Progress and Peril on Home Opportunity

Dramatic developments this month have underscored our nation’s progress, as well as our continuing peril, when it comes to Home Opportunity—the deeply held American ideal that everyone should have access to an affordable home under fair conditions. These developments, both positive and negative, should inform the national choices ahead, including in the presidential race.

On July 11th, California lawmakers enacted the groundbreaking California Homeowner Bill of Rights, halting unfair bank practices that have forced thousands of Californians into foreclosure. Among other protections, it restricts “dual-track” foreclosures, in which lenders preemptively foreclose on homeowners who are in active negotiations to save their homes. Importantly, the law also empowers consumers to hold lenders accountable in court.

Just a day later, the U.S. Justice Department announced a landmark settlement of lending discrimination charges against Wells Fargo. The settlement provides $125 million in compensation for borrowers who the Justice Department says Wells Fargo or its brokers steered into risky and expensive subprime mortgages, or charged higher fees and rates than white borrowers, solely because of their race. The discrimination “resulted in more than 34,000 African-American and Hispanic borrowers paying an increased rate for loans simply due to the color of their skin,” according to Deputy Attorney General James Cole.

The Wells Fargo agreement builds on an earlier Justice Department settlement—the largest ever—against Countrywide Financial Corporation for racial discrimination that included a widespread pattern of discrimination against qualified African-American and Hispanic borrowers in mortgage lending.
And on July 20, the Justice Department asked a judge to compel New York’s Westchester County to provide information on local zoning practices that might be racially discriminatory. This was a long-overdue step, since Westchester has consistently flouted the terms of a historic fair housing settlement it agreed to three years ago after decades of fostering neighborhood segregation.

These are important developments that, together, help to address the harm that years of lender misconduct and lax rules and enforcement have done to millions of American homeowners and our larger economy. They are making a difference, with the number of Americans facing foreclosure activity declining 11 percent in the first half of 2012, compared with the same period last year.

But much more is needed. Over one million homes and properties still saw foreclosure filings in the first half of this year. That’s hundreds of thousands of senior citizens losing their economic security, children and families disrupted, neighborhoods blighted with vacant properties, lifetimes of economic security destroyed.

And the financial institutions that wrecked our economy have continued their misconduct in different forms. This week, for example, JPMorgan Chase agreed to pay $100 million to settle a lawsuit filed by its customers accusing the firm of improperly increasing minimum payments on borrowers whom they knew could not afford to pay more, generating ill gotten income from the resulting late fees. This, after JPMorgan gambled and lost its clients’ money to the tune of at least $5.8 billion.

And after the British bank Barclays settled with U.S. and British regulators for $453 million, admitting to manipulating the London interbank offered rate, or Libor (a benchmark that underpins hundreds of trillions of dollars in contracts), over a dozen additional banks are now being investigated for similarly rigging exchange rates on international markets.

It’s time for Home Opportunity—American homeownership, fair lending, fair housing—to return to the national debate. That has begun, with the rise of Home for Good [1], a national campaign driven by people and organizations throughout the nation concerned about the enduring foreclosure and housing crisis. That effort is equipped with clear, practical solutions, in the form of a Compact for Home Opportunity [2] developed by housing, lending, and consumer protection experts around the country.

With the presidential contest now in full swing, it’s time for the candidates to take a stand on this crucial economic and moral issue. President Obama has taken important steps, yet he’s avoided some of the most bold and effective remedies that are available to him. Governor Romney has been mostly silent on what his Administration would do to restore Home Opportunity. It’s time we demanded clarity and commitment from each of them.