Foreclosure Relief Under the Obama Administration

April 16, 2010Goldman School of Public Policy

Kevin SteinCalifornia Reinvestment Coalition

Outline: Foreclosure Related Issues• Context – surveys, Redlining report• HAMP• Tenants – PTFA• Whats Left/Needed:–Judicial Modification–Financial Regulatory Reform – CFPA–CRA Modernization–Protest

Banks Not Helping Borrowers: CRC Statewide Survey Findings

• Foreclosure most common outcome• Loan modifications - rare, short term• Principal write downs - rare• Obama Plan–Servicers aren’t working w/ borrowers–Disparate outcomes??!!!

From Foreclosure to Re-RedliningCRC Report February 2010

From Foreclosure to Redlining Report: CRC 2010

• Redlining • Steering/Predatory Lending• Concentrated Foreclosures• Inadequate and Uneven Loan Modifications• Re-redlining

Foreclosure Filings by Neighborhood: Oakland 2008

Loan Mods to REO Ratio: Worse in CA Cities Than US

California Reinvestment Coalition: From Foreclosure to Re-Redlining

Monthly E mpty Homes v s . L oans Modified: S ample S ec uritiz ed L oan P ools Dec 2008-Nov 2009

0

5

10

15

20

25

R E O per Mod 6.77 21.87 11.38 15.69 9.38 8.19

US Oakland S ac S toc ktonL os

AngelesS an

Diego

Prime Loans Shift to White NeighborhoodsCalifornia Reinvestment Coalition: From Foreclosure to Re-Redlining

C hang es in the Dis tribution of P rime L oans in Oakland Neig hborhoods : All L enders 2006-

2008

0

10

20

30

40

50

80% or moreP OC

79.9% -50%P OC

49.9% -20%P OC

19.9% -10%P OC

% P

rime

Lns

2006

2008

Making Home Affordable Plan

1. Home Affordable Refinance2. Home Affordable

Modifications3. GSEs to Lower Interest Rates

Home Affordable Refinance

Predicted to help 4 to 5 million BorrowersMay have limited impact in CA:• Must have GSE owned or guaranteed

loan• Must be current• Must be less than 105%, later 125% LTV• Who fits this category?

Home Affordable Modifications

• Predicted to help 3 to 4 Bs• $75 Billion to incent servicers, investors, Bs• For owner occupants and 1st lien loans• Target 31% income for front end ratio• Must pass net present value test• Incentive to work with borrowers at-risk

HAMP #s March 2010Source: The Atlantic

,

HAMP: CRC Critique• Poor performance – 200,000 permanent mods• Not mandatory • Pays servicers to do what they should do• Principal reductions not a part, but..• Not much help for unemployed, but…• Little transparency – npv test, denials, but…• No meaningful way to appeal, but…• Race data collected, not public, but…• No enforcement, accountability, (no but)

Bankruptcy Cramdown: Judicial Modification

• Could have helped 600,000 borrowers directly• Would give borrowers leverage• Passed the House, Killed in Senate• Senator Durbin –

–the bankers “frankly own the place (Congress)”

• Where was the President? (in his platform)

CFPA

• Agency to protect consumers• No regulatory race to the bottom – Ex. OTS• Strong proposal by President• Strong opposition from industry• Key issues– Rule making and enforcement authority– Where does it reside?– Exemptions

Community Reinvestment Act Modernization

• CRA is the one law that works!• Paying More for the American Dream III study– CRA lenders more likely to make prime loans

• But CRA needs to be strengthened– Include race, not just income– Include all areas where loans are made. Ex: CW– Report data on which banks are helping– Cover mortgage, insurance, Wall Street firms– Don’t dilute public input!