Four decades prior to the millennium, faith-based community groups organized to become a very powerful force to confront the Pentagon and two U.S. Presidents—Johnson and Nixon—to stop the Vietnam War. These faith-based agencies facilitated anti-war protests nationally and offered draft resistance counseling to young men facing conscription. As these groups organized anti-war marches on our nation’s capital, people from other walks of life joined their ranks.
A decade following the millennium and coinciding with the election of Barack Obama, a banking meltdown commonly referred to as the 2008 financial crisis occurred. Two of the main focuses of the 2008 financial crisis involved housing and the mortgage industry. Many homeowners lost jobs or had their hours scaled back to reflect the economic downturn. These events reduced homeowners’ income, putting their homes at risk of foreclosure, default, and in some cases, Chapter 11 bankruptcy.
The financial crisis impacted homeowners’ ability to sell their homes to other people willing to buy. This recession also limited homeowners’ ability to transfer property titles in foreclosure, default or bankruptcy proceedings. As a result, properties in terms of dollar value were worth significantly less, making it more difficult to pay off creditors.
Housingtrack.net is a real estate web site that posts national property value statistics from all fifty states. It showed a drop in the median value of homes in Massachusetts from $430,000 in 2008 to $290,000 in 2010. In Boston, the drop in housing value was 13 percent from ’08 to ’10, and across the river in Cambridge the decline was lower, at 5 percent. The same web site showed an increase in unemployment from 8.7 percent from Boston, Quincy and Cambridge in November 2008 to 9.5 percent in February 2010. This represents a 10 percent rise in unemployment for the tri city area of Boston, Cambridge and Quincy.
Jenifer McKim wrote an article in the January 11 edition of the Boston Globe that highlighted the story of Andrade, a laid-off Boston schoolteacher who was falling behind in his mortgage payments. McKim described how faith-based religious groups had begun to meet with the U. S. Treasury Department, the Federal Reserve Bank, government regulators, banks, lawmakers and homeowners. McKim elaborated that Andrade was planning to meet with PICO (People Improving Communities), a California-based group mounting a nationwide campaign for mortgage lending change, and with officials from Bank of America.
For many faith-based groups, foreclosure activism is built on a series of moral principals. These principals include paying bank loans on time, helping home-owners to keep their homes, forgiveness (for homeowners unable to keep up with payments), and the sin of usury (lending at exorbitant interest rates).
“This economic crisis has opened everyone up to a moral crisis,” said Rachel Anderson of the Center for Responsible Lending, a secular North Carolina-based group that has been working with PICO to revise mortgage lending practices nationally.
The mortgage crisis has galvanized people into a potentially large national community network, drawing hundreds of people to rallies. These organizations have also started to get the attention of the Obama administration and U. S. Representative Barney Frank, who serves as Chairman of the House Financial Services Committee.
In the Commonwealth of Massachusetts, a web of groups with religious affiliations has joined the cause, including the Dorchester-based Greater Boston Interfaith Association and the Brockton Interfaith Community (BIC). The group that Andrade, the Boston schoolteacher, belongs to is the BIC. BIC is one of the six organizations in the Massachusetts Communities Interfaith Network (MCIN) and is also part of PICO.
Lew Finfer, director of the Massachusetts Communities Action Network, said that the foreclosure crisis has mushroomed, spurring people to get involved. He added that the lending and credit crisis crosses state lines and involves national lenders.
Over the last year, MCAN members have met with the Treasury Department, the Federal Reserve Governors, and with U.S. Representative Frank. This past week, MCAN members, spearheaded by the Brockton Interfaith Committee and lead community organizer Janine Carreiro, met with a group of banks, the Federal Reserve Bank officials, and staff people from Rep. Frank’s office to create and implement a series of guidelines to help Massachusetts homeowners with mortgages to keep their homes. This two-hour meeting at the Boston Federal Reserve Bank represented the first in a regular series of mortgage crisis meetings.
I interviewed Lisa Vlnikoor, staff director of the Merrimack Valley Project, an organization based in Lowell and Lawrence, about how the mortgage crisis has impacted homeowners with sub-prime mortgages in Massachusetts. I also interviewed Janine Carreiro, lead community organizer from BIC, about the steps that were tentatively agreed upon at the meeting with the Fed and that will be implemented to help Massachusetts home-owners to modify their mortgages, thereby keeping them in their homes.
Interview with Lisa Vlnikoor:
RS: How has the mortgage crisis impacted Lowell?
LV: Housing values in Lowell and neighboring Lawrence have dropped 25 to 30 percent. People in these cities are working class and housing values will never rise again to the 2008 average of $200,000 to 300,000. This drop in value is underemployment and unemployment related.
RS: What is the major factor contributing to the mortgage crisis?
Lisa: The key is the reversal of the injustice: principal reduction of mortgages. These mortgages are underwater, meaning paying more than the value of their homes. Many people with sub-prime mortgages pay a higher rate because they are deemed to be a risk. President Obama’s mortgage program will help people with adjustable rate mortgages fit into a better situation and reduce their costs. The Merrimack Valley Project and affiliates are demanding modification in principal. Groups are pressing nationally and this may help.
RS: What is modification of the mortgage principal?
LV: We are asking banks to adjust the principals, to limit risk cap implemented by the lender risks and the interest rates. Many of these people who have mortgages have the money to pay and are not bad credit risks. We are demanding banks to make right pertaining to the products that were a rip off. We want banks to transfer mortgages to other products that will help people to keep their homes.
Interview with Janine Carreiro
RS: Would you comment on the mortgage crisis?
JC: Some people were pushed into sub-prime mortgages by banks and their people when they could have gotten regular mortgages. These were people with good credit, over a 700 score. Banks and mortgages pushed people. Wells Fargo was one of the big banks with a mortgage division.
RS: Is this pushing of people into finance products legal? Also, were they pressured?
JC: This marketing approach is a miss representation. This sales approach is deceptive and maybe illegal.
RS: How are the faith-based groups working to resolve the mortgage crisis?
JC: The Brockton Interfaith Community spearheaded a meeting the last week in February with bank officials at the Federal Reserve Bank in Boston. We agreed tentatively to principal modification through a series of guidelines in our two-hour meeting. We also agreed to meet on a regular basis. We presented to the lenders group a survey that each member agreed to fill out and submit to the FRB [Federal Reserve Bank]. The homeowners group will review it and them we will meet and finalize the guidelines to be implemented by all parties.
Recommendations for resolving the mortgage crisis:
1. Lenders need to have a point person available for each counseling organization or region. This will reduce transaction cost for both servicers and counselors by cutting down hold time along with number of documents submitted.
2. Assign staff people to work with mortgage clients from initial application to application review. The case manager will contact the borrower as needed.
3. Access and availability to electronic transparency. Improved control of the database management for each of the individual cases. This will provide mortgage counselor and client access to case documents that are currently usually stored in India, freeing documents for case review and updating errors in income and other data.
4. Creation of an appeals process. Information should be provided by lenders to the family or to the mortgage counselor on why they were rejected.
5. Receipt of a detailed outline clarifying the reasons for rejection and the data used in the decision making.
An appeals process would simplify the mortgage modification process by providing homeowners with information in real time, ultimately helping them to reapply or make changes to already existing mortgages. Transformation of operating systems will cut down on time and legal costs, a savings that hopefully be passed onto borrowers.
This article was written to better inform Spare Change readers and the public at large about a very serious issue confronting the citizens of the Commonwealth—the mortgage crisis and the lack of guidelines designed to address mortgage modification. This issue needs prompt attention by both regional state and federal officials.
Take 10 or 15 minutes to call or email U. S. Representative Barney Frank. Express your concerns about the mortgage crisis and make any suggestions you might have.
Do you want to tell our Senators how you feel? Email John Kerry and Scott P. Brown. Our representatives in Washington need to be upfront and take the lead from Congressman Frank. It is the responsibility of all citizens to speak up in this tough economic time so that homeowners receive fair mortgage modification.
Robert Sondak is a Spare Change vendor and writer. Robert has a Bachelors Degree in Community Service Management from the University of Massachusetts Boston, College of Public and Community Service (CPCS). Robert also minored in Community Planning at UMASS.