The Housing Bubble Was No Mystery

I've not posted about the economic crash recently, although I've made references to it in other posts along the way.  Today I read a short comment on from Dean Baker at the Center for Economic and Policy Research.  He was responding to the announcement from Federal Reserve Chair Janet Yellen that there will be a new committee in the FED to study and seek to avoid another destabilizing economic crisis like the recent ones, including the Great Recession. 

Reporting on this announcement, the New York Times continues to imply the oft-reported impression that the coming of that crisis was a mystery that no one could see.  Baker's contention is that many people did see it coming, including seeing all the obvious signs of the housing bubble.  Rather than not seeing these foreboding signs, what accounts for the FED's unreadiness and lack of preventive intervention was "an extraordinary level of incompetence."  Former FED Chair Alan Greenspan himself admitted to responding wrongly to danger signs, having been blinded by a false ideology of market economic systems.

Here are Baker's remarks.

September 13, 2014
It Really Wasn't Hard to See the Dangers Posed by the Housing Bubble 

At its peak in 2006, the housing bubble had caused nationwide house prices to rise more than 70 percent above their trend level. This run-up occurred in spite of the fact that rents had not outpaced inflation and there was a record nationwide vacancy rate.

The dangers of the bubble also should have been clear. Residential construction peaked at almost 6.5 percent of GDP compared to long period average of close to 4.0 percent. The housing wealth effect had led to a consumption boom that pushed the saving rate to near zero.

Also, the flood of dubious loans was hardly a secret. The National Association of Realtors reported that nearly half of first-time homebuyers had put down zero or less on their homes in 2005. The spread of NINJA (no income, no job, and no assets) loans was a common joke in the industry.

These points are worth noting in reference to an article discussing the Fed's efforts to increase its ability to detect dangerous asset bubbles. An asset that actually poses a major threat to the economy is not hard to find. It kind of stands out, sort of like an invasion by a foreign army. The failure of the Fed to recognize the housing bubble and the dangers it posed was due to an extraordinary level of incompetence, not the inherent difficulty of the mission.

Homeowners' Shame

Since the foreclosure crisis began to be named in 2009, I have been noticing a pattern among homeowners facing hardships.  They are ashamed, so they keep their problems to themselves.

This speaks to certain moral convictions that form the bedrock of what many would believe makes a good U.S. American.  Because in the U.S., the concept of what it means to be a Christian is largely derivative from, or a corollary to, what it means to be a good U.S. American, these moral convictions find their way into the character and lives of good, church-going people.

Self-reliance is one of the moral convictions of which I am speaking.  Christians are likely to cite Paul's remarks to the Thessalonians in support of a belief in self-reliance:  those who will not work, shall not eat.  Again in Galatians, just after telling the church folk to bear one another's burdens, Paul turns around to say that each one should carry her own load.  Thus it is not outside of Christian faith to believe in the goodness of carrying one's own weight. 

Yet for faithful biblical and theological teaching, self-reliance is always tempered by being set in the context of community mutual responsibility.  Isolated from the communal context, self-reliance can become arrogance and blind optimism in times of good fortune, or it can transform into self-hatred in times of bad fortune.  "Fortune" is a key concept here, but one that self-reliance likes to ignore. 

Contrary to the self-deceptive claims of the Romantic/Progressive era, which led poets to wax eloquently about being "the master of my own fate," human beings are not individually in control of their own destinies.  First of all, human society is a complex, dynamic system in which many people are engaged in non-coordinated activities and agendas.  What I do may effect you, and vice versa.  Second, many powerful forces can affect the lives of particular people, completely without their own knowledge and participation.  The housing bubble, the house of cards called credit default swaps, and the entangled labyrinth of mortgage-backed securities were mostly invisible to average people.  Yet when these huge economic systems began to implode, they took away jobs, home values, credit availability, health insurance, and hope for many people.

Under new circumstances, people formed by self-reliance and the assumption that it mechanically leads to success, found themselves in a pit of shame.  They should have known, they thought, not to buy that much house, get that big a mortgage, borrow against their equity, etc.  Certainly there was a time, in another generation, when many people would have been more cautious.  Yet fed by a steady diet of "the rules of the old economy no longer apply" and "low downpayments are the new norm" and "housing values never go down," plenty of people were pointed, urged, or lulled into believing that extending more credit and taking out more debt would be an excellent plan, even a good example of self-reliance.

Closely related to self-reliance is the moral conviction of individualism.  This more encompassing concept asserts that knowledge, value, and action originate in the individual person.  Thus, individualists make up their own minds for themselves, adopt their own values, and do what they decide to do.  The myth that individualism perpetuates is that "doing it my way" is both a good idea and an actual practical activity.  The outcome is that people who do not have all the information that they need, have not experienced the pitfalls of certain activities, and may not be reasoning with full clarity, become convinced beyond the shadow of a doubt and "know that they know that they know that they know" what they should do.

Individualism linked with positivity can be a dangerous combination.  Many people think that if they do not think bad thoughts, entertain bad consequences as real possibilities, or say out loud what might go wrong, then everything will be fine.  This ignores that one person's thoughts and words operate without any relation to the risky, careless, and unjust actions of others who may be controlling millions and billions of dollars of economic power.

Individualists, counting on self-reliance, operating with positivity, expect that their efforts will lead to satisfying results.  They don't deny risks, but they have done what they should have done and things should go well.  If things don't go well, the self-reliant individual has trouble avoiding the conclusion, "I have no one to blame but myself."

Thus, shame has a powerful role in an economic crisis.  It protects the wealthy securities traders from a mass uprising against them because the average people blame themselves for their economic problems.  Many keep the problems to themselves, ashamed to admit that something has gone wrong. 

People who lose their jobs, have their homes foreclosed, and fall into medical debt may stop going to church, or even leave their churches, ashamed to admit that they are not prospering.  They theologize the problem to believe that they have sinned or failed God, interrupting the input-output machine of being a good person in order to get blessings from God.  They must be bad, for the blessings have stopped.

This shame makes it hard to organize people harmed by the economic downturn.  Some simply give up.  Others keep trying the same thing over and over, sure that if they just try harder the system will work.  Only a few get so fed up with the way that powerful economic institutions abuse and oppress them that they start to fight back.

What got me to write about this was a personal experience.  I am not facing foreclosure.  For now, my wife and I both are holding our jobs.  We are not in economic distress, as compared to many people.  We are, however, making lots of big financial decisions because we are relocating from North Carolina to Texas, while I still work in North Carolina.  After a year and a half of transition, we are finally preparing to sell our house.

Credit is tight, so even with a respectable credit rating, borrowing may not be easy.  Optimistically thinking that the process of getting a construction loan would not be hard, I was awakened repeatedly to realize there are many hoops to jump through and obstacles to overcome.  I can take that--life is not easy.

What caught me by surprise was a powerful emotional hit that came when a lender suggested that there were undisclosed details that would hinder the loan process.  Along with dread, there was a deep feeling of failure and inadequacy that welled up.  The dread was that feeling of wondering if there would be anything I would be able to do to solve the problem.  My self-reliance had not worked.  I was ashamed.

Now frankly, it was a very minor setback.  We continue to make progress on remodeling and getting credit to put our house in order.  It is not all worked out, but I'm not in the kind of mess many people are in.  But the reason to write about it is that I had a temporary and partial glimpse of what is multiplied millions of times over in this country with people who have lost jobs, lost homes, face foreclosure, face medical costs they can't pay, and feel ashamed.

If there is any truth in the Christian faith, then the teachings of the Bible should make it clear that the winners and losers of economic life do not equate to the ones God loves and hates.  Economics is rough in its sorting process.  Leverage, muscle, cheating, and injustice have inordinate power over people's destinies.  That is why the Sabbath Year and Jubilee systems were put into place in the biblical economic teachings. 

No economic system can claim to be just if it allows and promotes permanent indebtedness, homelessness, poverty, and joblessness.  There has to be a reset system to get people back into the economic game.

Moreover, our wealth is not our own.  It is for all of God's children.  Churches must find a way to leave behind their accommodation to modern economics and recommit themselves to be communities in which "there is no one in need among you."  We don't have to be ashamed to love one another enough to share our lives with one another.  That is the way of Jesus, who said, "Follow me."

Attorneys General Must Get Tough on Foreclosure Fraud

NAAG is the National Association of Attorneys General.  AGs from the fifty states and the various other jurisdictions such as territories, districts, etc., gather periodically to cooperate in how to manage common issues and work together on multi-state problems.  Some of the cooperative work they have done includes the Tobacco Settlement and the current Foreclosure Fraud Investigation.

Through North Carolina United Power, I have been participating with a working group of national organizations who are in conversation with the AGs about the Foreclosure Fraud Investigation.  Recently, we took a group to Chicago to meet with some of them about their work to protect homeowners and keep families in their homes.  I was interviewed by the local CBS radio affiliate in the hours before our meeting.

Among the key items of our agenda are:

• broad availability of principal reductions to reset the housing market and remove the risk of more foreclosures;
• remedies for all who have been harmed by fraud other criminal acts, whether they have already suffered foreclosure, are in process, or are facing impending foreclosure;
• the end of dual tracking, with simultaneous loan modification discussions and foreclosure procedures;
• all possible efforts for loan modifications and other non-foreclosure procedures should precede the initiation of foreclosure procedures;
• criminal prosecutions for criminal acts; and
• regulatory regimes to keep this kind of mortgage fraud from being repeated.

We were able to meet with four of the state Attorneys General:  Lisa Madigan of Illinois, Tom Miller of Iowa (the leader of the task force working on the foreclosure fraud investigation), Roy Cooper of North Carolina (President of NAAG who pushed the foreclosure fraud investigation forward), and George Jepsen of Connecticut (newly elected).  Our conversation was formal, perhaps overly so.  We discussed our agenda, they discussed their records, and then we exchanged questions and vague answers.  The time was short:  only 30 minutes.  There was very little new that came out of the meeting, but do not assume that I am saying it was not worthwhile.  Let me clarify why this was such an important meeting.

In organizing, we plan an action to get a reaction.  When we get our reaction, then we evaluate what we have learned and begin to plan future research and actions in light of it.  Our action in Chicago revealed a number of important things about our work on to change the conditions faced by so many families being hit by foreclosures.

This action showed something to our organizing groups, to the four AGs present in our meeting, to the many other AGs at the hotel but not at our meeting, and to the press and their readers.  To us, it showed that we have the power to bring the key law enforcement figures in the foreclosure negotiations to the table, even if we and they know they cannot negotiate publicly with us about potential criminal proceedings against banks.  Not only do they meet with bankers.  They also meet with us.

To the AGs present, we were able to deliver a multiracial, multiethnic, knowledgable, prepared, faith-based and non-faith-based, nationwide constituency to speak intelligently and passionately about this critical work they are doing.  They found us to be what we said, representatives of hundreds of thousands of citizens, thousands of churches and synagogues and mosques, and from states all across the nation.

To the AGs not present, we made it publicly clear that their colleagues who are leading in this foreclosure investigation are willing to meet with us.  Miller, Cooper, Madigan, and Jepsen will meet with us not only in their private chambers back home but in a public forum where they can express, even with the press in the room, their strong agreement with our agenda.  They were very adamant that they would not settle for an agreement that did not fundamentally change the practices of mortgage lending and foreclosure.  They believe the result must benefit homeowners and borrowers, not primarily get lenders off the hook.

To the press and their readers (including bankers) we were able to show that the case for principle reduction remains strong, with a powerful constituency.  Among the key items reported was the commitment to take banks to court if the negotiations do not bring fundamental change.  These AG negotiators  have not given up on a strong settlement and will not accept a weak settlement.  Our action got broad coverage in newspapers and in banking industry news sources.

The investigation and negotiation of a settlement could come very soon.  Or it could drag on through the summer.  Sooner is better, and we are expecting to see a court decree with tools to provide real help to homeowners.

Witness at Bank of America Shareholders Meeting

On May 11, 2011, North Carolina United Power (NCUP) gathered with some allies to challenge Bank of America to clean up its act concerning mortgage modifications and foreclosures.  We brought banners and posters, including a banner displaying the text of Micah 2:1-2.

Associated Press photo

Alas for those who devise wickedness
  and evil deeds on their beds!
When the morning dawns, they perform it,
  because it is in their power.
They covet fields, and seize them;
  houses, and take them away;
they oppress householder and house,
  people and their inheritance.

Rev. Clyde Ellis came from Virginians Organized for Interfaith Community Engagement (VOICE) came to speak about the disaster of foreclosures in Prince William County, VA.   Peter Skillern of Community Reinvestment Association-NC (CRA-NC) and Josh Zinner of Neighborhood Economic Development Advocacy Project (NEDAP) in New York City addressed the slow pace of improvement made by Bank of America in dealing with the enormous number of troubled mortgages they service.

Iraq Veteran Blackmon of the Harry Veterans Community Outreach Service in Winston-Salem addressed B of A's work with military families.  Rev. Spencer Bradford of Durham Mennonite Church spoke about bankers and homeowners sharing the same neighborhood, in the spirit of rejecting the utilitarian vision condemned by the Prophet Micah.  Rev. Dr. Greg Moss of HELP, Rev. Dr. Carlton Eversley of CHANGE, and many more from Durham CAN, Davidson County HOPE, Orange County Justice United, and the NC Latino Coalition, gave comments or stood to represent the continued efforts to bring change and justice to the foreclosure crisis.

The big news of the day came from information shared with us by the County Clerk of Court of Guilford County.  In our effort to slow down the railroading of foreclosures perpetrated through "robosigning" and other fraudulent practices of a hasty and careless banking industry, we have been meeting with County Clerks of Court in NC to promote the use of best practices in foreclosure procedings, especially in the determination of who holds the original promissory note on the mortgage.  We found that in Guilford County alone, the Clerk of Court had identified over 4500 fraudulent or forged documents presented to support foreclosures.  That is one county.  We had specific numbers for each bank, as well as the names of robosigners whom banks had employed.  We are calling for a county by county audit of foreclosure documents in NC to get to the bottom of this illegal practice.

Associate Press photo

The following is the speech I gave to open the witness outside the shareholders meeting.

Good morning.  I am Dr. Mike Broadway of Shaw University Divinity School and Mt. Level Missionary Baptist Church in Durham.

When theological educators in North and South Carolina issued a statement on this economic crisis, we identified key convictions about justice and the economy from our tradition of faith.  Among those convictions was that all people should share in the gifts of God's creation.  Another was that no society can allow a permanent debtor class to emerge, a kind of debt-sharecropping.  A third, among many more, was that the risks and benefits of the economy should be shared by all participants, not dumping all risks on the weak and paying bonuses to the elite.  It is with these kinds of convictions that we stand here today to address foreclosure fraud and mortgage modifications.

Some people say theologians and preachers should stay out of this business.  That's nothing new.  Long ago in the days of the Prophet Micah, the so-called leaders of the people  did not want to hear what he was sent to say.  The economy was in turmoil and people were suffering mightily.  But the leaders preferred a preacher who would gloss over it all and say, "Live it up!  Go have another drink!  Life is good!"  They wanted happy talk while people were losing their homes and livelihoods through fraud and injustice (Micah 2:6-7, 11; Isa. 1:15).

We don't want to be those kinds of preachers.  We don't want to be churches of the sort that Fannie Lou Hamer came to despise during her civil rights work.  She saw so many churches as hypocrites gathering "for the sake of paying the minister's way to hell and theirs, too."  No, we do not want to join the misleaders of the people.

Both the Prophets Micah and Isaiah challenged the financial and political elites of their day for being misleaders.  To the financial leaders they said, "you mislead and confuse the people," and "the spoils of the poor are in your houses" (Micah 2:1-2, 8-9; Isa. 3:12-14).  Back in those days, and now in our time, the financial elite manipulated the structures of the economy "because it is in their power" (Micah 2:1).  They preyed on the hard-earned livings of the working people.

The prophets said that the "add house to house" and "field to field," leaving "many houses desolate" (Isa. 5:8-9; Micah 2:2, 9).  In ancient Israel they foreclosed on the working class in massive numbers, transferring wealth from the producers to the predators, just as is happening in our day.  They turned from leadership to predation.  The prophets say the obvious:  the poor are losing their homes and livelihoods and widows and orphans are abandoned.

Why can this happen?  It seems patently unjust that some can ruin others simply "because it is in their power."  The prophets go on to say that the foreclosures and mass economic turmoil happen because political leaders "write oppressive statutes" and "turn aside the needy from justice" (Isa. 10:1-2).  Just yesterday, ten Attorneys General of the states met in Atlanta to oppose and try to derail a fair resolution of the mortgage crisis.  Recently, the Comptroller of the Currency suggested that the banks need not bear the weight of setting things right in this foreclosure crisis.  Then who will bear it?  If it is not a shared burden, then average homeowners will bear this burden that is too great for us.  We don't need this kind of misleader deciding our futures.

We think that Bank of America wants to be a leader for the average consumer.  We think that Bank of American can be a leader in finding a resolution for the foreclosure crisis that will be good for all parties.  That is why we are here today.  We are calling for leadership toward a just, streamlined process for mortgage modification, foreclosures as a last resort, and a solution that makes the Bank more profitable while keeping people in their homes.

It may seem that we are just a few average, unimportant people standing here today calling out for justice in the tradition of Micah and Isaiah.  But to quote Marian Wright Edelman, "You just need to be a flea against injustice.  Enough committed fleas biting strategically can make even the biggest dog uncomfortable and transform even the biggest nation."  And enough fleas can transform the biggest bank, too.

Theology and Economy Update

For those of you who check in here now and then, you probably know that in 2009 a group of theological professors in North Carolina and South Carolina distributed a working paper, "Theological Reflection on the Economy."  It was an early step in a series of actions and campaigns through which faith communities have organized around economic justice in the current economic crisis.  Since that time, I have occasionally communicated with the group of professors about active campaigns, particularly the "10% Is Enough" work on usury pertaining to credit cards and other consumer interest.  This week, I sent a note to update them on the range of actions and campaigns in which North Carolina United Power has continued to organize in the past year and a half.  Here is an excerpt of the note I sent them.

Hey, folks,

A year and a half ago I was sending you lots of emails as we started work on a major organizing campaign dealing with economic justice issues.  As theological scholars and servants of the church, we recognize our responsibilities to follow Jesus in the task of serving the poor, offering ministry of relief, building ecclesial structures to reshape economic life in our neighborhoods, and seeking justice in the face of economic powers.  Thus, the theological reflection leading to the "Theological Reflection on the Economy" of 2009 was an exercise of our vocation which helped to provide grounding for faith-based people's movements which have gone many directions.  The document has been studied in churches, in minister's conferences, in seminary classes, and far beyond North and South Carolina. 

The paths of discipleship continue to open before us even now.  Let me highlight some of the work linked to our efforts of 2009.

1.  The "10% Is Enough" campaign in the Eastern US, London, and Berlin, has continued to bear fruit.  We did not convince banks to voluntarily cap credit card interest rates, nor did with convince Congress to cap consumer interest rates.  But we have built relationships with bank executives which are paying off in continued access and influence.  Moreover, leaders of the "10% Is Enough" campaign have met with Dr. Elizabeth Warren to help shape the Consumer Financial Protection Agency.  Caps on interest rates continue to be a lively topic, in part because of the strong work of MetroIAF, of which we have been a part.

2.  The "6% Is Enough" campaign to protect military families from predatory credit practices and foreclosure has been an overwhelming success.  This is a NC United Power campaign, and we have worked with Wachovia/Wells Fargo and Bank of America.  B of A held ongoing conversations with us for over a year.  Last summer they agreed to everything we were asking for, extending benefits beyond the legal requirements for nine months of protection from rising interest rates.  For several months, they were reluctant to admit publicly that they had changed their policies in response to negotiations with NCUP.  This month, in a surprise turn, CEO Brian Moynihan publicly thanked NCUP and Gerald Taylor for our work in this crucial area.  Our fellow signatory, Dan Rhodes, was present to meet personally with Moynihan, the first time he has met personally with members of our organization.

3.   The effort to bring justice to the foreclosure crisis has taken off in recent months, in part because of the attention that NC Attorney General Roy Cooper has given to foreclosure fraud as President of the National Association of Attorneys General.  For this work, NCUP (also going by the name IAF-SouthEast) has made partnership with People Improving Communities through Organizing (PICO), National People's Action (NPA-US), Alliance for a Just Society, and the Alliance of Californians for Community Empowerment (ACCE), all faith-based community organizing groups, stretching our organizing from the west coast to the east coast, from the Rocky Mountains to the midwest to the south.  We have met with key leaders, including Iowa AG Tom Miller and NC AG Roy Cooper, all the while keeping our efforts alive with Bank of America.  One summary of our proposals, "The Homeowner's Bottom Line," has gained significant interest, and most of its proposals remain on the table in the nationwide AG's investigation and potential settlement with the major banks to improve the foreclosure process.

4.  In conversation with a major funding organization (no funding yet) for theological education research, I have piloted a course at Shaw University Divinity School, "Pastoral Readiness for Economic Crises."  We covered financial literacy and financial freedom for pastors as well as a form of Christian formation for churches and their communities.  We looked at a wide range of theological sources on money, possessions, economics, and consumption from the earliest churches down to our times.  We looked at tools for churches to evaluate their relationships with banks that may or may not be serving poor communities.  We looked at models of community development, such as the Christian Community Development Association model of ecclesial politics of neighbor love.  Finally, we looked at faith-based community organizing.  With this trial run under our belt, I am hoping to work with some of you as partners in developing a proposal for adapting this sort of clergy training to other seminaries and to continuing education programs for current pastors.

5.  The predatory practices of payday lenders and car-title lenders will not die without a fight.  From Texas to North Carolina, from Mississippi to New Hampshire, strong lobbying efforts to open the door to astronomical interest rates on small dollar loans are alive and well in the state legislatures.  I've testified before legislative committees in Texas, mentioning you all and our work.  Just this past week, a bill was introduced in the NC legislature to reopen the door to usurious rates.  When there is the chance of ripping people off legally, there will always be people trying to do it.  Contact your legislator right away to stop the progress of HB 810.  South Carolina, having passed important reforms in 2009, seems not to have any pending legislation at this time.

On two matters I am seeking your response to moving forward with this work. 

First, . . . we are considering a clergy witness [at an upcoming event], with particular attention to dealing justly in the foreclosure crisis. 

The text of Micah 2:1-11 is directly relevant to this matter (not to ignore Isaiah 5:8-17).  The injustice of Samaria and Judah included coveting and seizing houses, ruining people financially (v2).  The powerful put people out of their homes (v9).  All the while they continue to practice the trappings of faith.  Predictably, they demand that anyone who might preach judgment against their greed should stop saying that stuff (v6).  The prophet says they only want a preacher who says, "Go on and get drunk.  Live it up!" (v11), while they "rise up against my people as an enemy" (v8). 

We hope we might gather 100 clergy and seminarians to speak a word of witness about the injustices of foreclosing on people whose financial security was destroyed by the greed, risks, and fraud of bankers, brokers, and insurers. . . . Details of when and where to meet will be forthcoming, depending on whether we believe we can gather an appropriate-sized group for witness.

Second, I will be trying to convene a meeting of some of you professors in late May.  If you would be interested in meeting for three or four hours to evaluate the course I put together and to brainstorm about expanding clergy training for economic life, let me know. . . .

For more information, see

News coverage of recent NCUP action:  here and here

Foreclosure Justice:  Homeowner's Bottom Line 

Broad Campaign for Financial Reforms:  Showdown in America

Against Usury:  10% Is Enough 

Military Families:  6% Is Enough 

Periodic updates on "earth as it is in heaven"

Big Banks See Fines and Penalties Coming

Bloomberg reported on Saturday that Bank of America and Wells Fargo/Wachovia, the biggest mortgage lenders, are anticipating significant fines, penalties, and legal costs to come from the many current investigations into questionable mortgage lending and foreclosure practices.  This news comes as the "Homeowner's Bottom Line" campaign has been meeting with states' attorneys general across the country to press for justice in the foreclosure crisis.

Of course, the devil is in the details.  What will and will not be addressed in the results of the foreclosure investigation has yet to be seen.  However, these big banks see enough significant impact coming that they felt the need to inform the public in a recent report filed with the Securities and Exchange Commission.

Foreclosure Fraud Day of Action

I've finally finished breaking down the proposals in the "Homeowner's Bottom Line."  In the meantime, the campaign has continued to progress.

Around the country, citizens groups met with their state Attorney General during the past week to discuss the ideas in the "Homeowner's Bottom Line."  On Thursday and Friday, from Massachusetts to California, they pressed the agenda to be included in the potential settlement between the state Attorneys General, the thirteen federal agencies with a horse in the foreclosure derby, and the powerful banking interests.  In North Carolina, fourteen leaders,  representing six broad-based organizations with over 250 congregations, institutions, and community groups, met with the NC Attorney General's senior staff.  We came from Charlotte, Davidson County, Winston-Salem, Guilford County, Orange County, Durham, and Raleigh, and our constituents stretch across most of the state.  We are blacks, whites, and Latinos seeking the common good.

Attorney General Roy Cooper currently serves as the President of the National Association of Attorneys General.  In that office, he has played an important role in pressing for a fifty-state investigation into foreclosure fraud.  We were pleased to find that a new staff member who oversees the Consumer Protection Division is now devoting much of his time to this foreclosure fraud investigation.  The AG's staff were well-informed on our proposals and demonstrated a commitment to pursue an agenda very similar to ours.  Since AG Cooper was one of the instigators in bringing about this investigation, we were not surprised to find that to a great extent, our leaders and his staff were on the same page.  Good exchanges of information and assistance were followed by agreements for continued cooperation.

We have a follow-up meeting with AG Cooper himself scheduled for April.  The investigation on foreclosure fraud is apparently moving very fast, and it could be that significant announcements will appear within the next month.  When I hear reports from other states, I will post again about this Day of Action.

Foreclosure Fraud 6: Appeals, Resetting the Market, and Criminal Charges

The "Homeowner's Bottom Line" concludes by addressing a few additional concerns.  The issue of appeals echos earlier concerns with transparency.  This process cannot be left to autocratic decisions by banks and mortgage servicers.  The formulas they are using, the comparisons they are making, the documents they are relying on--all of these need to be available for examination by homeowners and their advocates.  Moreover, if a decision seems unfair to the homeowner, there must be an appeals process for reexamining the decision to foreclose.

Second, the insistence on loan modifications and principle reduction should not become a point of contention between homeowners facing foreclosure and other homeowners who have been able to continue paying their mortgages.  This crisis, and the lending feeding frenzy that led up to it, has harmed the entire economy.  Speculative, inflated prices of real estate harm entire neighborhoods, not only the homeowners facing foreclosure.  If houses in a neighborhood face sharp devaluation, underwater mortgages, and foreclosure, it hurts everyone there.  Neighborhood devaluations spread to entire municipalities as housing values drop.  People who bought homes during the housing bubble may have payed inflated prices and interest rates.  To get the housing and mortgage market back to a rational level of valuation, we recommend loan modifications be made available to all homeowners.  Mortgage principle and mortgage interest rates should be reset at the current market levels for all borrowers who want loan modifications, whether or not they are facing foreclosure.

Finally, the reckless, devious, and unscrupulous actions of some mortgage brokers, bankers, and other financial executives betrayed their primary fiduciary responsibilities to homeowners, workers, investors, and the common good.  Some have committed criminal acts.  As in the investigation of the savings and loan scandal, appropriate authorities at state and federal levels should bring criminal charges against any and all persons responsible for contributing to this crisis of credit, unemployment, foreclosure, and economic collapse.

Problem: Under the current system, borrowers who are denied for loan modifications do not have access to any kind of appeals or escalation process to have the decision reviewed for accuracy.

Solution:

Every borrower must have the right to appeal to an independent third party-a court, mediator or public agency-that can review the servicer's loss mitigation effort.  Foreclosure must be stayed during the appeal.

Problem: Mortgage fraud has caused a ripple effect of negative consequences for families, communities and government, including reduced property values, negative equity for millions of American homeowners, widespread job loss, and massive state revenue shortfalls.

Solution:

Allow homeowners to refinance at current interest rates and market values.

Problem: Throughout the entire mortgage process, from origination to servicing and modification, banks and bank executives have consistently broken the law.  Bank executives knowingly made and purchased deceptive and predatory mortgage loans; fraudulently packaged those risky loans as AAA high quality investments; ignored the securitization rules they themselves wrote; and systematically falsified loan documents in a rush to foreclose on families.  But so far, not a single bank or bank executive has had to face justice or pay for their crimes.

Solution:

As the top law enforcement officials in our states, Attorneys General must seek criminal penalties as they discover bankers and servicers who broke the law.  Banks and bank executives are not above the law and should not escape the consequences for their illegal actions.

 

Foreclosure Fraud 5: Help for All Who Have Been Harmed

The relentlessness of the current foreclosure crisis can push one to despair.  There is endless talk about solutions, but too many people get their hopes up only to see nothing change.  Many striving for some way to keep their homes wait and wait until the time and opportunities run out and their homes are taken. 

There have been many stories of improper foreclosure proceedings through which people who had not missed any house payments found their homes sold at auction.  They were told that since it was a legal sale, they could do nothing about it.  Even more people, guided through a loan modification process and assured by a bank that the modification is forthcoming, have awoken one day to discover that their homes will be sold at auction anyway.  This does not even take into account the foreclosures completed by banks and servicers who have not produced any proof of their right to foreclose on the home.

In the meantime, millions more homeowners are facing foreclosure in the coming year.  A loan modification solution needs to be available soon so that these foreclosures will not continue to drive people from their homes and further undermine and harm the housing market.  Yet fairness requires that those whose homes have been fraudulently foreclosed have recourse to recover their home and investment.  A just solution must take all of this into account.

Problem: Because of entrenched problems and long-standing fraudulent practices, many families who should have received a loan modification have already been harmed, including the loss of their homes.

There are two basic categories of homeowners who have been harmed by servicers' malfeasance: (1) those who have lost their homes; and (2) those who are still in their homes, but have been denied a loan modification, pushed into default, or merely had improper fees tacked onto their account.

Solution:

• Remedies for Those Still in Process

For homeowners who have not yet lost their home in a foreclosure sale, servicers should institute a supervised, full review of every file marked in default. This review must include a review of the payment history, including the timing and application of payments and the validity of fees charged.

1. Homeowners found not to be in default should be removed from foreclosure, corrections of credit reporting status must be provided to the credit bureaus, and accounts should be fully corrected.
2. All pending foreclosures should be halted while this review takes place, and dual track processing must be stopped on all loans so that the modification review can be completed.
3. Fees should be rolled back and limited to reasonable and necessary ones.
4. Recalculation of principal balances should be done to account for improperly assessed fees or overcharged interest.

• Remedies for Those Whose Foreclosures Have Been Completed

The servicers should also be required to undertake a review of all completed foreclosures to identify any cases where the foreclosure was executed on the wrong home, where the homeowner was not in default, and where the foreclosure was completed without completing the loan modification review process, providing a written denial to the homeowner, or failing to offer a qualifying homeowner an appropriate modification.

1. If the home has not yet been sold to bona fide third party, the servicer should offer to restore the mortgage, with a reduction of the principal balance to account for all assessed foreclosure fees, as well as any improper fees.  If the homeowner cannot afford the current mortgage payments, they should be assessed properly for a loan modification under the procedures established above.  Servicers must further provide corrected credit reporting to the credit bureaus to mitigate the negative credit reporting.  A restitution fund should be established, funded by the servicers, to provide damages to this class of injured party.  

2. If the home has already been sold to a third party or if the homeowner no longer wishes to retain the home, the servicer should be required to refund to the homeowner all foreclosure fees assessed against the homeowner's account, plus the amount by which the valuation the servicer relied on exceeds the foreclosure sale price.  Servicers must also take steps to repair the homeowner's credit in these situations.  A restitution fund should be established, funded by the servicers, to provide damages to this class of injured
   party.  

3. If the homeowner who was subject to a wrongful foreclosure cannot be located, the servicer should be required to deposit the money that would otherwise be paid to the homeowner into the fund for legal services and housing counselors.

The last post in this series will cover a few final concerns, including the criminality of foreclosure fraud.

Foreclosure Fraud 4: Reigning in the Imbalance of Power

Anyone who has negotiated a price for a car knows what happens next.  Having agreed upon a price, the salesperson or clerk starts filling out an invoice and adding more fees, charges, and items over and above the agreement.  A whole new round of negotiations starts, and unless the buyer is willing to walk away from the car, she or he may be stuck with paying these "mandatory" fees.

Banks and other lenders have taken a page from the car dealer's book, and they must have entire departments devoted to thinking up charges and fees with fancy and official-sounding names.  With the passage of reforms for the credit card business and other consumer credit, these fee inventors have redoubled their efforts to replace outlaws charges with new ones.

If there is any fairness in the consumer credit industry, then this ability to arbitrarily and independently add fees and charges has to be reigned in.  Borrowers need to be able to enter discussions on modifications with at least the presumption that the process has their interest as a concern along with the lender's interest.  We want the attorneys general to enforce procedures which help maintain a balance of power in the loan modification and foreclosure process.

Problem: Servicers take unfair advantage of borrowers in default by charging multiple fees, sometimes for services that are unnecessary, and sometimes for costs that are disproportionate to the service being performed (in some cases by affiliated companies).

Solution:

All Fees Must Be Reasonable and Transparent

All servicer fees must be bona fide and reasonable and fully disclosed to the borrower.  Lender attorneys fees charged to borrowers may not exceed bona fide and reasonable fees for work.  Fees may only be collected for services actually rendered or for work actually performed.

Forced-place Insurance Severely Limited

The use afforce-placed insurance must be limited to reasonable application, affordable payments and only after other options, including borrower's option to purchase on open market, have been exhausted.

Problem: For any requirements (including those already in place), adequate enforcement provisions and staff must be put in place so servicers are not able to ignore the requirements with impunity.

Solution:

• Each settlement should contain the creation of an ombuds-office under the AG that will investigate violations of the agreement. Fines should be imposed for violations of the agreement if servicer refuses to cure. Also, the AGs should have the right to issue a "cease and desist" letter to halt foreclosure activity during the investigation.
• A portion of any monetary funds from the settlement should be directed to legal aid and housing counseling groups to assist with modifications and enforcement of agreement including foreclosure prevention litigation.
• In addition to assigning each borrower a single case manager, a single team should be created in house at each servicer as part of the settlement to oversee loan modification activity under the settlement.

The next post will deal with which people should have relief and recourse in dealing with foreclosure fairness and foreclosure fraud.

Foreclosure Fraud 3: Clear and Unequivocal Communication

When a bank working on a possible mortgage modification tells a borrower to stop making payments in order to allow the modification to proceed, usually in another office of the bank a red flag flies up to say that the foreclosure clock must start ticking.  One mouth says stop making payments and become delinquent in order to get paperwork moving.  Another says don't stop payments unless you want another set of paperwork to start moving.  Case after case in the past year has found homeowners receiving notification of a modification offer almost simultaneously with notification of a foreclosure sale.  By now you are all thinking about an old saying having to do with a left hand and a right hand.

This kind of carelessness and lack of concern for customers has characterized the current foreclosure crisis.  Admittedly, banks do not traditionally have enough staff to handle the current volume of potential loan modifications or the current volume of potential foreclosures.  In trying to ramp up while also keeping staffing numbers down, the result has been libraries of lost paperwork, constant restarting of the process, and a different answer from the servicer every time a homeowner makes contact.  Getting the banks to clean this up would seem to be in their interest, but when banks are as large as Wells Fargo and Bank of America, there is also a kind of internal struggle over which departments get to do what they should and which ones just do what they can.  We think that it is more than reasonable for homeowners to expect better.  What follows is a second part of what we are asking the Attorneys General to do.

Problem: Servicers proceed with the foreclosure process at the same time as they are conducting a loss mitigation process. This leads to borrower confusion and further complicates the process and the communication between borrower and servicer. It also leads to unjust foreclosures before due diligence is completed in the loan modification process.

Solution:

Mandatory and Standard Loan Modification Review

Foreclosures should not be initiated until the servicer does a complete review of a borrower's file. If the borrower is already in foreclosure when he or she requests a review, the foreclosure process (and not just the final sale) must be suspended until the review is completed.

a. This review must include the complete payment history; the contact log; and any other relevant information to determine whether the borrower is actually in arrears.

b. This review must include a determination that all loss mitigation requirements (as set out by HAMP, investors, FHA, GSE's, etc.) have been met, and the servicer must disclose to the customer all inputs and calculations done to establish qualification for a loan modification (see NPV transparency above).

c. Servicers must develop a protocol for evaluating Pooling and Servicing Agreements for investor restrictions and must seek a waiver if necessary.

Written Confirmation of Review to Borrower

If a borrower is not offered a loan modification, the servicer must provide a sworn affidavit to the borrower, disclosing the reasons for denial, including

a. any calculations done to determine loan modification eligibility; and

b. if the denial is due to investor-imposed restrictions, the specific language in the PSA prohibiting the modification, instructions on how the borrower can view the full PSA, and a written log of the servicer's efforts to obtain a waiver of this restriction.

Borrower Appeals Process

The denial letter must provide the borrower with an opportunity to appeal this determination to a neutral party. Foreclosure can only be resumed after written denial has been provided and time for an appeal has passed. If an appeal is pending, no foreclosure can be resumed.

No Legal Foreclosure Without Proof of Due Diligence

Servicers should be required to file a certification of loan modification procedures as a precondition to a foreclosure sale. In the case of a non-judicial foreclosure, the government official responsible for recording deeds and other transfers of property in the jurisdiction in which the property is located shall not permit the recordation of a deed transferring title after a foreclosure without certifying that the party conducting the sale has demonstrated that the requirements of this section have been met. A sale of property in violation of this subsection is void.

Consistent Communication with Consistent Staff

Upon contacting the servicer, the borrower must be assigned a case manager that will remain with that borrower throughout their loss mitigation experience. This case manager will have decision-making authority and access to the highest levels of management in the company. It is permissible for additional line staff to assist the case manager, as long as the case manager is always accessible to the borrower.  If a servicer is temporarily incapable of providing this adequate staffing level, the servicer must refer to a licensed special servicer until adequate staffing levels are reached.

The next post will deal with the imbalance of power that leads banks to multiply additional fees and get by with ignoring the law.

Foreclosure Fraud 2: Loan Modifications First

The agenda for stopping foreclosure fraud has to address many aspects of the process.  One of the first problems is convincing banks to see that their best interest, rather than robotically following a set of foreclosure procedures, is often to renegotiate mortgages with homeowners.  The following is an excerpt from our detailed proposals to the Attorneys General.

TO:  Attorney General Tom Miller

FROM:  PICO, NPA, SElU, AJS, ACCE, SE IAF

RE:  Problems in U.S. Mortgage Servicing & Needed Solutions

DATE:  February 9,2011 (REVISED)

CC:  Other 49 State Attorneys General

Problem: Servicers are not making affordable loan modifications that benefit both homeowners and the housing market, even when modification would provide a greater return to investors than a foreclosure.

Mandatory Loan Modification

When a loan becomes delinquent or when a borrower provides their servicer with notice that default is imminent, the servicer must review the mortgage loan to see if an affordable loan modification can be made. If a loan modification is in the best interest of the homeowner and investor, then the servicer is compelled to offer a modification.

Mandatory Principal Reduction
If the balance on a loan exceeds the current market value of the house the first step must be to reduce the principal to 100%. Recapture of forgiven amount may not exceed 50% of the increase in market value as determined by a third party appraisal.

Junior Liens Extinguished or Reduced
For any junior lien that is entirely underwater, even if it is not in default, the servicer must extinguish that lien according to the payoff schedule. For other junior liens, all liens must be reduced proportionately to meet the CLTV cap.

Transparent, Fair, Appealable Net Present Value (NPV) Calculation
Each servicer must provide public access to the NPV Test that it uses in making a loan modification determination. Inputs of general applicability (default rate for a community, locally specific appraisal, foreclosure costs, etc.) must also be made public. NPV calculation must be appealable by the homeowner for errors and misinformation.
     The servicer must disclose the property value of the home that it has used for purposes of determining the terms of the modification and the methodology used to determine the property value. If the homeowner disputes the property value and can give basis for the dispute and show that disputed difference is material, the servicer must conduct an independent appraisal of the property at servicer's expense.

Fair Application of Fees

All foreclosure and default related fees and costs must be waived in determining the new principal balance for the loan modification.

Reasonable Debt-to Income and Residual Income Calculations

Affordability should be based on a debt-to-income ratio range and a residual income test. The front-end debt-to-income ratio for modifications should be between 25-31%. The back end ratio, which should include all other secured and unsecured debts and medical expenses, should not exceed 46-60% based on circumstances. A residual income schedule that accounts for geographical differences in cost of living shall be set to ensure that borrowers have sufficient residual to pay other necessary living expenses regardless of front or back-end ratio calculations.

All Modifications Permanent

All modifications must be at a fixed interest rate for the life of the loan.

No Release of Liability

No modification can include a waiver of any legal claims of the homeowner.

Affirmative Outreach

Affirmative outreach provisions should be put in place requiring servicers to alert borrowers of the terms of the settlement, search for and reach out to eligible borrowers with proposed loan modifications, including door to door contact in heavily impacted census tracts.

The next post will deal with the conflicting internal operations of mortgage servicers and banks who simultaneously start foreclosure procedings and negotiate potential modifications with homeowners.

Foreclosure Fraud 1

A letter went out this week to Attorneys General of all fifty states:  it is time to get tough on the fraudulent, unjust practices of banks and other financial institutions foreclosing on the homes of hardworking people.  Already banks have had to admit they have not followed legal requirements in processing foreclosures.  What needs to be uncovered is the full extent of the carelessness, fraud, and predation by the financially powerful institutions who believe they can get by with it because they can afford the lawyers that most of us cannot.

But each state has an Attorney General who works for us.  They already have initiated action on foreclosure fraud.  The lead investigator, AG Tom Miller of Iowa, has agreed to work with us in pushing this agenda forward.  The letter below is the first page of our expanded agenda to deal with key aspects of the foreclosure crisis, "The Homeowner's Bottom Line."  The letter was cc'ed to AGs from all 50 states.

For more information and to find out how to get involved, check out Showdown in America.

Banks Sucker Punch Military Families

As part of the work on resetting the economy, North Carolina United Power and the IAF-SE have been pressing for banks to obey the law in dealing with loans to military personnel.  The law, revised in the past decade, says that when soldiers are on active duty, all of their loans must be capped at 6%, and any existing interest above that level must be forgiven.  Moreover, when they are on active duty and three months beyond, a bank cannot start foreclosure proceedings or other debt recovery strong-arm tactics. 

We took up this cause because we were hearing many stories about how banks were not following these laws.  And that does not even take into account all of the predatory lenders, loan sharks, and such who open for business just outside the gates of military bases.

We made good progress in these negotiations with big banks and with NC government officials.  Bank of America was especially responsive, offering unilaterally to extend the grace period law demands from three months to nine months.  By doing so, they give room for the new shape of military deployment which relies heavily on National Guard and Reserves and which has led to numerous sequential tours of duty.  The law did not anticipate this change, and it has hurt many military personnel whose cases have not been handled correctly.

In case anyone wondered whether this is a real problem, a recent news article points out that at least one major bank, has admitted to breaking the law in dealing with military families.  J.P. Morgan Chase was foreclosing on military families while they were bearing the weight of active deployment.  The article names only a few cases.  I suspect that a committed investigative reporter would find many, many more at all major banks, in regional and local banks, and an explosion of cases among payday lenders, car title lenders, and other criminally conceived businesses trying to fly under the radar.

Let me again acknowledge Bank of America for its promises to improve services and go beyond the letter of the law in working with military families.  We have had some hopeful conversations with Wachovia-Wells Fargo who has had experience operating a specialized military bank out of San Antonio, TX, but they have not made any commitments in response to our requests.  Obviously, J.P. Morgan Chase has had to come clean on a few cases.  I hope some other groups working toward economic justice will raise these questions locally to stop the sucker punching on these families who already face stress and problems beyond what anyone should have to face.

A Prayer for the Foreclosure Crisis

I gave the invocation for a gathering of homeowners and organizers from fifteen states who met with Attorney General Tom Miller of Iowa.  Miller is leading a task force of the fifty state attorneys general who are investigating fraud and abuse in the foreclosure process.  Here is the prayer I offered.

God of all,

We come today with hearts that are heavy, yet hopeful.
Our hearts are heavy because
Your people cry out for the lack of justice.
Still, we come with hope because
We know the God who is a Waymaker.

Give us the clarity of your servant Isaiah
Who named the causes of economic collapse
Twenty-eight centuries ago--
The failed economy of Jerusalem caused by
The treachery of the powerful
Who had lavishly furnished their multiple homes
With the spoils of the poor.

May there be some like that prophet
Who will arise now,
Even from among this gathering,
To call on misleaders to repent
And do justice.

As you called Isaiah long ago,
We now listen to your calling:
"Come, let us argue it out," says the Lord.
Inspire our conversation,
And guide our feet.

Amen.

References:  Isaiah 3:14-15; Isaiah 5:8-9; Isaiah 1:16-18

Overheard in Des Moines

Here are a few things I heard while working on the foreclosure issue in Des Moines this week.

Gina Gates of San Jose, CA, said that her banker said she could get her home out of the foreclosure process if she would give them another $40,000.  When she asked for the agreement in writing, they said, "We don't put anything in writing."  Then they withdrew the agreement on the spot.

Peggy Mears of Los Angeles said, "When Bernie Madoff stole from rich people, he got 150 years on prison.  When bankers steal the homes of working people, they get millions of dollars in bonuses."

Ken Kelley of Antioch, CA, said, "If homeowners make a mistake on their mortgages, we lose everything.  But if banks make a mistake on our mortgages, we still lose everything."

Attorney General Tom Miller of Iowa responded to a question about criminal prosecution of fraud and other crimes in mortgage foreclosures, "We will put people in jail."

Push the Reset Button on Housing

That's what Gerald Taylor of North Carolina United Power keeps saying:  "We need to push the reset button on the housing market."  The economy got thoroughly messed up by the speculative, reckless practices of the mortgage industry.  The government responded by bailing them out.  They got their derivative market reset.  They get to borrow money for virtually zero per cent interest.  AIG got to push the reset button.  GM got to push the reset button.

But the banks don't want to give the rest of us a chance.  In a mess they willingly helped to make, they got off the hook.  The winners got to buy up their competitors for cents on the dollar.  They were allowed to voluntarily find ways to help homeowners, unemployed workers, pensioners whose incomes evaporated, and other victims of the economic crisis.  But they don't want to do it.

They string families along with delays and lost paperwork, offering loan modifications while simultaneously working full steam, even fraudulently, to move the foreclosure process forward.  Attorney General Tom Miller of Iowa says that this dual-track process of promising modifications while fast-tracking foreclosure is "insane."  What sense does it make for a family to get a loan modification proposal from the bank on the same day that the bank sold their house?

Give homeowners the same chance.  Reduce mortgage principal across the board to current market values.  That's right--we need across-the-board principal reductions for homeowners underwater, whether they are behind in their payments or not.  Push the reset button.  Make a market correction.  Why?

1.  Unemployed and laid-off workers, retirees depending on pensions, and many homeowners who bought market-rate homes with the assurance that the market was operating in a rational manner (when almost no one--not even the revered Alan Greenspan--recognized the housing bubble) did not come into financial misfortune because of carelessness, greed, or risky behavior.  They were overwhelmed by the economic tsunami from the collapse of the derivative house of cards.  Getting them on their feet and keeping them in their homes will help stabilize the economy.

2.  Foreclosing on one family, then selling the same house for half-price to another family is pure stupidity.  Without all the human trauma and with less paperwork and financial loss, banks could renegotiate reasonable mortgages for the people who are at risk of foreclosure. 

3.  Neighborhoods and communities where many foreclosures have happened become depressed, forcing down the value of other homes.  This puts more homeowners underwater and creates new risks for foreclosures.  Stabilizing neighborhoods by keeping families in their homes and paying modified mortgages is good for all of us.

4.  The so-called moral hazard of adjusting loans in a way that is beneficial to the borrower is a smoke screen.  If banks were being swindled into letting people off the hook who never intended to pay their mortgages, that would be a moral hazard.  But the true moral hazard came when the mortgage industry turned into the anything-goes-mortgage-derivatives orgy.  Even admitting that some homeowners took stupid risks or failed to do due diligence before borrowing, the risks and benefits of mortgage finance have to be shared.  Letting the banks off the hook for their bad debts while holding small borrowers accountable for their debts is an unjust financial system.

So set the reset button for homeowners.

Pillars of the Home Mortgage Business: Fraud, Lies, Theft, and Greed

I know everyone in the home mortgage business is not a thief and liar.  Let me make that plain.

Yet it is clearly the case that the ongoing foreclosure explosion has become a money-and-power-grab by banking executives and major shareholders who will stop at nothing to make sure they don't lose a dime on their crappy mortgages, no matter how many families they have to put out on the street.  First it seemed they were simply unprepared for such a large number of mortgages going underwater.  Then it seemed they were disorganized and careless about people's paperwork.  Of course there was the disingenuous worry about "moral hazard," as if the real moral hazard had not been perpetrated by the financial system that speculated and cast away all standards in order to create more and more billions of mortgage backed securities.  Eventually it became clear that even the mortgage foreclosure cases that were progressing were not undergoing due diligence.  Then cases of "mistaken" foreclosures began to pop up more and more.  Finally, banks began to admit the ways they have been breaking the law in order to prevent loan modifications and recourse against foreclosure proceedings.  What is emerging is a coordinated and willful theft of homes from average homeowners.

So this week organizers from all over the country have converged in Des Moines, Iowa, for a summit on ending the ongoing bank misconduct and lawlessness in home foreclosures.  Gerald Taylor and I represent North Carolina United Power at this meeting, along with people from coast to coast who are fed up with the impunity of banks in the current financial crisis.  Like me, you may wonder, "Why Iowa?"

There are two reasons to meet in Des Moines.  First, Iowa Citizens for Community Improvement have a long history of making a difference for working people who are being abused by the powerful.  They are hosting our gathering.  Second, Iowa Attorney General Tom Miller is the lead lawyer for the national investigation into illegal banking activity in the foreclosure crisis.  He will meet with our group to discuss the ongoing investigation and the possibilities for working together toward a just resolution of this crisis for all parties.

We want three major elements for a just solution. 

1. Hold banks accountable for real, transparent loan modifications with borrowers before any foreclosure proceedings, including lowering rates, to keep families in their homes.
2. Mandate principal reduction for owner-occupied homes as a first-line modification tool.
3. Include remedies for homeowners who have lost their homes to be reinstated as homeowners or financially compensated for the effects of this unlawful, corrupt system.

 We will not solve it with one meeting, but we hope to see another vital step this week.

Isaiah and Economic Justice 5: Forcing People from Their Homes

Isaiah 5:8-10

Ah, you who join house to house,
...who add field to field,
until there is room for no one but you,
...and you are left to live alone
...in the midst of the land!
The Lord of hosts has sworn in my hearing:
Surely many houses shall be desolate,
...large and beautiful houses, without inhabitant.
For ten acres of vineyard shall yield but one bath,
...and a homer of seed shall yield a mere ephah.

The foreclosure crisis in which we are wallowing in our time is not the first one ever to happen. Isaiah brings it up as one of the main issues of economic injustice in his day. We know how the system works. Some people who have control of large amounts of money finance home construction and offer homebuyers mortgage loans by which they can move into a house before they can pay for it. If all does not go according to plan, the homebuyer may lose everything, including the home. All the while, the creditor was making money hand over fist from the interest on a long-term loan.

Mortgage loans and interest are not inherently evil. In a prosperous economy they can give workers access to home ownership with enough time to earn the money and pay for a home. Yet when the economy is not so strong, the system can lead to disaster for the homeowner. Moreover, when an economy moves step-by-step down a path of greed and injustice, homeowners may be put at a great disadvantage, shifting more and more risk onto them.

For instance, in an economy in which health costs have risen rapidly and growing numbers of workers become uninsured or underinsured, one illness or injury can lead to loss of income, loss of job, enormous debt, mortgage foreclosure, and bankruptcy. The bank adds another house. In another case, when businesses export jobs overseas and leave entire towns and neighborhoods without opportunity for earning a wage, people lose their homes. The lender adds house to house. When industrial farms use their political influence and polluting ways to undercut hard-working farmers, old family homes, farms, and lands are lost. The wealthy add house to house and add field to field. Entire towns, neighborhoods, and subdivisions may be emptied of occupants, until the foreclosed homes occupy all the land and there is no room for anyone else. The wealthy financiers are left alone to live in the midst of the land.

So around Phoenix and Las Vegas, in Los Angeles and Seattle, in Florida, Ohio, and Michigan, surely many large and beautiful houses are without inhabitant. The gimmick in such a system is to "get mine, and get out." Many mortgage bankers believe they have done this. For insurance, they got the government to bail them out so that whatever they lost in the crash was reimbursed to them out of our pockets. But at some point, somebody has to bear the cost of getting mine and getting out. Isaiah says that the cost will ripple to the point that the productive economy will diminish to near nothing.

The point is to fix this before it gets so bad. Find a way to get people into homes and keep them there. An economic system can't stand on this kind of self-serving injustice.

Isaiah and Economic Justice 3: Oppression and Idolatry

Isaiah 2:7-9, 18, 20-21

Their land is filled with silver and gold,

....and there is no end to their treasures;

their land is filled with horses,

....and there is no end to their chariots.

Their land is filled with idols;

....they bow down to the work of their hands,

....to what their own fingers have made.

And so people are humbled,

....and everyone is brought low—

....do not forgive them!

The haughtiness of people shall be humbled,

....and the pride of everyone shall be brought low;

and the Lord alone will be exalted on that day.

On that day people will throw away

....to the moles and to the bats

their idols of silver and their idols of gold,

....which they made for themselves to worship,

to enter the caverns of the rocks

....and the clefts in the crags,

from the terror of the Lord,

....and from the glory of his majesty,

....when he rises to terrify the earth.

Isaiah 2 links together the sins of idolatry and economic oppression. A major theme of prophetic literature is the distinction between the Lord and the gods of the nations. The people of Israel are called to be a sign of God’s purpose for humanity throughout the world. They are blessed so that through them, all nations will be blessed. At the heart of such blessing is to know that the Lord is a good and just God. Therefore, the prophets often write that God will act “for the sake of my name.” “Name” is not strictly an arbitrary label applied to an object here. It is more like the idiomatic English use in the phrase “my good name.” God has a reputation to uphold, and if God’s people display to the world a society built on social oppression and violence, then it seems that the Lord is just one more prejudiced tribal deity looking to help out some cronies.

One aspect, then, of idolatry is the devotion to gods who one hopes to manipulate for personal favor or gain. The idolatry of Israel involved worshiping gods who might deliver protection from a worker’s uprising or a competitor’s advantage. Such gods might offer an exchange or a deal—in return for worship and obedience, a bumper crop to be sold for unjust gain. These gods might offer to increase the landholdings of their devotees, giving tacit blessing to driving the poor from their lands through sharecropping and usurious practices. The Lord is not willing to be known as the god of this kind of people. The Lord will not be tossed in with the gods of oppressors. The Lord will not be manipulated.

Another aspect of idolatry is its link with self-centeredness and pride. One criticism of the idols in this oracle is that they are themselves the creations of human hands. People are bowing down to worship products of their own making. What they are worshiping is not a god in any traditional sense. They are, as Adam and Eve, longing to become gods themselves and usurp the place of the Lord. Having plenty of gold or silver allows them to commission and purpose beautiful sculptures of deities. It is a reminder of the way that the people at Mt. Sinai brought their wealth to Aaron to shape for them a god of their own making.

This oracle cites their haughtiness and pride as the seed of their downfall. They rationalize their self-idolatry on the basis of their treasures and military might. They believe that their appearance of wealth and power means that they are in charge of their own destinies. But soon, these illusions, so perfectly visible in the mansions and idols of silver and gold, will become useless. Instead, they will flee to the caves and cliffs, finding their delusions of deity have become worthless.

Those who believe their ill-gotten gain is salvation have much to learn about the Lord, who is just, holy, and good.

Again, a few lines from Bruce Cockburn, “Call It Democracy,” offer a contrapuntal melodic line.

Sinister cynical instrument

Who makes the gun into a sacrament—

The only response to the deification

Of tyranny by so-called "developed" nations'

Idolatry of ideology.

North, South, East, West—

Kill the best and buy the rest.

It's just spend a buck to make a buck.

You don't really give a flying f---

About the people in misery.

IMF (dirty MF)

Takes away everything it can get,

Always making certain that there's one thing left:

Keep them on the hook with insupportable debt.