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Tuesday, December 8, 2009

FORECLOSURES WORSE AMID BANK APATHY, FED DELAYS

Posted By on Tue, Dec 8, 2009 at 1:36 PM

Federal lawmakers came to Cleveland this week for a grim analysis of how foreclosures continue to devastate the region. The lawmakers — part of a domestic policy congressional subcommittee — listened to a panel of local officials who shared stories of ongoing attempts to alleviate disaster for homeowners and neighborhoods.

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“I’m sad to say that this state and this county haven’t been in worse shape,” Cuyahoga County Treasurer Jim Rokakis told the subcommittee during a hearing at the U.S. federal courthouse in Cleveland. “This is an endless war. We are losing that war.”

Rokakis’ bleak assessment is based on rising figures for 90-day loan payment delinquencies and pending foreclosures, locally and throughout Ohio. While much of the prior focus was on the problems created by sub-prime loans, the rise in unemployment means that more people with traditional loans are facing foreclosures and delinquencies. And more people are finding that their homes are worth less than the balance on the mortgage.

Rokakis’ says the federal Home Affordable Modification Program (HAMP) has failed in Ohio. The program to assist homeowners has serviced about 650,000 loans nationwide, but only a fraction of those loans have been permanently modified.

Michael Dudley, a Garfield Heights councilman, also bemoaned the loan program and begged lawmakers to intensify education efforts for homeowners who get lost in a sea of bureaucracy, misinformation and apathy. Dudley says banks have misled some of his residents, telling them they could delay loan payments while they waited for their loans to be modified — then continuing to charge interest and and tacking on penalties. “We need to get something that’s going to educate these people,” Dudley said.

While officials say loan counseling works, one Ohio group says even that outlet for troubled homeowners could soon be diminished. Mark Seifert, executive director for Empowering & Strengthening Ohio’s People (ESOP), said federal funding for foreclosure counseling in Ohio will be slashed in half.

"These cuts will severely cripple ESOP’s ability to continue to serve the thousands of people we serve each year,” Seifert said. He also criticized HAMP, saying that his group had helped with 400 cases of loan modification. To date: only one permanent loan modification.

Part of the problem with HAMP — and with tackling foreclosures as a whole — is lender apathy. Officials complained about lenders who continued to skirt accountability, even after receiving millions of dollars in federal money to tackle the foreclosure crisis.

Howard Goldberg, a community development administrator for the city of Lorain, says he sees too many vacant, valueless properties in his city, properties essentially abandoned by lenders. Those lenders should be compelled by the feds to unload these “stagnant properties” by assigning those mortgages to cities and non-profits that can foreclose and secure a title, Goldberg said. Lenders should not force cities to bid on houses up for demolition, a practice that eats up federal dollars. (A Bank of America official on the panel, Robert Grossinger, said his bank was locked in agreements that prevented it from accepting “a lesser bid for a social good.”)

While a U.S. Treasury official assured the committee that the feds were making progress with HAMP, Congressman Jim Jordan, a Republican from Urbana, called the effort “one more example of a big federal government program that doesn’t work.”

Congressman Dennis Kucinich, who chairs the subcommittee, said it's “obvious that the HAMP program is not effective” and that money should go toward foreclosure prevention programs practiced by groups like ESOP, which he called a “model organization.” Complete testimony from ESOP's Seifert is available here. — Damian Guevara

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