Protesters Demand Federal Mortgage Aid

by Lindsay Gebhart, 2007-06-11

On June 6, dozens of members of the Association of Community Organizations for Reform Now or ACORN held a press conference in front of the Federal Reserve Bank in the Financial District to demand the Federal Reserve finally step in to protect homeowners from unregulated sub-prime loans. "We're asking the Federal Reserve to use the power that it has to regulate the industry more strictly so that brokers and lenders take some responsibility for their actions,” said predatory lending victim Jackie Phillips.

The group is asking the Reserve to pass The Home Ownership and Equity Protection Act (HOEPA) at a hearing on June 14 in Washington D.C. ACORN is also demanding that the Federal Reserve Board of Governors and Chairman Ben Bernanke issue regulations to protect hard-working families from predatory lending practices.

In over 25 actions across the country where there Federal Reserve offices, ACORN is calling on the Federal Reserve to:

(1) Prohibit lenders from making loans that become unaffordable after the interest rate increases

(2) Stop the misuse and abuse of stated income loans

(3) Reduce or eliminate prepayment penalties on sub-prime loans

(4) Hold lenders responsible for the actions of brokers

(5) Require sub-prime lenders to escrow for taxes and insurance

2007 is poised to be a record year for the impacts of predatory lending on homeowners: 1.5 million will lose their homes to foreclosure as a result of predatory lending. In California in 2006, there were 142,429 foreclosure filings. This was a 131% increase from 2005 and was the third largest percentage increase in the country.

This comes out to one foreclosure filing for every 86 households in the state, the fourteenth highest foreclosure rate in the country.

While foreclosures are expected to worsen everywhere, the situation is looking especially bad in California because there are so many adjustable rate loans that are re-setting this year.

This crisis is hitting California especially hard because housing prices have been declining. When housing prices kept rising, there were fewer foreclosures because homeowners who were behind on their mortgage could refinance or even sell their home at a profit. But now people in foreclosure have fewer options. Why is this happening?

“People sign up for loans with one interest payment, and, oftentimes unknown to them two years later it is completely different,” said San Francisco ACORN member Valarie Adams. “This will be an epidemic as more and more people will be forced out of their homes families will have no place to go.”

ACORN has been working with clients and has found that hard-working families are being put into loans that they can’t pay back or sold mortgages that they think they can afford until they find out they have an adjustable rate and their payment goes up. Families are also placed into loans with prepayment penalties that keep these homeowners trapped in their loans or strip their equity in order to let them out.

A third trend is that more and more homeowners have to come up with large lump sum payments for their taxes and insurance when they find out they weren’t included in their payment, and are put in a situation where they have to refinance in order to pay these amounts.

In last Wednesday’s announcement, ACORN stated that they are organizing across the country to fight back to save their homes and win major policy changes presented in a ten-point platform.

“Our objective is to make sure the hard working families will get protections, justice and have peace a mind instead of continuing to have sleepless nights,” said Adams.

Members said that they plan to go door-to-door with lists of individuals who are either in foreclosure or have received sub-prime loans. ACORN said the Federal Reserve Board has the power to address these problems but has chosen to do nothing.

Sub-prime loans are generally defined as loans with higher interest rates given to those whose credit would normally not qualify them for regular loans. According to ACORN, recently many people have received these loans through predatory lenders. These lenders mislead and lie to their customers in order to trick them into signing agreements that include surprise interest-rate hikes, excessive fees and harmful terms suck as prepayment penalties.

Unscrupulous predatory lenders and brokers also convince borrowers to lie about their salaries in order to qualify them for the loans. After these brokers collect their commissions, the borrowers find themselves unable to afford the loan and go into foreclosure.

ACORN is asking that lawmakers sign a bill that would, amongst other things, prohibit lenders from making mortgages that the borrower has no ability to repay, either from the beginning or after the interest rate increases.

In addition to this bill they are asking that the Federal Reserve Board hold lenders responsible for the actions of brokers and to reduce or eliminate repayment penalties on sub-prime loans. They are also asking that the state attorney general prevent foreclosures on predatory loans and the county sheriff’s and courts refuse to conduct foreclosure sales or auctions on the properties.

When asked what the community and other organizations and institutions can do, Adams responded, “go to every nook and cranny, every neighborhood and let them know the severity behind this and get them help because you could be next.”

EDITOR’S NOTE: ACORN provides homeowners with information regarding the foreclosure process and timeline, possible options to prevent foreclosure, how to avoid foreclosure rescue scams, and available resources to help them. Contact them toll-free at 1-866-67ACORN