Since the beginning of the foreclosure crisis, more foreclosures have occurred in California than any other state. California metropolitan areas have made up a majority of the hardest hit cities in the nation for most of the last three years.
The foreclosure crisis is a direct result of the abusive mortgage lending practices, lax regulatory oversight, and Wall Street slicing and dicing of loans that marred the last several years. As a result, California homeowners and communities were saddled and saturated with high cost subprime and option ARM loans that many could not afford and that some did not even understand. Just as the monthly payments on these loans started to spike, the housing bubble burst. Housing values began to fall steeply, and the economy began to falter, leaving Californians with increasing housing payments but falling incomes and home values. Foreclosures are not only devastating for working families trying to stay in their homes, they also have profound impacts on neighboring homeowners, tenants, city and county governments, local communities, and the broader economy.
Early on, CRC and its members warned policy makers, banks and the public that worsening industry practices and abusive loan terms were creating a recipe for household and neighborhood disaster. When the expected foreclosure crisis hit, CRC identified loan servicers as the problem, and sustainable loan modifications as the solution for families trying to stay in their homes. We have advocated for foreclosure moratoria, better loan modification policies that result in principal reduction for struggling underwater homeowners, as well as better protection for tenants who have been living in properties that go into foreclosure. We have advocated for these principles through legislative and regulatory advocacy, action research reports that analyze lending, loan modification and foreclosure patterns, media and public education work, coalition building statewide and nationally, and direct negotiations and advocacy with the largest financial institutions.
CRC has been successful in focusing policy makers and the public on the inadequacies of current foreclosure prevention policies and performance. Our surveys of housing counseling agencies have been widely cited, and have helped to counter misleading industry messages about how many people are being helped. Additional CRC research has highlighted the disproportionate impact of bad lending practices and foreclosure on neighborhoods of color, even as all communities continue to be affected.
CRC was one of the first groups to call for the federal HAMP program to require lenders to report on the race and ethnicity of borrowers applying for loan modifications, which the Obama Administration later made part of the program. CRC supported or sponsored state legislation to encourage servicers to offer more loan modifications, to better protect tenant rights, and to crack down on loan modification scams. Direct negotiations with banks have led to modest improvements in bank contact with housing counseling agencies, participation in loan modification programs, and bank dealings with tenants living in REO properties.
In recognition of the critical need for assistance that homeowners have in navigating the complex and frustrating loan modification process, CRC raised $5 million to support housing counselors in the state, and this money was used to leverage an additional $8 million for counselors in California. CRC advocacy with state and national allies is also moving state and national regulatory agencies to be more responsive to homeowner and tenant concerns. CRC and allies worked for the creation of the new Consumer Financial Protection Bureau, which will play a large and important role in stopping abusive lending and foreclosure practices in the future.
Update: If you'd like to read CRC's latest report about ongoing problems with banks and servicers, read this report: Chasm Between Words and Deeds X: How Ongoing Mortgage Servicing Problems Hurt California Homeowners and Hardest-Hit Communities published in May 2014. The report includes declarations from 11 homeowners who worked with attorneys at Housing and Economic Rights Advocates (HERA) to describe the countless challenges they faced in seeking help from their bank or servicer. You can also listen to a story about an individual homeowner and the difficulties she's faced in trying to keep her family home: NPR Morning Edition: Foreclosure Overhaul Comes Too Slowly For Many Homeowners (Chris Arnold, May 20, 2014).