Friday, February 22, 2008

Detroit Struggle Continues to Stop Foreclosures; Government Weighs Relief Program
Feb. 28, 2008 Page 3

After court victory

Activists fight to stop foreclosures

By Kris Hamel

New statistics confirm the widespread crisis in Detroit and throughout Michigan caused by predatory lending and racist, subprime home mortgages. Wayne County, where Detroit is located, ranked first in the U.S. in 2007 foreclosures.

According to RealtyTrac, a California-based mortgage research company, 4.9 percent of homes in Wayne County are in some stage of the foreclosure process, a figure that is almost five times the national average. Stockton, Calif., ranked second at 4.8 percent while Las Vegas and suburbs, with 4.2 percent of homes in foreclosure, came in third.

The number of foreclosures filed in Wayne County in 2007 was 72,616, a 68-percent jump from 2006. Oakland and Macomb counties, which together with Wayne comprise the metro Detroit
area, had a foreclosure rate of 2.1 percent of households, ranking them 17th among metropolitan areas in the U.s. and nearly double the rate in 2006.

Overall, the state of Michigan ranks third in the country for the highest rate of home foreclosures, with 136,205 foreclosures filed in 2007, or almost 2 percent of all homes. This rate is 68 percent higher than 2006, and a staggering 282 percent over 2005.

Michigan Gov. Jennifer Granholm has failed to acknowledge the crisis, even though the state leads the country in unemployment and job losses and has been in a severe economic depression for years due to restructuring, outsourcing, plant closures and attempted union busting in the auto industry.

But grassroots political leadership is stepping up to the plate, taking on the inaction of the government and advocating a program that can provide real relief to Michigan’s working, unemployed and poor people. The Michigan Emergency Committee Against War and Injustice (MECAWI) has been engaged in a struggle demanding the governor declare a state of economic emergency and use her authority under the law to impose a moratorium stopping foreclosures.

MECAWI organizers have opened a broad campaign to popularize the idea of a moratorium and to show the basis for the governor to take such action.

Thousands of people have signed petitions demanding the governor declare a moratorium. Victims of predatory lending and home foreclosures have become involved in this struggle. More and more activists are speaking out and organizing and have received an excellent response from the public.

MECAWI wins in court

Recently the campaign has taken on the reactionary, repressive state apparatus allied with the banks and financial institutions that want to squash this struggle.

MECAWI activists filed a complaint in federal court on Feb. 8 claiming their First amendment rights to free speech were violated by the City of Detroit and the state’s attorney general in December.

On Dec. 13, Michigan attorney general Mike Cox had hosted an “avoid foreclosure” forum at Cobo Hall. More than 4,200 people came to seek relief.

The forum provided dozens of banks and lenders with a forum in which to talk to people and give supposed tips on how to avoid losing their homes. But MECAWI activists were ejected from Cobo Hall when they tried to leaflet and petition the attendees about the moratorium campaign.

The attorney general scheduled another such forum at Cobo Hall for Feb. 12. Jerry Goldberg, a MECAWI organizer and progressive lawyer, argued at an emergency hearing before U.s. District Court Judge David Lawson on Feb. 11 that plaintiffs should be allowed access to the forum attendees.

At the hearing, lawyers for the attorney general and for the city, which owns Cobo Hall, exposed their animus against the campaign for a moratorium on foreclosures.

In his 16-page opinion and order, which ruled in favor of MECAWI, Judge Lawson stated: “The [attorney general] contends
‘[p]laintiffs’ moratorium only delays the issues. It is not a solution. Further, plaintiffs’ position could disrupt the cooperation of the mortgage servicers who are participating voluntarily. Plaintiffs’ position is hostile to the servicers and focuses blame on them.’”

The court wrote further: “[I]t appears from the attorney general’s briefing that its restriction against the plaintiffs’ leafleting is not content-neutral, and limiting the plaintiffs from distributing leaflets violates the First amendment. ... The Court finds that the plaintiffs’ proposed leafleting activity advancing [their] viewpoint and seeking … political action is protected by the First amendment. ... shielding lenders and the public who will come to see them from this viewpoint certainly cannot be a governmental interest…that justifies curtailing speech. ...

“[T]he plaintiffs have demonstrated a likelihood of success on the merits of their claim. The Court also believes that if the plaintiffs lose out on the ability to offer their message to the thousands of attendees, they would suffer irreparable harm.”

The court granted MECAWI activists the preliminary injunction and ordered that the defendants—the city and the attorney
general—be restrained and enjoined from prohibiting MECAWI’s right to leaflet and petition inside Cobo Hall at the Feb. 12
“avoid foreclosure” forum.

MECAWI organizers, buoyed by this legal victory that sprang from their struggle, reported that people attending the forum “grabbed up literature and stood in line to sign petitions.” The following day in Saginaw, Mich., MECAWI activists were allowed to leaflet and petition inside another forum hosted by the attorney general, even though that wasn’t included in their lawsuit and injunction.

Jerry Goldberg told Workers World: “activists felt great taking on the state and actually winning. While none of us holds any credence in the judicial system, and all of us know that the laws are stacked in favor of the capitalists, we felt that this victory was won because of struggle, because we have refused to back down from putting forward a solution to the foreclosure crisis that’s devastating the working class. The government and banks and lenders may hate our campaign, but it resonates with the workers and oppressed who are losing their homes in record numbers.”

Moratorium activists are also taking up direct actions and have begun organizing squads and preparing to defend homes when bailiffs and sheriffs come to foreclose and evict families.

MECAWI has called a demonstration for Feb. 27 at noon outside the HUD office in Detroit at the McNamara Federal Building to call attention to the federal government’s role in paying off banks and lenders, then foreclosing homes and throwing people into the streets.

February 22, 2008

Rescues for Homeowners in Debt Weighed

New York Times

WASHINGTON — Prodded in part by some of the nation’s biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses.

Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s

Administration officials say they still oppose any taxpayer bailout for either people who borrowed more than they could afford or banks that made foolish loans during the height of the speculative bubble in housing.

But with the current efforts to arrest the housing collapse so far bearing little fruit, Washington is being forced to explore new ideas, among them the idea of a federal mortgage guarantee for troubled borrowers.

And policy makers are listening to proposals from industry and community groups to use government funds to purchase and refinance billions of dollars in mortgages now in danger of default.

Many owners are only gradually becoming aware that their homes would sell for less than the debt against them — a phenomenon, said Richard T. Curtin, director of the Reuters/University of Michigan Surveys of Consumers, that is “beginning to weigh on people, making them uncertain and nervous about the future.”

That nervousness is evident across the country, particularly in places like Memphis, a city of nearly 1.3 million people where falling home prices and negative equity are new experiences.

The housing slumps of the mid-1970s and late 1980s were confined to the coasts. The current bust, while leaving some cities relatively unscathed, has cut a far wider path and it comes just when home debt is at its highest level since World War II.

For Stuart B. Breakstone, the problem hit home when he was forced to come to the closing on the sale of his eight-year-old custom-built house with a check for $65,000. The money, out of his own pocket, was to pay the difference between what he still owed on the mortgage for his home and the lower selling price.

Mr. Breakstone, a 42-year-old lawyer, and his wife, Lori, chief of customs agents at Memphis International Airport — who together earn more than $250,000 a year — managed to extricate themselves by paying off the mortgage. But millions of others are trapped in their homes. They have jobs, make their mortgage payments on time, but cannot raise enough cash to cover the shortfall.

Some eventually default, surrendering to foreclosure. But the vast majority — embedded in their communities, their children in public schools, their reputations at stake — wait nervously in hope that prices will bottom and rise once again, eliminating their negative equity and restoring their freedom to sell or refinance.

“People can’t believe this is happening to them,” said Robert Moulton, president of the Americana Mortgage Group in Manhasset, N.Y.

In Washington, it will be difficult to engineer a bailout similar to the one for savings and loan companies in the early 1990s, because Democrats and Republicans alike cringe at the very word bailout and fear a backlash by people who never became overextended.

But with millions of homeowners already underwater and the prospect that millions more may face the same situation, Democrats and Republicans alike are scrambling for ideas to keep people from simply walking away from their homes and to help those struggling to pay their bills.

Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate federally guaranteed loans.

The bank warned that tightening credit conditions were leading to “escalating levels of delinquency and default among borrowers” and “an unprecedented number” of homes that would enter foreclosure.

Administration officials have given the Bank of America plan a cold reception. But the idea is similar to one proposed by Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate Banking Committee.

The Federal Housing Administration, meanwhile, is examining ways to expand its new insurance program, known as FHA Secure, to help people replace their costly subprime mortgages with federally guaranteed fixed-rate mortgages.

Mortgage industry executives have complained that the F.H.A.’s eligibility requirements are so restrictive that the new program has helped only a trickle.

Credit Suisse executives said they have held lengthy meetings with F.H.A. officials and have urged the agency to relax rules that currently disqualify many borrowers.

One idea, company officials said, was to allow borrowers who had simply made six payments during the course of their mortgage to qualify.

Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, has ordered his staff to come up with options for a broader rescue bill. An aide to Mr. Frank said his bill would, among other things, allow the government to buy up at least some troubled mortgages.

A more modest plan is being developed by John M. Reich, director of the Office of Thrift Supervision, the agency that regulates savings and loan companies. His plan, still in rough form, would create a voluntary system under which mortgage lenders would reduce debt and monthly payments to reflect the diminished sales value of a home.

It would take the remainder of the mortgage as a “negative amortization certificate,” a lien that the investor could recoup if the house were later sold for its original mortgage value or higher.

In an interview, Mr. Reich said he hoped that most of the old mortgages would be replaced by cheaper mortgages insured through the F.H.A.

“It isn’t a bailout,” Mr. Reich said. “It is a market-driven solution.”

For Americans caught in a mortgage trap and owing more on a home than it would sell for, consumer spending and confidence are the most immediate casualties, Mr. Curtin reports. But the damage goes deeper.

People cannot move easily to jobs in other cities if they have to sell their homes at a loss. The $168 billion federal stimulus package is likely to be less effective than intended because many homeowners may simply use their government checks to pay down their debts.

Housing prices in Memphis fell by 2.5 percent last year, only the second decline since records began to be kept in 1968, and by far the largest dip, according to Chandler Reports, which gathers this data for Greater Memphis.

The Memphis metropolitan area highlights the larger national trend, with the average first-mortgage debt, at $153,764, edging above the average home price, $152,815, for the first time. And that does not count refinancing and home equity loans, as well as closing costs.

Collie Tuttle, in her early 60s, is caught in this bind. Four years ago, she purchased a newly built four-bedroom three-bathroom house in the Memphis outer suburb of Olive Branch, Miss., for $270,000. She put nothing down, relying on her six-figure income from selling furniture to pay down the mortgage, reducing it to $248,000.

But then she lost her job, and in her next one — also selling furniture, but at lower pay — she is being forced to choose between her home and the rest of her life.

“It was a big mistake on my part to buy this house,” she said. Divorced, with two grown sons, she rattles around in it alone. She had thought the house would add to her wealth.

But now, to sell it for the $269,000 a potential buyer was recently willing to pay, “I would have to come up with $6,000 from my pocket,” Ms. Tuttle said, explaining that she cannot afford to invade her meager retirement account. “All I’m asking is for enough so that I come out even.”

Her house payments and utilities come to nearly $2,400 a month. That is affordable, she said, on her present income. But very little is left over to replace her 11-year-old car, to travel, to pay down her credit card debt, or even to buy new clothes.

“I’m stuck,” she said. “I’ve tried everything and I can’t get rid of this house.”

The reluctance to sell at a loss helps to explain why the number of homes listed for sale in the Memphis area has climbed to more than 13,000 from 9,000 a year ago.

Jane and Kevin Naus, in their mid-40s, have had their home on the market since last May; their attempts to sell for a price that covers their debts are skewing their lives.

Mr. Naus took a job in Greenville, N.C., last March, at a local bank. His wife stayed behind, putting their house up for sale, just a month before prices began to unravel.

But there were no offers at the $239,000 the couple asked for their four-bedroom brick house on a one-acre corner lot, so they gradually cut the price to $220,000, barely enough to cover the $192,000 in mortgage debt and an additional $22,000 in closing costs and broker’s fees. It still did not sell.

Mr. Naus says prices are under downward pressure because of competition from the auctioning of foreclosed homes at bargain prices. There were 5,714 foreclosures in Memphis in 2007. “In our neighborhood alone,” Mr. Naus said, “five houses were sold last September and October, and four of the five were foreclosures.”

Mrs. Naus joined her husband in Greenville in December but he lost his job in January, when his division was shut down. The couple decided to stay in Greenville, to be near the family of Mrs. Naus, who has multiple sclerosis and no longer works.

Her $1,800-a-month in disability pay, however, falls short of the $1,400 in monthly payments on the Memphis house and the $700 in rent for an apartment in Greenville. The Nauses make up the difference with his severance pay, and occasional dips into their savings, which have fallen below $100,000.

“We don’t want to lose the house or cut the price,” Mrs. Naus said, “and end up owing money.”

“Basically,” she added, “we are praying that the house sells before my husband’s severance runs out.”

The Breakstones are similarly in danger of sinking, despite their high income. After forking over $65,000 on the house they just sold, they are struggling with $670,000 in debt on their present, larger home — perhaps more than the house itself is worth.

The Breakstones, each previously divorced, married in 2006, bringing three children to their union. They needed a bigger house than the one Mr. Breakstone had built.

Mr. Breakstone thought that he could sell his other home quickly, but it sat on the market for 17 months and finally brought only $170,000. He covered the shortfall by borrowing against his present home — bringing it closer to being underwater, too.

Now the Breakstones are saddled with $4,000 a month in house payments, and $14,000 more in fixed outlays, including child support, car leases, taxes, consumer debt and utilities, using up the bulk of their income.

“I used to think,” Mr. Breakstone said, “that I would pay the piper later and enjoy life now. I’ve totally reversed that view.”

Edmund L. Andrews reported from Washington and Louis Uchitelle from Memphis and New York.

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