By Len Canty and Orson Aguilar | OW Contributors
With reports that only 9% of eligible loans being modified, families across the country are beginning to lose hope that President Obama’s Home Affordable Modification Program (HAMP) will help them remain in their homes.
According to The New York Times, only 235,000 mortgages, or less than 9 out of every 100 loans deemed eligible for the program, have been modified. This does not take into account the number that will ultimately re-default. Even if the program is able to modify 500,000 loans by November as the Obama administration hopes, Moody’s (a financial research and analysis corporation), has stated it will take at least 1 million mortgage modifications to make a dent in the foreclosure crisis and stave off the worst effects to American families and their neighborhoods.
There is increased concern that the $75 billion offered to banks as an incentive to modify loans they hold will not “trickle down” to the community. This large carrot offered to the banks, without a stick to persuade them to take action when they decline loans, appears to be dooming the President’s program to help homeowners modify their troubled mortgages.
It is clear that any proposal that truly serves the needs of Main Street will need to originate from grassroots efforts of foreclosure counselors and community leaders working daily on this issue.
Grassroots community organizations have raised numerous creative proposals and ideas for implementation on a federal level. For example, the $75 billion that has been allotted for banks as incentive to modify troubled loans through HAMP, why not make a similar amount available to grassroots organizations and foreclosure counselors from the communities most effected by the crisis? This $75 billion is readily available since $250 billion in TARP (Troubled Asset Relief Program) funds have been returned, including $65 billion returned by JP Morgan Chase, Goldman Sachs, and US Bank.
Another innovative idea that has been proposed to the major servicers, as well as officials in the Treasury Department is a rent-to-own program that will allow foreclosed families to remain in their homes and possibly even regain homeownership within 5 years. The $75 billion could easily be spent on programs such as this as well as other creative, Main Street that depend on grassroots versus Reagan-esque top-down strategies.
Despite his efforts to address Main Street concerns, there is a perception that Treasury Secretary Geithner is too intimate with the Goldman Sachs of the world and has no Main Street connections or experience. We believe a tour of impacted communities to meet with local organizations helping families on the ground, along with more community oriented modification programs, will go a long way in dispelling this sentiment. In California Greenlining would be happy to host a visit that would include locations such as such as East and South LA as well as areas of Oakland and Richmond in Northern California where African American families are disproportionately suffering from the foreclosure crisis.
While we write from a California minority perspective, our views are applicable in any state where homeowners are underwater on their mortgages.
Although 47 economists stated in last week’s Wall Street Journal that we are out of the recession, Latinos, African Americans, and South East Asians, the groups hardest hit by the foreclosure crisis (and that most support the president), say the economy is getting worse and that foreclosures are being exacerbated by depression era levels of unemployment. Our fear is that this sentiment, that “the recession is over” being promulgated by the Wall Street Journal and echoed by other main stream media outlets, will be similar to the now infamous picture of former-President Bush on an aircraft carrier with a banner behind him stating “Mission Accomplished” in regards to the Iraq War.
The Greenlining Coalition will be in Washington D.C. the week of September 14th to meet with Federal Reserve Chairman Bernanke and FDIC Chair Bair to discuss what can be done to stem foreclosures in the hardest hit states of our nation. We propose a meeting between community groups and President Obama, Secretary Geithner, and their top advisors to discuss how to make HAMP more successful in serving families facing foreclosures, especially minority families.
The mission to stop foreclosures has not yet been accomplished and we desperately need leadership from President Obama and his administration to move closer.
Len Canty is the President of the Black Economic Council and Orson Aguilar is the Executive Director of the Greenlining Institute.