Wednesday, January 23, 2008


The following story below out of Boston is one I'd expect to be seeing replayed more and more. In that city when they came to take a woman's house away due to a bank foreclosure activists, family and friends surrounded the place and physically would not let it happen. The subprime mortgage lender backed down at the 11th hour today and postponed for now the foreclosure eviction.

What is going on across the country with these foreclosures is a crime. The crime, of course, is the predatory lending policies that led folks into the situation to begin with. Policies like the issuance of subprime loans have led to millions of American families losing their homes in the past decade."

Under a subprime loan, customers with low credit ratings are offered mortgages in return for high interest rates. Proponents have advocated subprime financing as a way for low-income residents to own their first home. It's a scam

One of the authors of a two year old study by the University of North Carolina's Center for Community Capitalism entitled, "The Impact of Predatory Loan Terms on Subprime Foreclosures: The Special Case of Prepayment Penalties and Balloon Payments" stated back in 2005, "The study demonstrates that subprime prepayment penalties and balloon payments place Americans at substantially greater risk of losing their homes. Given the significant financial and emotional costs associated with foreclosure on families and neighborhoods, policymakers should take note." Predatory lending is based on "deceptive and in some cases illegal practices to coerce borrowers into unfavorable mortgage agreements," according to the report. "Data suggest that low-income, elderly, and minority borrowers may be especially vulnerable to this type of lending because of their greater susceptibility to 'push marketing,' high-pressure sales pitches, lack of experience with mortgage lending, and urgent need for credit," states the study.

How many reports of mortgage brokers fudging applicants’ incomes on forms or ignoring them entirely—and rushing through approvals on loans that have little prospect of getting paid back have we now read about?

As the Freedom Socialist Newspaper explains, "Enticements include artificially low introductory "teaser" interest rates, "option" payment plans that can be lower than the monthly interest (never mind the principle on the loan) and often result in a borrower owing more on the mortgage than the house is worth, and getting prohibitive penalties for paying off loans early. Such terms can make it nearly impossible for people with Adjustable Rate Mortgages (ARMs) to refinance."

For borrowers, these sub-prime loans seem affordable at first, but then quickly become more than a household can bear.

We didn't need the study to know that. The banks and lending institutions were only too well aware. Mortgage loan companies and banks have made hundred of billions of dollars in profit by preying on people who would otherwise be shut out of the market.

Where was the government that is supposed to protect the people while all this has been going on?

The absence of lending policy regulations pushed forward by those famous "anti-government" conservatives encouraged the predatory lending practices that have left millions of Americans facing foreclosure.

The Daily Press in Newport News Virginia put it thus:
"The current sub-prime mortgage mess is simply the latest wreck on the highway. Banks have been left to their own devices, unchecked by government watchdogs or pesky regulations. Interest rates on millions of mortgages are set to accelerate in 2008. Defaults of $1 trillion are predicted –– affecting not only large institutions such as pension funds, hedge funds and universities but also countless average Americans. Hand-wringing time? Just consider these recent events:

• Moody's and other such agencies have threatened to downgrade the ratings of securities that are based on mortgages that allow accelerated payment.

• To avoid bankruptcy after its stock plummeted because of record-high foreclosures, Countrywide Financial is being acquired by Bank of America.

• Money managers including Bear Stearns and investment bankers Citigroup, Merrill Lynch and Washington Mutual are under investigation for fraud.

• Of the nearly 3 million sub-prime adjustable-rate loans surveyed by the Mortgage Bankers Association, a record 18.81 percent are past due.

What clearer evidence do we need that markets do not regulate themselves? Yet the government response has been mostly timid.

The Fed's recent rules allow action against predatory lenders only on showing a "pattern and practice" of unlawful conduct; disclosures of "yield-spread premiums" –– kickbacks –– can still remain buried in a mountain of loan documents. Prepayment penalties make it nearly impossible for good-faith borrowers to get out from under bad loans. The Bush administration's voluntary mortgage-rate "freeze" will reach fewer than 25 percent of borrowers."

And while the mortagage crisis caused by predatory lending practices does affect people of all colors, there is most certainly a racial aspect involved here as well.

“It’s the ugly geographic pattern that we’ve seen before,” said Paul Collier, the director of litigation for Harvard Law School’s clinical program. “Sub-prime lending is narrowly focused on neighborhoods of color.”

According to Valerie Rawlston Wilson of the Urban League, home equity accounts for nearly 90 percent of black homeowners' total net worth. So as the housing market collapses, much of the trumpeted new wealth that has accumulated in black communities in recent decades will go with it.

Black Agenda Report points out a recent study, titled "Foreclosed: State of the Dream 2008," shows definitively that banks and other lending institutions trapped Blacks and Latinos in predatory lending schemes as a matter of policy. "Even a surface check of the demographics shows," the study says, "that, in city after city, a solid majority of subprime loan recipients were people of color." The very scope of the crime proves that the lending crisis is not the product of Black "culture," but the result of calculated policies, near-uniformly carried out by virtually all of the nation's mortgage lending institutions. This is institutional racism writ large, and indisputable.
And whatever plans (good or bad) are put forth by Presidential candidates, local governments, and Congress don't solve the situation for folks on the ground right now.

Only People Power can do that. Working class homeowners need to organize community committees to demand an end to foreclosures and zero tolerance to throwing families out of their homes. People need to do exactly what was done in Boston and stand in the way of the "law" and the lenders as they attempt to take away their neighbor's home.

It's time folks that we stand up and stay "Screw this crap." It isn't working folks who ought to be paying for this mess. Make those truly responsible, those who have made millions off our backs for so long now, pay for the hole they've dug and put so many working Americans in.

The following is from WBCV (Boston)

Mother Works To Save Dorchester Home

BOSTON -- A Dorchester mother fighting to keep her home received a reprieve Wednesday from an eviction deadline with the support of many local groups.

NewsCenter 5's Gail Huff reported that protesters created a human barricade around the front door at 26 Semont Road.

They refused to let a constable physically force Melanie Griffiths-Evans and her three teenage children from their Dorchester home. U.S. Bank foreclosed on the home in 2007.

Community activists, friends and family waited for the constable to show up at 9 a.m. Labor union leaders were also there to lend support.

"These banks, the way they are doing it right now, are vicious, and they could take your house right out from under you," said Ed Childs, of the Dining Services Union.

By 9:30 a.m., the constable did not show up at the home. Instead, he called Griffiths-Evans and said that he would not be coming Wednesday.

"In the future, I just hope that they'd be willing to negotiate. My intent was that they see me as a family, as people, and not as an account number. I think we've accomplished that," she said.

Inell Mendes is renter, and the bank has taken over her building, too.

"We really don't know what is going on. We are just waiting," she said.

"There's lots of absentee buildings being foreclosed, and the first the tenants hear about it is when they get an eviction notice from the bank. Probably at least 750 properties will be foreclosed in 2008, and so that is probably 1,500 plus families facing eviction," housing activist Steve Mecham said.

Copyright 2008 by

1 comment:

JN said...

You know, the reasons the govt didn't do anything were three.

Their buddies in the banks were making a lot of money up front.

The people who wrote the loans made a lot of money upfront too.

But I think the biggest reason, one that doesn't get a lot of play, is
that all that lending and refinancing made the economy look better. It
was all a fake, as is coming out now, but they needed the illusion and
encouraged it because they had already stripped out so much of middle
class wealth via the war and their buddy's oil profits. Without the
hocus pocus economic things would have looked grimmer earlier.