This February marks the one-year anniversary of the $25 billion national mortgage settlement made with the nation’s five largest mortgage servicers: Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial. Since then, the banks have barreled through their obligations at a rapid clip, leaving us with some concerns.
To explore the settlement’s progress, the Alliance for Stabilizing Our Communities, a partnership between the National Council of La Raza, the National Urban League, and the National Coalition for Asian Pacific American Community Development, hosted a summit featuring Joseph A. Smith Jr., an independent monitor of the national mortgage settlement.
On the heels of the monitor’s third report released last week, this summit examined how the national mortgage settlement has been implemented and the ways in which it has affected communities of color.
Families from across the country shared their personal stories of trying to remain in their homes (see video). This conversation revealed troubling questions about the extent to which communities of color—those hit hardest by the housing crisis—receive relief through this settlement.
When announced last year, the $25 billion agreement held promise that families across the country would see relief. Indeed, it was a major victory for struggling homeowners who had fallen victim to predatory lending and wrongful foreclosures. But one year later, the gaps in the implementation of the settlement are becoming clear.
Although the servicers have extinguished many second liens, which will help stabilize some households, serious concerns remain about the large number of short sales being credited as principal reduction. Short sales are not a home-saving solution and fall short of our expectations of the settlement.
There has been little transparency regarding where the settlement funds are being spent and whether relief is truly reaching the hardest hit, including communities of color, which were most targeted for predatory lending.It has been difficult to get answers to many questions:
- How are the servicers determining the principal reduction amount or the current value of the home?
- How can homeowners obtain information about whether they qualify for principal reduction?
- How successful has the national mortgage settlement been in keeping low- and moderate-income families in their homes?
The settlement, along with the recent shuttering of the Independent Foreclosure Review in favor of a settlement with 14 servicers and the Office of the Comptroller of the Currency, have reminded us that we need to push harder for higher standards, equitable relief, and more rigorous enforcement.
Future settlements and relief packages will be judged by the extent to which they can truly reach struggling homeowners. Any settlement should include data collection on fair-lending metrics, a public reporting component, more transparency from the servicers in terms of who qualifies for principal reduction, and other foreclosure mitigation strategies that will keep borrowers in their homes.
Future settlements should direct the banks to provide relief in the ZIP codes hit hardest by predatory lending, publicly disseminate the geographic and socioeconomic breakdown of who is receiving relief, and share what criteria banks are applying when determining which homeowners would receive principal reduction offers.
All of these components must be delivered through sophisticated and deliberate outreach.
Every day, more Americans join the ranks of those who have lost their jobs and will lose their homes to foreclosure. Such experiences are often concentrated in communities of color.
Despite this reality, our national leaders and mortgage-market players continue to rigidly follow the status quo—if not in word, certainly in deed. Our families need a robust and thoughtful solution that reaches all households. We expect and deserve more.
The housing crisis must be resolved not just for the sake of hardworking families, but also because the full recovery of our economy depends on it.
About the authors: Janet Murguía is president and CEO of the National Council of La Raza, the largest national Hispanic civil rights and advocacy organization in the United States; Marc H. Morial, former mayor of New Orleans, is president and CEO of the National Urban League; and Lisa Hasegawa is executive director of the National Coalition for Asian Pacific American Community Development and serves on the board of the National Low Income Housing Coalition.