A National Failure on Foreclosures—and a Local Model for Success

Our economy is still reeling from the collapse of the housing market and the crisis in the financial industry. Keeping people in their homes and preventing future crises should have been a top priority, but the response we’ve seen at the federal level has fallen far short of the scale of the problem. A new BusinessWeek report goes in depth on the failures of the national response to the housing disaster.

And the $25 billion mortgage-fraud settlement—as we predicted—has turned out to be truly insufficient to the scale of the problem, in many cases rewarding banks for things they would have done anyway, and leaving too many homeowners waiting for relief. Much of the money going to states has been used for purposes other than helping homeowners, and the settlement overall does too little to penalize banks for real misconduct. And it’s increasingly obvious bank misconduct and fraud played a major role in the crisis, which even today is making it hard for families to keep a roof over their head.

There is one level at which the fight to hold banks accountable and prevent foreclosures is succeeding, however, and it’s coming from grassroots activism. Bringing together neighborhood-advocacy organizations and Occupy protesters, this anti-foreclosure movement is making a real difference in people’s lives.

Yesterday, Colleen McKee Espinoza, a single mom from Minneapolis, got a piece of good news: she wouldn’t be foreclosed on and evicted by Citibank. Instead, thanks to a concerted effort from Occupy protestors and her union, the Minnesota Nurses Union, McKee will get a deal to stay in her home and get her payments reduced. This victory proves a powerful point: we don’t have to be alone at the mercy of banks. By using strength in numbers, we can actually score a win for working people.

At the Netroots Nation conference this past weekend, the broken housing market and these local efforts to fight foreclosures were a major topic of conversation. Malcolm Chu, a community organizer in Springfield, MA, said that one key to making progress is overcoming the isolation, guilt and shame that often affect homeowners hit by the foreclosure process—even those who have been the victim of fraud by banks and servicing companies. Once you get people to realize they aren’t alone, that they haven’t been “irresponsible,” the next step is bringing them together to pressure both banks and local elected officials. And local efforts need to be accompanied by an effort to raise the profile of this issue on the national level, and to make sure people understand this is not just an issue about individual homeowners. It’s about justice, human rights, the rule of law and the role of the finance industry in our economy.

The scale of fraud and misconduct by banks is staggering, and the consequences of it for the economy, for neighborhoods and for the day-to-day lives of families have been dire. Lynn Szymoniak, an attorney who went through foreclosure herself and fought back, also spoke at Netroots Nation, and she detailed the chains of faulty paperwork, signature fraud and other misconduct she has found—hundreds of cases in just her county in Florida. She blew the whistle and got a settlement from Deutschebank—but, she says, the same kinds of fraud are still commonplace.

The flawed federal response and continuing irresponsibility by mortgage servicers and banks show that it’s only through determined, cooperative efforts that we’ll be able to hold banks accountable and protect homeowners. The Occupy Our Homes movement, its community allies and the brave homeowners who are standing up to banks prove that there’s a way forward.