Monday, January 2, 2012

Foreclosure update: Sen. Shields responds

During the Christmas holidays, I received a phone call from Senator Shields. He was concerned that I had not been aware of his efforts to change the rules on foreclosures, and subsequently sent me an email outlining the work that the legislature had actually done and that he and his colleagues were proposing to do.

If passed, the bills would protect homeowners who have been subjected to the most egregious practices in the past. They would not allow banks to let you go through the process of mortgage modification and, while you think you are in compliance with everything they've asked of you, simultaneously foreclose under your nose. They would stop the banks from charging excessive fees and require pre-foreclosure mediation, etc. I have copied his email below, and request that you read and consider what he says. Together we can discuss whether these bills are worth supporting. And below his email, I have given my own opinion:


First, Sen. Shields:

"The legislature actually did pass SB 628 in 2009, that bill dealt with requiring a meeting prior to foreclosure...at least in its original form.  Here's a link to what that bill and HB 3630 from 2008 did:

http://dfcs.oregon.gov/ml/hb3630.html

"In the 2011 session, we passed SB 827 (summary attached) in the Senate, but it died in the 30-30 split House.

"But perhaps the biggest advance was removing the exemption banks enjoyed from being subject to the state's Unfair Trade Practices Act, which was a relic of 16 years of Republican control of the Oregon House.  It allows the banks to be sued by the Attorney General and/or individuals, if they engage in fraud.  We passed that in the Feb. 2010 session over fierce objection by the big banks. See here:

http://activerain.com/blogsview/2106700/what-if-homeowners-use-tools-like-oregon-house-bill-3706-to-fight-back-

"and here:

http://www.davidsugerman.com/2010/02/24/oregon-legislature-provides-consumers-with-tools-to-fight-bank-fraud/

"I have been a close partner in the foreclosure coalition that includes Economic Fairness Oregon, SEIU Local 503 and the Oregon Law Center (Legal Aid).  We decided through democratic means to go forward with the following bills.  Unfortunately, the group decided to take a different route than the one you proposed.  I encourage you to work closely with We Are Oregon, an SEIU 503 partner, to help steer the direction of the coalition.

"Here is a summary of the bills the coalition decided to pursue.  We considered yours, and I also argued for some other approaches, including making banks prove they had the right to foreclose in court, making Oregon a judicial foreclosure state.  We debated and debated and after that fairly democratic process, the group decided to move forward with the following bills:


"1) Ending the foreclosure dual track.
The dual track is a common situation of that happens when the lender simultaneously pursue loan modification or loss mitigation and foreclosure. The harm occurs when the homeowner is lead to believe the foreclosure sale has been postponed while they complete the loss mitigation review only to be surprised to learn their home was foreclosed.  This is most similar to the bill the Senate passes last session, SB 827. 

"2) Mortgage servicing rules.
These business conduct rules set a standard of good faith and fair dealing, restrict excessive fees and require a single point of contact for borrowers in default. This is most similar to SB 826 from last session.

"3) Pre-foreclosure mediation.
Requiring a review of loss mitigation options in the presence of a neutral third party has proven to be one of the most effective steps states can take to help avoid foreclosures and put both lenders and borrowers in a better financial position. So far, 24 states have adopted some form of pre-foreclosure mediation.

"4) A reintroduction of SB 827.

"I have also enclosed a summary of the first three bills and an endorsement form from Economic Fairness Oregon if you and the petitioners want to sign on.  I know these bills are not what you wanted.  You and the petitioners can decide for yourselves on whether you'd like to work to pass these bills or go another route.  We can use all the help we can get. 

"You can also help to get like-minded people elected against the wishes of the powerful mortgage-banking industry.  The Bus Project is an easy way to plug in to work on electing more progressive representatives:


"I apologize that I didn't communicate as well as we should of.  I take full responsibility for that.

"As always, if I can ever be of service, please don't hesitate to call at 503-231-2564 or email here at my campaign address or at sen.chipshields@state.or.us."

Please note that I was unable to figure out how to link Sen. Shields' summaries of bills to this blog post. If you want those links, please email me.

And now, my comments:

My concern is that the existing and proposed legislation still leave an awful lot of people out in the cold--literally. To paraphrase the late Justice Harry Blackmun, they tinker with the machinery of foreclosure. In the meantime, we have an economy emergency here in Oregon, and everywhere else in the U.S. Millions of people have lost their jobs due to the actions of Wall Street, the big banks, and the multinational corporations. Others have lost their jobs due to illness and/or disability. (Millions of others are one major illness or one layoff away from homelessness.) These people have no way of paying a modified mortgage. Tinkering with the machinery doesn't help those who need it most. 

The current real unemployment rate, per the Bureau of Labor Statistics, is 16.2%. As others have noted, the foreclosure rate is actually higher than it was during the Great Depression.

As we all know, the banks and Wall Street have been bailed out. After exporting tens of thousands of American jobs to China, GE CEO Jeffrey Immelt was named Obama's "jobs czar." And during the last session of the U.S. Congress, Obama pushed through three new "free trade" agreements which would export even more jobs to low wage countries. When he made his speech demanding that Congress pass these agreements, Mr. Immelt stood up and applauded wildly. The point I'm trying to make is that our jobs aren't coming back any time soon. We are looking at a permanent underclass of low-wage and unemployed workers, and an increasingly large homeless population.

The proposal I've made--and the petition many of you signed--asks the legislature to think outside the current rules that box them in. A moratorium on foreclosures isn't a new idea. Many states enacted it during the Great Depression.

In the petition we also asked the state legislature to take over empty homes and fix them up in conjunction with groups like Habitat for Humanity, and make them available as affordable housing. Sen. Shields' aide said that the state can't afford it. I don't know whether Oregon could find the money somehow, but clearly this is way beyond what they would consider. IMO, we need to support the Occupy people who are taking matters into their own hands.

There is nothing sacrosanct about our predatory system of home mortgages. In Europe the government helps disabled or unemployed people stay in their homes rather than kicking them out into the street. Call it socialism if you like. I call it doing unto others.