Foreclosure Settlement between five of the nation’s largest banks and government authorities acknowledges need for principal reduction but is not a solution to the foreclosure crisis.
SPRINGFIELD, MA — For years, housing justice groups from across Massachusetts, including Springfield, Mass based Springfield No One Leaves, have been demanding principal reduction for homeowners who owe more on their homes than its worth. Yesterday settlement acknowledges the validity of that demand, but the deal with five of the nation’s largest banks is at best, a tiny step forward, those groups say.
“It won’t come close to doing enough to make the the foreclosure crisis go away… and that means the grassroots movement to stop foreclosures and hold the banks accountable isn’t going away either,” said Isaac Simon Hodes of Lynn United for Change. “We know that reseting underwater loans to real value is the only thing that will really work to stop the foreclosures and get the economy going again.”
David Dunwell, a Springfield Bank Tenant Association member (SBTA) who was foreclosed by Bank of America says that even if the settlement has been improved during months of negotiations, it fails to address the issues working and middle class people are most concerned with. “It doesn’t put families who were evicted based on fraudulent documents back in their homes. It won’t put bankers responsible for creating the foreclosure crisis and recession in jail. And it will only provide real help to a tiny fraction of the homeowners who need it.”
The deal includes an estimated $17 billion for principal reduction, which pales in comparison to the total of $700 billion in negative equity for homeowners in the country. According to a recent report by Zillow, Inc, 28.6%, or more than 1 in 4 US homeowners are underwater on their loans.
Following enormous grassroots pressure in Massachusetts and across the country by housing advocates, and demands made by Attorneys General Martha Coakley (MA), Eric Schneiderman (NY), Kamala Harris (CA), and Beau Biden (DE), the settlement is better than the original proposed deal, but still doesn’t go far enough. The settlement still allows both government authorities and individuals to go after the banks with lawsuits over securitization and other issues.
“The banks have made it clear that unless forced to, they will not help clean up the mess they created,” says Sellou Diaite of the SBTA. “Banks deliberately created a housing bubble that led to the foreclosure crisis. Thus far our country’s response has been inadequate. This settlement asserts that principal reduction is critical to achieving a economic future that serves interests of working and middle class families.”
Massachusetts AG Coakley recently sent a letter to the Federal Housing Finance Agency urging Fannie Mae and Freddie Mac to do principal reduction, and launched her own investigation into the nations five largest lenders and MERS in December 2011. Fannie Mae and Freddie Mac are not included in this settlement but control nearly half of all loans in the country.
“We expect that Attorney General Coakley and others will continue to take strong action in the courts to hold the banks accountable. Her recent calls for banks, as well as Fannie and Freddie to use principal reduction are encouraging,” says Malcolm Chu, an organizer with SNOL. “However, for the 39 out of 40 homeowners who won’t receive anything in this deal, we encourage them to come out to our weekly meetings to collectively fight for the solutions we need!”
Springfield Contact: Malcolm Chu, Springfield No One Leaves, 718-666-6872
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