Housing Crisis

One in Four US Home Mortgages Under Water

Robert Borosage — Wed, 24 Feb 2010 09:48:22 -0800

Nearly one in four homes with mortgages are under water as of 4th quarter of 2009. In Nevada, a staggering 70% of all mortgaged properties are under water. No wonder Harry Reid is in trouble. They've got to blame someone.

How Mortgage Lending Became An 'American Casino'

Isaiah J. Poole — Tue, 28 Jul 2009 08:09:54 -0700

The roots of the mortgage crisis, and its devastating effects on communities, are explored by Andrew Cockburn, who co-produced with his wife, Leslie, the documentary "American Casino." The documentary details the fraudulent and unethical practices committed by the nation's top financial institutions that have led to record numbers of foreclosures, especially in people of color communities.

Cockburn in this interview says it is critical for Congress to pass a consumer financial protection bill to prevent the practices that led to the current crisis.

"American Casino" will debut in Chicago August 14. Americans for Financial Reform, a coalition that includes the Campaign for America's Future, plans to use the documentary as a teaching and mobilization tool to promote changes in the mortgage lending industry.

The U.S. Chamber of Commerce: Threat To Capitalism

Eric Lotke — Thu, 11 Jun 2009 07:42:23 -0700

The U.S. Chamber of Commerce launched yesterday “a sweeping national advocacy campaign … to defend and advance America’s free enterprise values in the face of rapid government growth and attacks by anti-business activists.”

The Chamber of Commerce doesn’t get it. They aren’t defending capitalism and free enterprise. They are all but destroying it.

Free-market fundamentalists don’t understand that capitalism is a system. It has rules, boundaries and obligations. When those rules are broken, the system falters.

• It’s not football without lines to mark touchdowns and out of bounds.
• It’s not basketball without a referee to call the fouls.

This is more than just a sports metaphor. Capitalism won’t work unless a negotiated price and promise to pay $100 is followed by payment of $100. And someone needs to enforce those rules. Otherwise it's not capitalism. It’s robbery.

These rules operate at every level.

• My AAA bond valued at $100 million actually needs to be worth $100 million, and it needs AAA assurance of quality — not conflicts of interest where companies issuing securities pay the agencies for their ratings.

• My “mortgage-backed security” needs to be backed by an actual buyer with an actual stake in real property — not bankers whose interest is in transaction fees from bundling, re-bundling and sales.

• My tomato should be free of salmonella, my toys should not have illegal levels of lead-based paint, and my pet food should not be infused with toxic melamine.

If nobody enforces those rules, the system starts to break down. That’s what’s happening now.

A generation ago, free-market ideologues decided that markets could police themselves and regulate themselves. They said history had finally invented something that was truly-self correcting. So they took the police off the beat and slandered as socialism every effort to enforce rules or enforce the reliability of promises.

Look at the result. Now we need to save capitalism from itself.

“We’re launching this campaign,” declared Thomas Donahue, President and CEO of the U.S. Chamber of Commerce, “because those who make or influence economic policy must understand that a productive, competitive private sector is not something they can take for granted.”

That’s precisely the point. A productive, efficient private sector is not something we can “take for granted.” It is something we need to fight for.

We need to fight against anti-competitive monopolies, fight against regulatory agencies captured by the industry they are supposed to regulate, and fight against industry groups that break the rules in the name of freedom.

Freedom isn’t free. The crisis interventions of recent months were needed to save capitalism from itself. The Chamber of Commerce got exactly what it wanted these last few years. We need to stop them before they kill again.

Bankruptcy Law Key To Obama's Foreclosure Fight

OurFuture.org Staff — Fri, 20 Feb 2009 07:35:38 -0800

The Truth about the Community Reinvestment Act

Hillary Hampton — Mon, 29 Sep 2008 11:11:27 -0700

Conservative commentators in the Wall Street Journal and the National Review, and on YouTube are spreading the myth that the Community Reinvestment Act, a law designed to eliminate discriminatory banking practices, caused the current financial crisis. In the words of Fox News' Neil Cavuto, “Loaning to minorities and risky folks is a disaster.”

Conservatives have twisted the facts to substantiate their revisionist history. But don’t be fooled: the financial crisis was caused by conservative financial follies and bankers run amok and nothing more.

Myth: The Community Reinvestment Act forced banks to make loans to all low-income families and people with poor credit, fining banks that refused to comply.

Fact: The Community Reinvestment Act has encouraged banks to lend fairly and responsibly for over 30 years. The Community Reinvestment Act does not impose fines; it periodically examines FDIC-backed banks and issues them a CRA-compliance rating. [Community Reinvestment Act] To receive a high rating, banks must meet the financing needs of as many members of their community as possible and must not discriminate against racial and ethnic groups or certain neighborhoods. However, a bank cannot receive a high rating unless it is also maintaing “safe and sound banking practices.” [Community Reinvestment Act] In other words, the CRA requires banks to lend to working-class families and people of color, but only when those people have been deemed credit-worthy.

Myth: The housing bubble burst when too many people with home loans mandated by the Community Reinvestment Act failed to make their mortgage payments.

Fact: More than half of problematic sub-prime loans made in the last few years were issued by banks that are not regulated by the CRA. [U.S. House Committee on Financial Services] The CRA applies only to financial institutions that are insured by the FDIC, but not to independent mortgage companies such as Countrywide. In fact, non-CRA lenders were twice as likely as CRA lenders to issue excessively expensive subprime loans to vulnerable creditors. [Federal Reserve Bulletin] Responsible mortgages made by CRA lenders have a low rate of foreclosure similar to that of traditional mortgages. [Federal Reserve]

Myth: In 1995, Bill Clinton changed the Community Reinvestment Act to allow the securitization of CRA and subprime mortgages.

Fact: The 1995 revisions to the CRA changed only the way in which a bank’s CRA compliance is evaluated; they made no mention of mortgage securitization. [60 F.R. 22156] Under the 1995 rules, banks are rewarded only for making mortgages in their communities, not for re-selling mortgages as securities.

Myth: President Bush and Senator McCain tried to stop the subprime mortgage crisis, but Democrats blocked their efforts.

Fact: Bush and McCain supported the Federal Housing Enterprise Regulatory Reform Act of 2005, which would have created a new government agency to oversee Fannie Mae and Freddie Mac and other federal housing programs. However, the bill would have done nothing to stop the rash of subprime lending that preceded the housing bubble because it provided oversight for only Fannie and Freddie, not for the companies that issued subprime mortgages. [GovTrack]

Housing Construction Falls

Armand Biroonak — Tue, 16 Sep 2008 21:00:00 -0700

The Commerce Department reported that both housing construction starts and permits for future construction fell by more than 6 percent in August. August was the worst month for housing construction since January 1991.

No End In Sight For Housing Slump

OurFuture.org Staff — Tue, 09 Sep 2008 08:03:55 -0700

Even after U.S. Treasury Secretary Henry Paulson placed government-sponsored enterprises Fannie Mae and Freddie Mac under federal "conservatorship" on Sunday, the outlook for U.S. housing prices is poor. Unsold home inventories remain at record levels, and foreclosures are increasing at an alarming pace. There is little sign of stabilization in the housing market. Several factors suggest that housing prices are likely to continue falling into 2009.

Record 1.2 Million Homes Hit By Foreclosure

OurFuture.org Staff — Mon, 08 Sep 2008 08:44:12 -0700

Loans in foreclosure have doubled over the past year, while delinquency rates continue to soar. A record 1.2 million homes were in foreclosure during the second quarter of 2008. That represents 2.8% of all outstanding loans, up from 1.4% of all loans during the same period a year ago, according to a report released Friday by the Mortgage Bankers Association (MBA). And 490,000 of the 45 million home mortgages serviced by MBA members began new foreclosure proceedings. That's up 9% from the 448,000 starts recorded in the previous quarter, and marked the seventh straight quarter that foreclosure starts increased. The delinquency rate, which measures mortgages that aren't in foreclosure but have missed least one payment, also hit a record high.

Dean Striker

Dean Striker — Sat, 19 Apr 2008 15:25:34 -0700

CEO Pay Helped Fuel Subprime Crisis, AFL-CIO Says

Alex Carter — Tue, 15 Apr 2008 08:17:05 -0700

Pay plans for chief executive officers helped create the subprime-mortgage crisis by encouraging companies to take on too much risk for short-term gains, the AFL-CIO said in an analysis.