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Florida Mortgage Bankers Push to Undermine Foreclosure Mediation, Call It ‘Homeowner Relief’
Our guest blogger is Andrew Jakabovics, the Associate Director for Housing and Economics at the Center for American Progress Action Fund, and Alon Cohen.
The Florida Bankers Association has been pushing hard in that state’s legislature for passage of the cynically named Homeowner Relief and Housing Recovery Act. The Act is pure doublespeak; it speeds up foreclosures, reduces the homeowner’s involvement in the process, and circumvents Florida’s burgeoning foreclosure mediation program and replaces it with an optional informal meeting of the parties. Luckily, the bills have been tabled for this session, but homeowners, housing counselors, and community advocates — who have all vociferously protested the bill — should expect them to reappear.
Attempting to Move Foreclosures Outside the Court
The Act seeks to radically change the foreclosure process in Florida, which is currently a judicial foreclosure state, meaning servicers must file a case in court to foreclose on a property. This gives homeowners the opportunity to appear, present evidence, and – most recently – negotiate with the servicer in a mediation session. The Act would create a new option in Florida – nonjudicial foreclosure, in which the servicer sends notice to the homeowner that it is foreclosing on the property and can do just that around 90 days later.
Worse, even before they actually take possession of the house, the new law would allow servicers who wish to sell the foreclosed property at auction or to market it for sale on the open market to enter the property and put up a “FOR SALE” sign or its equivalent.
Homeowners could shift the foreclosure back to court by submitting a request within 45 days of receiving the notice of sale, but there is solid evidence that opt-in programs reach far fewer people than opt-out ones. (Under the current judicial process, a borrower can opt-out by simply failing to appear in court.) Philadelphia’s foreclosure mediation program sees a participation rate of 75 percent while Connecticut’s program, saw participation rates of 36-39 percent while it was opt-in. (They have since changed to automatically schedule mediation sessions.)
Circumventing Foreclosure Mediation
Moving foreclosures outside the court system would also circumvent Florida’s newly-unified foreclosure mediation program. In late December 2009, the state Supreme Court issued an order requiring all judicial circuits to implement automatic foreclosure mediation programs, based on successful programs in Miami-Dade, Okechobee, and Okaloosa counties. Since May 2009, parties in over 2,000 foreclosure cases have reached settlements that keep Miami homeowners in their homes.
Under the new regime, the parties receive notice of a scheduled mediation when the case is filed; the homeowner may appear with an attorney or housing counselor, and the servicer must have available a representative ready to make a deal. The $750 cost is borne by the servicer. As in any mediation, the parties are just required to meet, not to settle. Settlement is only appropriate if it is in the best interest of both parties.
The Act replaces this with an informal meeting. Under the Act the servicer must schedule an informal meeting if the homeowner requests one. The meeting conditions fall far short of mediation:
• Face-to-face negotiations are important for creating successful outcomes, but the new law would allow the meeting can take place by phone “or other reasonable means,” with the decision left up to the servicer.
• In mediation, the servicer must make available a representative with authority to agree to settlement terms. In this meeting, the servicer’s representative must have only the “authority to terminate the foreclosure if the representative determines that there is no legal basis for foreclosure.” Settlement is not mentioned.
• In judicial foreclosure, the servicer – as plaintiff – bears some of the responsibility to provide financial documentation necessary for settlement negotiations. The Act places this burden squarely on the homeowner, who must provide documentation and prove to the servicer the grounds for a forbearance or modification.
There is No Homeowner Relief in This Act
With a name this promising, we were hoping to find legislation that could help Florida’s homeowners land on their feet while netting maximum value for servicers. Instead, we found Florida Bankers Association pushing an Act that speeds up foreclosures, limits or removes homeowners’ participation in the process, and seeks to circumvent Florida’s recent efforts at proven foreclosure relief through mediation, the better to relieve Florida residents of their homes.
It is April 12, 2010. Having just returned home from my morning dog walk, I replayed my messages. A voice identifying itself as representing my lender called. The man on the end of that voice takes little time in informing me that the documents that my lender requested earlier for consideration of a loan modification are all in.
We have been going through this dance the last few months where my lender requests a list of documents. I respond by supplying those documents and then check back with the lender days later. It is then that my lender requests either a different series of documents or summarily informs me that they did not receive the documents already requested and sent. It is a dance that provides more time, but that also creates inordinate angst in that I have no sense of where my home loan and my life and living space are headed.
As I listen there is a downturn in his tone as he speaks and informs me that though I have complied with all of their requests, the fact that I filed no federal taxes over a period disqualify me from continued consideration for a loan modification. He continues that he has read my explanation and appreciates that my father, sister and partner have died, all in a very short period. But he then concludes that these conditions carry no weight in the decision to disallow the continued consideration of my loan modification. I reflect that this is odd because if my lender knew that they would not accept explanations as to non- compliance, then why ask for the explaining document in the first place? Others farther along in this process have told me that this process by the Obama/Geithner cabal is not seriously focused on helping the public counter the excesses of the business community.
“Had Arabs or Chinese investors moved to blight the American housing landscape with policies creating massive foreclosures and displacing our friends and neighbors, citizens would have locked and loaded their Second Amendment granted weaponry with more than tea bags and the surrounding philosophy. Why then has there been no outcry when banks have done the same thing?”
My thoughts immediately return to the notion that the Troubled Asset Relief Program (TARP,) forwarded by the Obama Administration, was not given the teeth necessary to “buy down” mortgages or eliminate them altogether. This seems glaringly and frustratingly peculiar since those loans have already been paid for. America's bailout of the banking system paid for my mortgage and all the other “toxics” that are out there. The federal government located and released those funds in record time. The rationale was that the nation would suffer irreparable short-term damage, as the nation's options were sorely limited. It also saddens me that the man that many African-Americans revered and pushed so stridently to the White House functioned as any other non-African-American would have done showing no particular compassion or appreciation for the lowest rung of the public once in office. It becomes clear to me that the President did what the business community told him to do.
Of course I am unhappy with a nation that touts its virtues while acting altogether diametrically opposite to its ethos. Meanwhile families are moved from their homes to live in cars and in the streets. Homelessness has become faire that should never be the side dish, much less the staple of an evolved society and the home of the richest nation in world history. My family's personal legacy thus amounts to nothing as some anonymous guy with an education that comes nowhere near my own and a workload the size of Wyoming, makes life and death decisions about my time and place on this planet. And his decision is all based on whether some investor group gets a windfall increase on an undeserved return at my expense. I wonder if Wachovia, my bank recently taken over by Donald Stumps at Wells Fargo, knows that both my parents have been recently nominated for the Congressional Medal of Freedom Award. Even a nomination for the nation's highest award should be worth something…no? Then I realize that dead Black patriots don't pay mortgages or taxes. It is all so surreal.
But first things first! There is some backdrop that should be shared here. There is a history that helps bring us to this point and some of that history should be shared here. Much of this nightmare began when I was forced to seek a loan on a home that my family had already owned. Months before, I had used monies received from my sister's having passed on to pay off the remaining mortgage on this home. We had lived in the home since its first having been built thirty plus years ago. We are the only family that has ever occupied this space.
My mother died here, my sister, love Lori and father, all dead now, had lived and loved and laughed here for more than thirty years. I had just spent nearly three hundred thousand dollars refurbishing the property in hopes of selling it and using the revenues to initiate an international children's literacy project. And all this history and future were being terminated by an anonymous voice on the other end of the telephone. But earlier still there had been another telephone call to help initiate these proceedings.
Two plus years earlier, the shock was chilling when I finally understood what was being said. The voice at the other end of the telephone had just informed me that the fifty thousand dollars that I thought was being held in an account was not available to me after all. Recognizing that the Bush Administration was coming to an end and like Bautista in Cuba, they were about to gut the national treasury before they left, I desired to repair and then sell our home. I reluctantly took out a loan to “bridge” returning our family's investment. My plan was to sell the home and purchase something less expensive in another region of the nation. The excess return would be used to buy books for children in America and countries around the globe.
Texas housed several opportunities to extend my efforts towards promoting international literacy for children and I knew that this window of opportunity was closing. Upon taking out an Adjustable-Rate Mortgage (ARM) I had understood that as a condition of my loan, I could still retrieve monies for emergent situations. I still had a repair or two to effect on my refurbished home before placing it on the market. It was the Fall of 2008 and the deaths of my sister, my deceased love, my parents and my dog's had all taken their toll. I was reeling but thinking clearly and acting responsibility.
I'd been forced to stop work as a realtor and business consultant to take care of the business associated with those who had passed on. The “Gatlin” rapid fire of death in my family had forced my accommodating the issues of one death after the other. I had never been allowed any adequate personal healing–coming to grips–period. I was dangling in this netherworld where I could find no income to stave off this newly looming catastrophe while becoming catatonic at my lender's having reneged on its commitment to supply me with the promised capital to repair, sell and save my home. I felt like the woman who returns home to find that her boyfriend, who made his getaway in her car, has robbed her. The thought was sickening.
“Since before the New Deal, property has been considered a sacred right of Americans but today, the right of the poor to own a home is constantly challenged by conservative business interests.”
Months earlier I had contacted my lender to suggest ways to avert this calamity. Their various representatives were everything from commiserative to quietly hostile but there existed no mechanism whereby I might input ideas to help save people's homes. They made it harshly clear that the bank was not interested in any methodology that I might offer to save homes. I was not an employee of their system at a level high enough to warrant being listened to. The bank Vice-President that I continued to contact became weary in telling me that they just weren't interested in anything that I might have to offer relative to my loan or anyone else's. They had committed to their “lack of consummate plan” and going to honor it. Had I sent thirteen more correspondences, it would not have mattered.
I had worked out several options focused at saving mortgages for people. One involved the eventual “buy down” now being explored by the Bank of America. It was odd to me that ideas that I came up with, without being an economist, eventually would become policy even though the very banking institution that I was attempting to work with would not embrace my offering. It became clear to me that the deal the Obama Administration made with the receding Bush Administration in taking office involved maintaining the status quo and offering no options that would truly remove the tightening fiscal tourniquet from the throats of the American people. No, the banking system had the eight year old by the throat and was not going to let him up.
Tearing at me was a great sense of failure. My father had been one of the eleven individuals responsible for introducing to the world the final incarnation of the electronic computing device. Yes my dad was one of those people who brought to the world the computer in 1953. He had also been a member of the team that helped Chuck Yeager topple the sound barrier in 1947. For her part, the United Nations, Holland, France, Germany and the City and County of San Diego had acknowledged my mother posthumously for her international efforts for children in education. These were august achievements for any family. And the loss of the only remaining symbol of that achievement certainly weighed heavily on me as my gambit to swap our legacy for the children's future was blowing up in my face. My life was quickly becoming a microcosm of how someone else's miss-managed derivatives were evolving into my own nightmare.
Recently, Conservative voices have pushed that home ownership is not a right and that all Americans should not be allowed to believe that they have a right to such ownership. It is instructive that the overly vocal right wing Conservatives on the one hand, usually the clarions of personal rights, would tell those less advantaged what rights they do not have. It was my impression that all not expressly given to the federal government belonged to the states. Do I have a right to live in a home in Texas but not in Oklahoma?
I would argue that the “pursuit of happiness,” though admittedly more accessible through the mobility of an automobile, cannot be achieved without the right to a safe living space for families and individuals. Our housing and lending practices are all so very predatory in this nation. The founding fathers would never have assented to that. They formed their ideas about nationhood long before Adam Smith and John Maynard Keynes were heard murmuring in the halls of academia. Both those gentlemen were attempting to devise and rationalize a “moral” lexicon for the fair distribution of goods and services. Nothing that modern banking does even closely approximates what Smith and Keynes were attempting. The founding fathers certainly would never have condoned banking returns on investment taking precedence over shelter for children and families. It is only the most distorted of thinking that forwards this philosophy.
So much for the primacy of allowing the news value of events to determine the news!
And the Fourth Estate has been frighteningly complicit in not carrying out its mandate on this issue. The New York and Washington based periodicals especially, have waved their owner's banners of ideology, while abdicating responsibility relative to truly informing the public of its options. A democracy cannot exist without informed decisions or a populace that can make sense of that information. It was becoming clear with each refusal that not only are there no free lunches, but that there are no free refills on drinks either. And even your coffee is served with ice in it–no substitutions!
So in a nutshell, here is my take on the current foreclosure process in America. First, the banking system now in place should have been told by the federal government that they would henceforth be monitored with a whole new set of guidelines and oversight. The forces that caused this national and international meltdown are still in place and show no signs of being corrected soon. Secondly, those banks should have been informed that, both by Presidential edict and Congressional law, they would themselves be responsible for the loss in value to homes now depreciated in the marketplace. Acquiescing to the investor bypasses the reality that the American people are the first “investors” to be paid when the banking industry's malfeasance is responsible for the destruction of their economy. Any banking institution unwilling to abide by that edict should have been suspended from banking practices in America for a ten-year period.
Third, a moratorium should have been imposed on all investment having to do with federal dollars and any concessions to the banking industry. All banking rules and laws should have been suspended with the advent of a new form of “fiscal martial law.” Fourth, the electronics industry should have been encouraged to do what “Google” and the like are already doing. What's wrong with the advantages that can be had through “CLOUD” banking? We could streamline much of the 'fiscal fat' with just a little creative input. My doctoral work was at both Northwestern University and at the Massachusetts Institute of Technology and I know freshmen that could positively change banking in less than a semester.
Though most Americans cannot conceive of it, they are in a mortal battle with business interests for their very souls. They are in a life and death struggle for the futures of their progeny and they substitute fluff for substance, tea parties for the revocation of licensure of the banking industry and elimination of several rogue business practices.
Some forty years ago in San Diego, California, one of the ship builders there decided to show its clout by paying off its labor force in silver dollars. The company flooded the San Diego economy with hard currency and that lesson has not been lost on city government officials in San Diego yet today. The banking/investment community in America just beat up your eight year old. And they are now daring you to say anything about it as they go after your toddler.
As for me, my age (not my inclination) represents that portion of the demographic that will take a beating and do nothing about it. The data clearly show that above seventy-five years of age is the best place to clear them out, but the repercussions of putting granny out of her home might be more than are a banker's preference. No, the forty-five to sixty-five year old set is not known for any activist politics. They will however drive their motor homes down the road to the next cookout to protest taxes and the lack of steak fajitas with their chicken at the barbecue this weekend. The Wells Fargo Stagecoach image comes to mind here except that in the revised image they're not bringing you money.
It should be appreciated that band-aids on a gaping cut will never stop the bleeding, especially when those band-aids are placed on the knuckles of the aggressor who caused the damage in the first place. The Obama Administration could learn much more about civic first aid. As for me, sadly, it will be too late to save our home and legacy; but then again, so much for the audacity of hope.
