Why Isn't The Foreclosure Crisis Getting Any Better? Is Bush Still In Office?

What would FDR & a more robust breed of Democrats have done?

Careful DWT readers may recall me talking about spending months looking at financially distressed properties with my pal Roland, a public school teacher in Compton who thought he could possibly make the leap from apartment renting to home owning. We found a great house in an upcoming L.A. neighborhood.

My friend found a house in the Glassell Park neighborhood of L.A.-- a changing neighborhood-- that has been hard hit by the foreclosure mania. A hard working man who speaks little English had literally been tricked into a complex variable rate mortgage that he was assured was safe for his family of six. The house is beautiful and he got it for around $500,000 with 5% down (around $25 grand). It was a stretch but he was able to make all ends meet for two years, in the meantime upgrading everything in the house-- electric, plumbing, a guest cottage, a gorgeous garden... And then the full force of Bush's Republican Economic Miracle hit. His mortgage payments more than doubled. He had just been able to make things work before this inexplicable rise in his payments. Now he couldn't. The bank was willing to renegotiate, but not substantially. He faced foreclosure and the complete destruction of his credit-- let's hope Vice President Biden takes an active role in reforming the disgraceful bankruptcy law he helped Bush shove through Congress for his pals in the banking community now that he's in charge of that middle class task force-- and he realized he'd have to sell the house. Unfortunately, houses aren't selling-- at least not at the prices people paid in the last 15 years.

He put his house on the market as a potential short sale for $250,000, half what it was valued at when he bought it. If the bank approved-- and ate the loss-- he would be able to save his credit. My friend the school teacher saw the house and offered $270,000 in cash (borrowing money not from a bank but from a friend). The deal was approved by the homeowner's bank. But then the homeowner realized he had nowhere to go with his family. After spending months looking for a place to relocate-- even out in the dreary desert communities between L.A. and Las Vegas-- he realized that unless he was willing to split his children up among relatives, he couldn't leave the home he could no longer afford to pay for.

Legally, my friend the school teacher could have forced him out at this point. Escrow was about to close and he was entitled to pay the agreed amount and take possession. Ethically... well, how do you evict a family from their home? Instead, we found him another home (in Hollywood), and we suggested the Glassell Park guy follow the advice being offered by Ohio Congresswoman Marcy Kaptur, the longest serving Democratic woman in the House: squat in his own home.

Last week we drove over to visit the family and see how they had made out. They hadn't. They were evicted and had moved to Bakersfield, we were told by some neighbors. The house is empty... sitting and rotting, falling apart; losing value. Tragic-- and a story all too familiar across the country, especially here in California, as well as other bubble growth states like Florida, Nevada, Arizona, Texas, Georgia, Ohio and Illinois. The problem, as Kevin Hall reported in the McClatchy papers yesterday, is that the voluntary loans modifications that lenders were "supposed" to make just are not happening.

Remember when progressives tried making it not voluntary? When they thought all those billions and billions, hundred of billions, of dollars in taxpayer money gave the government the right-- and the obligation-- to force the greedy and stupid, failed banksters to make the loan modifications? We can thank the same crooked reactionary politicians who are busy gutting health care reform for that not happening, basically the entire GOP congressional caucus plus a handful of Blue Dogs in the House and corporate shill Democrats, in this case led by Evan Bayh and his anti-Obama bloc of ConservaDems, in the Senate.

The Obama administration has stepped up pressure on lenders and their mortgage servicers, who act as bill collectors on behalf of investors who own mortgage bonds. The administration on Aug. 4 unveiled the first of what will be monthly "name and shame" exercises, publishing data on the loan-modification efforts of about three dozen companies.

The administration thinks that about 2.7 million U.S. homeowners are at least two months behind on their mortgage payments, roughly equal to the population of Kansas. Yet only 9 percent of eligible borrowers had been offered trial loan modifications through June.

McClatchy's Washington Bureau received calls and e-mails from borrowers across the nation in response to a recent story about the "name and shame" effort. In subsequent interviews with them, a common theme emerged: Virtually all say they were encouraged, directly or indirectly, by their lenders to fall behind on their mortgage payments in order to qualify for loan modifications. Then the modifications never came, however.

These borrowers burned through retirement savings, destroyed their credit ratings and suffered mental and financial hardship.

And then got screwed by the lenders and evicted! Wells Fargo, for example, who has visited this nightmare on countless families has modified only 6% of eligible loans. Bank of America is just as bad.These banks are agents of social degeneration in neighborhoods across America and the government is remiss to not take action against them for the economic well being of the nation.


UPDATE... Hopelessness Is Never As Good As Hope

Looks like the talk this morning isn't about charging forward with an uplifting progressive agenda for helping the working families of America-- you remember... that HOPE thing-- but dialing back expectations. Democrats took the White House, the Senate and the House and they're not all that much better than the Republicans in keeping the special interests in check. Corporate power is too much for them. Maybe they should have started with real campaign finance laws that established more of a balance between normal Americans and corporate power. Oh well... at least McCain or Biden isn't president, I guess. The link above is to a long list of campaign promises-- like from revising No Child Left Behind, Rebuilding the Gulf Coast and funding veterans' programs to allowing consumers to import pharmaceuticals-- that will just have to, at best, wait-- probably a really long time (like for a president whose first instinct isn't to pick a corrupt Wall Street shill as his chief of staff).

On the brighter side, the White House now claims Sebelius misspoke yesterday when she threw health care reform under the corporate bus. Yeah? Prove it with some real CHANGE by firing her and replacing her with someone who wants real reform, like Howard Dean. Better yet, get rid of Emanuel before it's too late.