in an e-mail that “The Attorney General and Assistant Attorney General Breuer have conformed with all financial, legal and ethical obligations under law as well as additional ethical standards set by the Obama Administration.”
She said they “routinely consult” the department’s ethics officials for guidance. Without offering specifics, Schmaler said they “have recused themselves from matters as required by the law.”
Senior government officials often move to big Washington law firms, and lawyers from those firms often move into government posts. But records show that in recent years the traffic between the Justice Department and Covington & Burling has been particularly heavy. In 2010, Holder’s deputy chief of staff, John Garland, returned to Covington, as did Steven Fagell, who was Breuer’s deputy chief of staff in the criminal division.
The firm has on its web site a page listing its attorneys who are former federal government officials. Covington lists 22 from the Justice Department, and 12 from U.S. Attorneys offices, the Justice Department’s local federal prosecutors’ offices around the country.
As Reuters reported in 2011, public records show large numbers of mortgage promissory notes with apparently forged endorsements that were submitted as evidence to courts.
There also is evidence of almost routine manufacturing of false mortgage assignments, documents that transfer ownership of mortgages between banks or to groups of investors. In foreclosure actions in courts mortgage assignments are required to show that a bank has the legal right to foreclose.
In an interview in late 2011, Raymond Brescia, a visiting professor at Yale Law School who has written about foreclosure practices said, “I think it’s difficult to find a fraud of this size on the U.S. court system in U.S. history.”
Holder has resisted calls for a criminal investigation since October 2010, when evidence of widespread “robo-signing” first surfaced. That involved mortgage servicer employees falsely signing and swearing to massive numbers of affidavits and other foreclosure documents that they had never read or checked for accuracy.
Recent calls for a wide-ranging criminal investigation of the mortgage servicing industry have come from members of Congress, including Senator Maria Cantwell, D-Wash., state officials, and county clerks. In recent months clerks from around the country have examined mortgage and foreclosure records filed with them and reported finding high percentages of apparently fraudulent documents.
On Wednesday, John O’Brien Jr., register of deeds in Salem, Mass., announced that he had sent 31,897 allegedly fraudulent foreclosure-related documents to Holder. O’Brien said he asked for a criminal investigation of servicers and their law firms that had filed the documents because they “show a pattern of fraud,” forgery and false notarizations.
(Reporting By Scot J. Paltrow, editing by Blake Morrison)
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- MERS Settles, Avoiding Class Action Foreclosure Fee Lawsuit (mainstreetresolutions.com)
CIN Alert for January 12, 2012: 2011 Year in Review
CIN Alert for January 12, 2012
From the Editors: 2011 Year in Review
At each year end a favorite task for many editors is a look back at top stories of the “old” year” and in the early days of the new year sharing some highlights with readers. The choice of news items to highlight is usually sharpened as events throughout the past year put things in perspective, as to importance or “passing fad” items. Here are some of the hot issues of 2011 as your CIN editors saw them at the time.
How did we do in our trend-spotting? Send us your thoughts – and candidates for top stories of 2011. And what do you think the top stories of 2012 will be – let us know!
To start a look back at 2011: If you were keeping a scorecard on fiscal and housing issues during 2011, you would have needed extra paper and pencils (or in today’s world, lots of changes on those Excel spreadsheets).
The year was certainly filled with housing and economic news, including many twists and turns, as the US and global economies continued to struggle in an attempt to rise from the nagging Great Recession. (Still a top story for most of us in 2012).
The impact trickled down to virtually every household, every wage earner and every business during the year, and your CIN editors continued to provide timely information on a variety of important related subjects. Like Dave Letterman of late night fame and others, we have a Top 10 list of 2011 news and trends we will share with you over the coming issues of the newsletter.
Here is our choice for the top two trends of 2011 as we look back at our CIN Alert archives.
Hot Topic #1 – Is the American Dream Becoming a Nightmare?
As we brought the news in the issue of July 18, 2011. The day was perfect for early June: a bright blue sky, temperatures in the mid 80‘s and about 120 friends and family gathered around a village gazebo in the Southeast as Mike and Meredith tied the knot. There was just one thing wrong: the couple, who had dated for five years, recently learned that their plan to buy their own home a few months after they were married may be unraveling due to a proposed rule change by the federal government.
“The end of the American Dream as we know it may be near for millions of working families” said John Taylor, President & CEO of the National Community Reinvestment Coalition (NCRC). “At a time when our economy is fragile and our housing values have plummeted along come the regulatory agencies with a solution that will limit access to mortgages for millions of families. If regulators move forward with the current plan, it will block homeownership for millions of Americans, who will find themselves being punished for the mere fact that they are not wealthy.”
The plan which John Taylor referred to was a proposal regarding the definition of a Qualified Residential Mortgage which would require 20% down payments to get a loan. For young people like Mike and Meredith, with a modest income and minimal savings, there is no way they could come up with the $60,000 needed for the $300,000 home they’ve had their eyes on.
These are the type of critically important issues CIN editors explore every day in our Housing Section. For as long as our nation has existed the dream of homeownership has been a primary motivating force for individuals and families. Thanks to far-sighted public sector programs – such as the GI Bill for returning WWII veterans, federal tax deductibility for mortgage interest, and FHA or other government guarantees of mortgages – the rate of homeownership has now passed the 70 % mark in the United States.
In theory, everyone today who earns a salary should be able to buy a home of his or her own. However the impact of the recession combined with the proposed down payment rule change could place first time homeownership in jeopardy for millions of families. CIN stays abreast of this and many other housing-related issues with fresh new material and updates posted every day.
Hot Topic #2: How’s Business Down on Main Street?
In the issue dated August 1, 2011 we brought you news of small business. Sharon had always dreamed of owning her own small furniture store. Her parents had owned and operated a hardware store downtown for three decades, and she had plenty of retail experience, good and bad, helping them out as she grew up. However, upon graduation from high school, Sharon decided to major in education, eventually landing a teaching job at a nearby high school.
Even though she had a successful 12-year run as an English teacher, her desire to own a store never completely went away. It was at the high school’s graduation awards ceremony four years ago when one of the parents told her they were looking to sell the small furniture store they operated in a community about 15 miles away.
Sharon had been able to save up some money while teaching, plus as an only child, she had received a significant portion of her parent’s estate. She viewed this as a once in a lifetime opportunity. If she could cobble together the needed funds, she would buy the store, tidy up the building and focus on selling the type of furniture the big stores often ignored.
Three years later, her Main Street business is doing quite well, even in the midst of the economic recession. Meanwhile, Rod’s carpet shop across the street shut its doors for good last year, and Larry, the jeweler next door, is barely getting by. These are tough times, to be sure, but Sharon is a very hands-on owner, with extensive knowledge about every aspect of the business.
Is her success story the exception rather than the rule? Maybe not. According to a recent study, women owned small businesses are faring better than those owned by men. Findings indicate that, this past quarter, women-owned small businesses seem to be rebounding faster out of the recession than those owned by men.
CIN presented this article prominently in our Small Business Section — the place where such news, information, research and perspective can be shared to benefit local communities and our precious hometowns.
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What developments and issues will be in focus as we enter the year 2012? None of us know for sure, but you can be certain that CIN will be here to present pertinent news, commentary and trends for you 24/7!
What were your top stories for 2011? Please let us know – and while you are thinking about it, what might the 2012 top stories be? What trends are you watching?
Building Community, One Household at a Time 