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As Congress prepared to pass an economic stimulus package aimed at taxpayers and homeowners holding subprime mortgages, Rep. Nydia Velazquez held a roundtable discussion for housing and finance experts at St. Francis College in Brooklyn Heights last week. The ripple effect that this is having is too great for people to ignore, said Velazquez. In order to respond to the gravity of the problem, we have to walk a fine line and make sure we dont create unintended consequences. This affects the entire nation. The rate of subprime lending in New York City is significantly higher than the national average. Some 19.8 percent of loans issued to New Yorkers in 2006 were subrpime, compared with 12.8 percent issued nationwide. In the 12th Congressional District in New York, 27 percent of loans originated between 2005 and 2006 were subprime, according to the Center for Responsible Lending. Over one in five subprime loans in the district will end in foreclosure. CRL estimates that the foreclosures will result in price declines for over 200,000 homes, leading to a decrease of $2.9 billion in home equity. Velazquez and her colleagues, Reps. Yvette Clark, Ed Towns and Anthony Weiner, joined the discussion, which featured an exchange of ideas from housing nonprofit leaders, city housing and banking officials, lawyers, and financial industry representatives about how to remedy the foreclosure crisis. Most of the discussion focused on addressing foreclosures in the short-term and preventing the reemergence of the crisis. A short-term solution is to improve access to counseling and other organizations, pass the stimulus package which will include between $300 and $1,600 per couple and at least $300 for individuals, and lift the caps on Freddie Mac and Sallie Mae, said Velazquez. The experts discussed several ideas for short-term relief, including loss mitigation strategies, aiding neighborhood counseling services and minimizing the impact on neighborhood property values. Richard Wagner, an attorney with Brooklyn Legal Services in East New York, urged the officials to work with the courts clarify the National Bank Act. The National Bank Act is preempting every single state remedy related to fraudulent lending, said Wagner. Congress needs to make clear to courts that they never intended the National Bank Act to allow fraud in the states. Other nonprofit leaders spoke about amending the bankruptcy code to allow certain loan modifications for borrowers, such as allowing bankruptcy judges to modify mortgages for those homeowners more than 60 days delinquent on their payments. There should be an infusion of cash to create a secondary market for people beyond sixty days delinquent on loans, in the form of rescue loans or remediation loans, said Josh Zinner, an attorney with South Brooklyn Legal Services. These are people who are further along than that, but they could afford to refinance their loans. Most of the participants, including members of the private sector, urged more government oversight and accountability over secondary markets. What you need here is uniformity, said Mark Willis, executive vice president of Community Development for JP Morgan Chase. Let's have everybody obey the same rules and have them examined on a regular basis. Other representatives from the banking industry expressed their concerns about pending legislation and about customers unwilling to reach out to their companies for assistance. I am very concerned about a lack of willingness to contact their servicer when seeking assistance paying their mortgage, said Edward Delgado, a senior vice president at Wells Fargo Home Mortgage. Only 16 percent of those in foreclosure called us. Leaders from community based organizations and legal services firms argued that they have been unable to get adequate responses from mortgage servicers and that their clients feared additional financial swindling. They also criticized the one-stop shops where borrowers can meet brokers, attorneys, and appraisers before securing a subprime loan for their home. These brokers are door-walkers extraordinaire, said Ismene Speliotis, executive director of ACORN Housing Corporation. They have the same race and ethnicity and they offer loans that can cost thousands more than a bank. The industry needs to catch up. Speliotis urged the banks in attendance to not close homeowners' opportunities for credit, which she believed would allow subprime lenders to stay in the marketplace. Wagner lobbied for more incentives for lawyers who represent homeowners or tenants facing foreclosure. According to Wagner, Brooklyn Legal Services are overburdened with cases involving foreclosures, most of which occur in neighborhoods that predatory lenders targeted for race and ethnicity. These are civil rights issues as much as they are fraud issues, said Wagner.
©2008 Community Newspaper Group
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