3-13-09, 12:20 pm

Original source:

While banks and mortgage lenders get bailed out, families across the country are increasingly facing the prospect of losing their homes. There's a new bill in Congress that would help: the Helping Families Save Their Homes in Bankruptcy Act. It would enable struggling homeowners to renegotiate the terms of their loans and stay in their homes.1 It would also go a long way towards stopping the downward spiral in home values and the destabilization of our economy--which affects us all.2

Banking industry lobbyists are working hard to kill the bill.3 They refuse to see the role of banks and lenders in creating the crisis and don't want to share the cost of helping us get out of it. It's unclear whether the bill will pass, because some senators seem ready to fall in line with the banking industry.

You can help make sure this bill passes by making your voice heard. Let your senators and their colleagues know you expect them to support the bill, and ask your friends and family to do the same. It takes just a moment:



The housing crisis has been brewing for years, and the root cause wasn't irresponsible home buyers (as right-wing allies of the banking industry are trying to argue). The wave of foreclosures we're seeing today is because of changes to banking rules that let banks and lenders abandon responsible lending practices in order to make large short-term profits.4

The financial industry pushed hard to win these changes about ten years ago, spending billions on lobbyists and campaign contributions to secure the help of their allies in Congress.5,6 The new rules created huge financial incentives for banks and lenders to issue as many mortgages as possible. And that's what happened -- at every level of the mortgage industry, there was an insatiable drive to issue more loans, without regard for the potential consequences.7 Many in the industry made a killing, but now huge numbers of people have mortgages that will be impossible for them to repay.

Some people acted irresponsibly and stretched to buy homes they knew they couldn't afford, enabled by mortgage brokers that often went as far as falsifying documents to qualify people for loans.8 But many are victims of predatory lending who were lied to and tricked into taking loans that would inevitably trap them in a downward spiral of debt, resulting in the loss of their home and everything they put into it.9 Subprime lenders preyed on people with low incomes who were less likely to have good financial literacy--and they targeted Black people and other people of color in particular.10,11

A threat to Black America

Foreclosures are affecting all Americans and threatening our country's economy. But it's a particularly devastating problem for Black folks. Black and Latino homeowners are more than twice as likely as White homeowners to face foreclosure as a result of subprime loans, and foreclosures are projected to affect 10% of recent African-American mortgage borrowers, compared to about 4% of White borrowers.12

The current foreclosure crisis is rolling back significant gains in Black wealth acquired over the past 30 years, ever since Congress passed laws to reduce redlining and other types of discrimination in the housing market. And a disproportionate amount of Black wealth is in our homes. Home equity accounts for 63% of total average net worth for Black households, as compared to 38.5% of average White net worth.13

A threat to America's economy

While it's important to recognize the huge threat foreclosures pose to Black people in particular, it's just as important to recognize that this problem affects all of us. Homeowners who are at no risk of facing foreclosure could see their home values drop if the epidemic of foreclosures continues. And the more people who are pushed deeper into debt, the harder it will be for our economy to recover in general. Stopping foreclosures is essential to getting the economy back on track--which means we all have a stake in solving this problem.14

An urgently-needed solution

Congress is considering a plan that could offer real relief by allowing bankruptcy judges to modify the terms of mortgages during bankruptcy proceedings. This would help people facing bankruptcy avoid foreclosure, and it would also create an incentive for banks to renegotiate with borrowers before it gets to that point.15

The House passed its version of the bill last week. But banking industry lobbyists are hard at work trying to make sure it doesn't pass in the Senate.16

We need to put as much pressure as we can on Congress right now. We're working with Brave New Foundation, ACORN, and MoveOn to make the biggest impact possible. Please join us by telling your senators to side with the homeowners who are casualties of this economic crisis, not with the banks that caused the mess. And when you do, please ask your friends and family to do the same.



References:

1. 'House Approves Mortgage Bankruptcy Overhaul,' Reuters, 3-5-09: http://www.reuters.com/article/topNews/idUSTRE52482F20090305

2. 'Loan Modification Can Stop the Foreclosure Crisis,' Wall Street Journal (Op-ed from Congressman John Conyers), 1-30-09: http://online.wsj.com/article/SB123327754670931503.html

3. 'How Banks Are Worsening the Foreclosure Crisis,' Business Week, 2-12-09: http://tinyurl.com/agjok9

4. 'Blame beyond Washington,' Countdown with Keith Olbermann, 03-09-09: http://www.msnbc.msn.com/id/3036677/#29604900

5. 'Sold Out: How Wall Street and Washington Betrayed America,' Wall Street Watch, 03-04-09: http://wallstreetwatch.org/soldoutreport.htm

6. 'Foreclosure Phil,' Mother Jones, 05-28-09: http://www.motherjones.com/politics/2008/05/foreclosure-phil

7. VIDEO: 'Help Homeowners Level the Playing Field,' Brave New Films, 02-28-09: http://fightingforourhomes.com/

8. See reference 7.

9. 'Mortgage Industry Bankrupts Black America,' The Nation, 6-26-08: http://www.thenation.com/doc/20080714/wright

10. 'Study Finds Disparities in Mortgages by Race,' The New York Times, 10-15-07: http://tinyurl.com/bpanjq

11. 'Minorities hit with higher fees, AG says,' Boston Globe, 6-4-08: http://tinyurl.com/cvdc4a

12. 'Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners,' Center for Responsible Lending, 12-06: http://tinyurl.com/dlvqk3

13. 'Sub-Prime as a Black Catastrophe,' The American Prospect, 9-22-08: http://tinyurl.com/4plo96

14. 'Elizabeth Warren: Foreclosures Threaten Economy,' National Public Radio, 3-9-09: http://www.npr.org/templates/story/story.php?storyId=101611260&sc=emaf

15. 'Questions, Answers on Bankruptcy Mortgage Rewrites,' Associated Press, 3-6-09: http://www.newsweek.com/id/187910

16. See reference 3.

Additional references:

Fighting for our Homes campaign: http://fightingforourhomes.com/

'More Cramdowns!' Washington Monthly, 3-03-09: http://tinyurl.com/b84zoy

'Power to Modify Mortgages Sits Well With Judges,' Wall Street Journal, 1-12-09: http://online.wsj.com/article/SB123170970691971885.html

'Everyone's Feeling Economic Pain, But It's Hitting Minorities Worst of All,' ColorLines, 1-19-09: http://tinyurl.com/9xvj58

'The Bubble Economy,' The American Prospect, 09-24-2007: http://www.prospect.org/cs/articles?article=the_bubble_economy