Changing the Way We Help Underwater Homeowners

This opinion piece by LeeAnn Hall originally appeared in the Seattle Times.

By LeeAnn Hall and Will Pittz

While the recession officially ended in 2009, there are still over 9 million households across the country with homes worth less than the value of their mortgage. There are still neighborhoods in Seattle where more than 20 percent of homes are underwater.

How many more Seattle families need to lose their homes in the foreclosure crisis that continues year after year? There are solutions, but they need champions, and leadership – both locally and nationally.

Advocates are pushing the Seattle City Council to pursue a local principal reduction program to reset the value of mortgages based on their current market value. That local action can help thousands of homeowners in Seattle, but it must include strong buy-in from the City Council and include mechanisms to encourage big banks to participate. Proposals are outlined in a recent report by Reset Seattle and the Alliance for a Just Society.

Thankfully, members of the City Council are making progress. The council commissioned a short study on the feasibility of principal reduction in Seattle, and council members have publically expressed their intent to pursue a program similar to one in Oregon. This action comes too late for homeowners who have already lost their homes, but it can still help many families throughout the city with underwater mortgages.

While Seattle is making slow progress, other families throughout the country also need champions. Leadership was expected from Mel Watt, the recently appointed director of the Federal Housing Finance Agency (FHFA).

For more than 20 years, Mel Watt served the people of North Carolina as a member of Congress. During that time, he earned a reputation of being on the side of working families in his district, including those who were struggling to make ends meet. Watt advocated for struggling homeowners, co-sponsored mortgage reform, and promoted affordable housing.

However, as director of FHFA, Watt has done an about-face. While he once urged the president to enact principal reduction, he has done nothing to take steps within his power to make that assistance a reality. Such steps would not even require congressional approval.

It’s too late for millions of homeowners across the country, it’s not too late for leaders at the local and national level to step up and take action for those homeowners still struggling.

The foreclosure problem hasn’t gone away; the need for assistance remains critical in Seattle and nationally, especially in urban neighborhoods and among people of color. In many cases, these mortgages were the result of predatory lending practices in the years leading up to the market’s collapse.

By not acting, Watt is making matters worse. Local leaders on the Seattle City Council are considering a great step to help homeowners in Seattle and especially communities of color, as in the International District and Delridge, that still have high rates of underwater mortgages. However, both local and national action must happen soon before more families lose their homes.

It’s time for Seattle to move quickly toward a local principal reduction program, and it is well past time for FHFA Director Watt to remember the work that landed him in the nation’s capital and take action to help homeowners.

LeeAnn Hall is executive director of the Seattle-based Alliance for a Just Society. Will Pittz is executive director of Washington Community Action Network

Progressive Cities Can Offer a Helping Hand to Families Facing Foreclosure

Foreclosures and high numbers of underwater homes aren’t making headlines around the country the way they were a couple of years ago, but that doesn’t mean the housing market is back on solid footing – or that people are no longer suffering.

Thousands of families in Seattle are still dealing with the traumatic repercussions of the housing crash – wrecked credit, lost wealth, and relocation. Housing advocates, like Reset Seattle, are working with cities and public agencies to come up with creative ways to help homeowners.

Reset Seattle is asking the City of Seattle to use their power of eminent domain to buy underwater homes at fair market value, and then sell them to the current owners, at the current market price. It’s an innovative idea that just might help someone like Seattle high school teacher Betsy Andrews, who is hanging on to her home by a thread.

Betsy Andrews of Seattle has tried every avenue to try and save her home.
Betsy Andrews of Seattle has tried every avenue to try and save her home.

After being laid off from her job as an English teacher because of budget cuts, she worried that she wouldn’t be able to make the payments. Terrified of losing her house she called banks, worked with supposed-loan modification services, and spent hours and hours on the phone getting the run around. One “specialist” even told her the way to save her home was to “go get a job.”

“It is humiliating,” she recently told a Seattle City Council Committee that is hearing options for helping families facing foreclosure to save their homes.

Finally, after 18 months without work, Andrews is teaching again and sighing with relief that she would be able to keep her house. But within days, she came home to a “Notice of default. Intent to accelerate” notice from the bank on her front door.

“I consider myself well-educated and pretty savvy,” said Andrews. “This has been an absolute nightmare navigating the system. It has affected my health. The reality is, if I lose my home, I will never be in a position to buy a house again.”

Despite the heart-breaking stories, Seattle homeowners like Andrews are unlikely to get help anytime soon from the City of Seattle.

This week, the Interdepartmental Team (IDT) created by the City to review strategies for helping families, including using eminent domain, made its first report to the council committee.

The results were pretty disappointing.

What they presented during a two-hour meeting Wednesday (that you can watch here) was a half-hearted attempt to perform their assignment. They painted a rosy picture of the Seattle housing market that runs drastically counter to what organizers, advocates – and homeowners – are seeing in the community.

What was their alternative solution? More outreach to put people into the federal government’s HARP (Home Affordable Refinance Program) and HAMP (Home Affordable Modification Program). In the past two years, those two programs have helped a mere 125 homeowners in Seattle. They have caused many others unbearable misery.

Reset Seattle invited city council members on a bus tour of homes and communities blighted by foreclosure.
Reset Seattle invited city council members on a bus tour of homes and communities blighted by foreclosure.

“More outreach isn’t going to help people,” said Chris Genese with Washington Community Action Network and Reset Seattle. “Throwing more energy at the same programs that aren’t working – isn’t the answer. We need to do something else.

“I am disheartened the Interdepartmental Team didn’t mention, any real options,” said Genese. “Our interest from the beginning has been finding avenues for principle reduction, to keep families in their homes, and to restore wealth – particularly in communities of color.”

Reset Seattle is open to other creative options. Boston Community Capital bought homes at short sales and auction, then reissued the mortgage to the homeowner at 6.3 percent interest. The program has kept 500 families in their homes so far.  Other cities have implemented other efforts to help homeowners, and protect communities.

While the Seattle’s interdepartmental team didn’t expressly say they were eliminating the eminent domain proposal, they emphasized “significant” legal and logistical barriers that they indicated would outweigh the potential benefit.

Seattle has a reputation as a progressive city. It’s a city built on daring and dreams. It’s a city willing to try something different.

So here’s my advice to Seattle’s interdisciplinary team:  Let’s get creative, let’s be bold, and let’s try this again.

Jason Collette is a national organizer for the Alliance for a Just Society. He specializes in banking issues, especially around foreclosure, payday lending and student debt. Jason@allianceforajustsociety