President Obama spoke Tuesday in Phoenix and outlined his second-term housing agenda, highlighted mainly by his vision for a replacement for Fannie Mae and Freddie Mac, the government-backed giants that currently own or guarantee over 80 percent of the nation’s mortgages. Today, he’s doing a live chat at 1:00 p.m. ET moderated by Spencer Rascoff, the CEO of Zillow.
You can submit questions at Zillow’s Facebook page or using the #AskObamaHousing hashtag on Twitter. (Or, if you’re me, you can fill out a column with 20 questions for Obama on housing. Feel free to appropriate them.)
These are 20 urgent questions President Obama should answer regarding housing in America:
1. Four years ago, you also gave a speech in the Phoenix area, outlining your foreclosure mitigation program called HAMP. You said it would help up to 4 million borrowers; as of May, less than one-fifth of the money allocated has been spent, and only 880,000 still pay on permanent modifications. Moreover, nearly half of borrowers receiving permanent mods have re-defaulted, as the HAMP modifications servicers granted at their discretion were not sustainable. And servicers used HAMP to trap borrowers, forcing them into either foreclosure or a more lucrative alternative modification. Do you think HAMP succeeded for homeowners, not just for banks who got to delay their foreclosures until they could absorb them?
2. Your fact sheet on the second-term housing agenda touts that, since the program was tweaked to add more incentives for principal reductions, the most effective type of loan modifications, 70 percent of new HAMP modifications contain them. But since barely anyone uses HAMP anymore, this is a misleading figure. Shouldn’t the initial HAMP program have mandated principal reductions where it made economic sense for both the borrower and the lender, as the special inspector general overseeing the program recommended repeatedly?
3. Credible allegations from Bank of America whistle-blowers allege that they were – and still are – deliberately told by superiors to lie to homeowners and block loan modifications, as well as being offered bonuses like Target gift cards to push people into foreclosure. Why are these revelations coming in the context of a class-action lawsuit, where some lawyers and named plaintiffs might get rewarded but nobody else, instead of through a thorough federal law enforcement investigation, which you promised?
4. The reason mortgage servicers favor foreclosure over loan modification is that their compensation structure advantages foreclosure for a variety of reasons. New rules on mortgage servicing do not change that. Why?
5. Why do you continually distinguish between what you call “responsible” and “irresponsible” homeowners (your fact sheet on the second-term housing agenda references “responsible” borrowers 10 times)? Do you use the same language to single out “irresponsible” welfare or food stamp recipients or natural disaster victims? Isn’t it the job of the lender to check a borrower’s credit-worthiness, and subsequently how “responsible” their decision is to take out the loan? Haven’t banks admitted to preying on communities with low incomes and poor financial literacy, steering them into risky, higher-cost loans? Why aren’t you talking about “irresponsible” banks?
6. Your Consumer Financial Protection Bureau says that banks are still steering borrowers into riskier, higher-cost loans. How is this still happening?
7. Speaking of things still going on, banks continue to foreclose on homeowners using fabricated, back-dated or forged documents, making a mockery of the property records system in America. In addition, banks failed multiple metrics of the servicing standards they agreed to in the National Mortgage Settlement, which was supposed to stop abusive conduct. Given that these sanctions did not stop much of anything, should new criminal investigations be initiated?
8. You say that homeowners have seen $50 billion from the consumer relief elements of the National Mortgage Settlement. But the majority of that figure comes from facilitating short sales, where the homeowner negotiates a way to leave the home by selling it for less than they owe on the mortgage. Wasn’t the goal of the settlement to find a way to help keep borrowers in their homes, not the other way around?
9. Should servicers who agreed to certain standards as a penalty for misconduct be allowed to sell their servicing rights to non-bank servicers not covered by the standards, leaving borrowers who thought they would finally be dealt with fairly back at square one?
10. Do you think the big servicers should be allowed to illegally foreclose on a certain number of borrowers, as they are under the National Mortgage Settlement’s “threshold error rates”? Will you meet with families who have recently been illegally foreclosed upon in this manner, and explain to them why the banks have too tough a job to properly manage all of their foreclosure operations?
11. Do you think a check for $800 is sufficient compensation for families thrown out of their home and completely abused by the mortgage industry over a period of years? How about $400? Why can’t lawmakers get a straight answer about how the numbers in that settlement, put together by the Federal Reserve and the Office of the Comptroller of the Currency, were calculated?
12. Why is the company handing out the checks on one of these settlements owned by the parent company of Citigroup, leading to suspicions that they are not trying very hard to find the 400,000 borrowers whose checks were sent to the wrong address, since all money not cashed by borrowers reverts back to the banks that paid the penalty, including Citi?
13. The Residential Mortgage Backed Securities working group, the task force you established to prosecute fraud in the packaging and selling of mortgage-backed securities during the housing bubble, has thus far not issued one criminal subpoena, and just a few civil cases, where the perpetrators can often settle without having to admit wrongdoing. Do you believe in the concept of prison as a deterrent to criminal behavior?
14. The head of the Financial Fraud Enforcement Task Force, the umbrella group supposedly investigating financial fraud, abruptly left last week to join a white-collar criminal defense firm. Should we not expect any further criminal cases on the conduct that led to the financial crisis?
15. Looking forward, you’ve consistently called for Congress to allow underwater borrowers to refinance their loans and save “thousands of dollars” in the process. That’s not exactly true anymore, now that mortgage rates soared over the past couple of months. In fact, for many families, the closing costs for refinancing offset whatever benefit they might get in the short term. Why does this remain the centerpiece of your plan to help underwater, at-risk borrowers?
16. As for the money available in the Hardest Hit Fund, for communities still suffering from the ravages of the foreclosure crisis, you mention in the fact sheet that the fund “committed” $7.6 billion for this purpose, but are you aware that the fund spent just 2 percent of that in its first two years, and has still only spent a fraction of that total? Do you think the difference between committing funds and actually spending them is significant? Because this is the same problem with HAMP, and practically every other housing program your administration has put out.
17. Some hard-hit communities have considered using their eminent domain authority to acquire mortgages and refinance them for struggling borrowers at a market rate. Government agencies, like the Federal Housing Finance Agency, have threatened never to do business again in communities that enact eminent domain strategies. Do you find these threats productive?
18. You take credit for the nascent housing recovery, which has been driven by an extremely low level of inventory on the market, and increased demand from Wall Street-funded investor purchases, particularly in distressed areas where they’re buying up giant numbers of properties. Are you concerned about metropolitan areas with absentee Wall Street landlords, and do you think the market can sustain a housing recovery without the participation of homeowners who intend to live in the homes?
19. The big news in your speech yesterday concerned the future of housing finance, and your principles for replacing Fannie and Freddie. Your plan would basically have private entities bundle mortgages into securities, for which investors could acquire government-backed insurance against catastrophic losses for a fee, while having to take the initial losses themselves. What investors do you think will actually want to purchase mortgage-backed securities, after being abused so systematically by private issuers the last time? While you say you want to “put private capital at the center of the housing finance system,” what if private capital doesn’t want to be there?
20. Ultimately, your plan would preserve the 30-year fixed-rate mortgage, and what economist Adam Posen calls “the cult of homeownership.” Should we rethink the value of homeownership as a wealth-building tool, because it burdens Americans with more risks than rewards, and because new research shows that rises in homeownership accompany rises in the unemployment rate? Should we reconsider ways in which we subsidize homeownership, like with the mortgage interest deduction? Should we provide incentives for saving that aren’t tied up in volatile home equity?
David Dayen is a contributing writer for Salon. His first book, "Chain of Title," is out now. Follow him on Twitter at @ddayen. MORE FROM David Dayen • FOLLOW ddayen
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