This week, Minnesota Rep. Jason Metsa is taking the Working America Minimum Wage Challenge – living on the minimum wage of $7.25 an hour. He’ll report his experience back to the Minnesota legislature, where they are considering a bill to raise the minimum wage to $9.95.
On Wednesday, Rep. Metsa’s challenge was to find a place to live. Why a challenge? His budget that he set out on Monday allowed for only $359 a month for housing.
Metsa researched apartments both in the St. Paul/Minneapolis area (close to work) as well as up north in Virginia, MN (where he is from).
What he found was that it is very time consuming and almost impossible to find a place for that amount.
First off, there were not many listings available. Listings that did fall in Metsa’s budget didn’t have phone numbers available, so he had to inquire mostly through email. Many low-wage workers can’t afford an Internet connection at home or don’t own a personal computer. If Metsa was really living on minimum wage, he might have had to do this research at a local library, if he was in an area where there was one. And of course, there’s the issue of time and transportation.
Metsa did find the option to be a roommate for $323 in a house in Minneapolis, one of the few metropolitan locations in his price range. When he looked in Virginia, MN his home town he found an apartment listing for $100 a month. He called to follow up, and learned that if he wasn’t on housing assistance the one bedroom apartment was $585 a month with a $250 deposit for the utilities. Most of the utilities were included except electric, and the apartment was heated on electric heat. And if you’ve ever been to Virginia, MN, you know that heating bills run high.
As a test, we recalculated Metsa’s housing budget if the legislature successfully passed the minimum wage increase to $9.95. The new housing budget was $490: this gave us a dozen more options with legitimate phone numbers to call, actual property managers to speak to, pictures of the apartments, and better locations.
Rep. Metsa’s initial reaction was how time consuming this was. Because there were so few options, 45 minutes of research and following up could get him nowhere. At a public library the limit at a computer is 30 minutes – sometimes up to an hour – which meant that a round trip to the library to find housing could all be for naught.
“If I was really on minimum wage, I’d have to rely mostly on friends and family on what house they knew about or even canvass the neighborhood looking for ‘For Rent’ signs and hope some of them were in your price range,” Metsa said. “It’s clear that you wouldn’t be able to find housing without assistance of some sort with $359 a month.”
“What I’m really learning from this challenge is that on minimum wage, it’s a constant juggle of what I don’t pay this month,” Metsa continued. This lines up with a lot of the comments we hear from Working America members who work low-wage jobs.
Thursday, Rep. Metsa will meet with small business owners and low-wage workers to talk about their experiences. Follow along on Twitter by using the hashtag #mnwage.
See more photos on Facebook here.
Tags: Housing, Jobs, minimum wage, minimum wage challenge, Minnesota
The following is a statement from AFL-CIO President Richard Trumka.
We are deeply disappointed by today’s announcement by Federal Housing Finance Agency Acting Director Edward DeMarco that he will continue to prohibit Fannie Mae and Freddie Mac from participating in the Obama Administration’s mortgage principal reduction program. DeMarco’s decision is irresponsible.
As Treasury Secretary Tim Geithner has observed, providing principal reduction for struggling homeowners is also in the best interests of taxpayers. The Federal Housing Finance Agency’s own analysis has found that participating in the program could save $3.6 billion for Fannie Mae and Freddie Mac and $1 billion for the taxpayers.
The combination of a real estate bust, high unemployment, and falling real wages has created the perfect storm for homeowners. Millions of working families owe more on their mortgages than their homes are worth. The U.S. economy cannot recover until decisive action is taken to address the housing and foreclosure crisis.
Principal reduction is the most effective way to prevent foreclosures, stabilize housing prices, and get our economy working again. By refusing to allow Fannie Mae and Freddie Mac to engage in principal reduction, DeMarco will deny relief to as many as half a million struggling homeowners.
Despite today’s setback, we will continue to work with the Obama Administration to fight to make assistance available to struggling homeowners. We need federal housing policies that will help make it possible for working families to own their homes, not short-sighted polices that protect the interests of bankers and Wall Street.
Tags: foreclosure, Housing
In the years since the vicious, recession-inducing collapse of the housing market, we’ve learned more and more about the irresponsibility and bad practices that caused the bubble and the crash. The banks and the mortgage-servicing industry abandoned all reasonable standards in their rush to turn people’s homes and debts into the equivalent of casino chips—and the consequences have been enormous.
Fortunately, California has taken the strongest step yet to hold financial institutions accountable for their wrongdoing and protect people from illegal foreclosures. Yesterday the state legislature passed a “Homeowners’ Bill of Rights,” which would give homeowners more power in facing the institution that holds their mortgage. The state’s Attorney General, Kamala Harris, sponsored the bill. The provisions include making sure homeowners have one point of contact and can’t get foreclosed while they’re pursuing a loan modification, stronger penalties for “robo-signing” of loans, and increased rights for homeowners to sue banks if they’ve been the subject of violations. (David Dayen, a Californian who follows this issue closely, has more analysis.)
The new law builds off of the multi-state mortgage fraud settlement negotiated this spring, but goes considerably farther. Critically, it actually provides a deterrent to bad practices by banks and mortgage servicers.
The biggest factor in the foreclosure crisis is the uncertainty that comes from a mix of shoddy paperwork, careless repackaging and resale, and dramatic decline in housing values. In many cases, people are paying much more than their home is worth and they don’t even know who owns their mortgage. Many people who are facing foreclosure or eviction have done everything they thought was required of them, and a wave of local, grassroots activism has sprung up to combat unfair foreclosures.
California’s move comes at a time when national politics is losing focus on this crisis. Foreclosure hurts not just families who might lose their home, but also their neighbors and the economy generally, and yet we still haven’t done enough to fix what’s wrong. “There has been no shortage of good ideas, what has been lacking is will,” says law professor Jean Braucher, who says that there’s a sense of “foreclosure fatigue” among Washington policymakers. Well, people in neighborhoods riddled with evictions are getting tired of it, too.
What should really happen is principal reduction—the banks and servicers who hold mortgages should write them down so that people are paying based on what their house is worth now, not at the height of the bubble. The fact that people are having trouble paying for their homes is a big drag on our economy and principal reductions would help give it a boost.
Still, California’s move to increase the power of homeowners is a big step in the right direction. We need to make sure the financial industry is doing its job, and that means putting real penalties on misconduct and giving it the incentive to help people stay in their homes. California is the biggest housing market in the country, and this new law should be a model for other states. Harris, and the grassroots activists who pushed for tougher laws on mortgage fraud, should be commended.
Tags: California, foreclosure, Housing, mortgages
Arizona Governor Jan Brewer and her allies in the state legislature are seeking to use millions of dollars intended for struggling homeowners to pay for prison construction and tax cuts instead, echoing a policy put in place earlier this year in Wisconsin by Governor Scott Walker.
Remember the $26 billion foreclosure settlement, the one agreed upon by the five biggest banks and 49 state Attorneys General? As one of the hardest hit states, Arizona is getting $1.6 billion, as well as an additional $97.7 million to be overseen by the office of Attorney General Tom Horne, to be used for “housing counselors, legal aid, hotlines, and to help stressed homeowners with their payments.”
Two main things to understand about these funds: they are wildly insufficient given the scale of the problem, but all the same they are extremely crucial. In March, Arizona had the highest foreclosure rate in the country, according to RealtyTrac, with 9,497 foreclosures. If any state needs all the help it can get when it comes to homeowner education, assistance, and relief, it’s Arizona.
Even so, Governor Brewer and Republican state legislators want to siphon $50 million from those funds to “relieve pressure on the budget.” So in other words, use money intended to help homeowners for…other things.
Lawmakers say the money amounts to a pricey outreach and education fund. It won’t hurt to take half of it, House Speaker Andy Tobin said.
“We’re using the funds to relieve the pressure on the budget,” said Tobin, R-Paulden. Those stresses range from a push to replace welfare dollars lost to federal budget cuts to prison construction, he said.
How is this justified? You can thank a loophole in the settlement language, which says the funds can be used “to compensate the state for costs resulting from the alleged unlawful conduct of the defendants.” Arizona lawmakers like House Speaker Tobin are claiming that since foreclosure fraud hurt homeowners, which in turn hurt tax revenues and by extension the state budget, they can use the money for whatever they damn well please.
They can make this logical jump without acknowledging a.) that the big banks committed any actual fraud, or b.) that maybe Gov. Brewer’s $538 million tax handouts to businesses has anything to do with budget problems.
What’s scarier is that this move by Arizona is not unprecedented. They are doing exactly what Gov. Scott Walker already did in Wisconsin.
In February, Walker and Attorney General J.B. Van Hollen decided to use $25.6 million of Wisconsin’s share of the foreclosure fraud settlement to plug holes in his state budget. For justification, he used the very same loophole in the settlement language:
“Just like communities and individuals have been affected, the foreclosure crisis has had an effect on the state of Wisconsin, in terms of unemployment. . . . This will offset that damage done to the state of Wisconsin,” Walker said.
A week later, Missouri followed suit, taking $40 million from their share for the state’s general fund. Ohio decided to allocate $75 million meant for homeowner assistance to actually demolish vacant homes. South Carolina legislators insidiously pushed for using $31 million of settlement funds for corporate tax breaks.
Of all the horrific policies that have come out of the offices of governors like Walker in the past two years, this is one of the worst – and the most under-reported. With Walker and Brewer giving out huge tax handouts to businesses, cutting services and education, and then dipping into foreclosure fraud assistance to pay for their bad decisions, they are no different than a modern day Bonnie and Clyde. Robbery in multiple steps is still robbery, even if you’re a governor.
Tags: Arizona, foreclosure, Housing, Jan Brewer, Scott Walkerf, Wisconsin
In Ohio, over 482,000 homes are “underwater,” meaning the value of those homes is less than the amount owed to the bank in mortgages. The values of those underwater homes total a whopping $14,943,488,000, or almost $15 billion.
Even though it rarely breaks through the noise of national debate, the mortgage crisis continues to be an enormous drag on our economic recovery. AlterNet estimates that homes in the U.S. lose $500,000 of value every hour, and there are thousands of foreclosure actions taken every day.
In the Cleveland area, there was recently some controversy about a foreclosure prevention event planned for the summer. An article in the Cleveland Plain Dealer detailed the disagreements between the various organizations involved, but skipped over the enormity of the crisis facing homeowners in Ohio and nationwide.
In this context, Working America member and Vietnam War veteran Michael Lime wrote a letter to the editor of the Plain Dealer titled “Struggling homeowners need more than unreasonable mortgage modifications”:
I don’t know anything specifically about the Neighborhood Assistance Corp. of America (“Out-of-town foreclosure aid group has local critics,” Thursday), but I do know the importance of having real help for struggling homeowners. I believe the housing crisis is a significant stumbling block to real economic recovery.
As a small-business owner, I certainly felt the crush of the economic downturn. Although there has recently been a slight pickup in business, the sustained slowdown meant I fell behind on my mortgage payments. I was contacted by a group supposedly trying to help; of course, they required money up front but failed to do anything tangible. I ended up on the brink of foreclosure and accepted a loan modification that added thousands of dollars and 25 years to my mortgage — on a house worth half of what it was worth prior to the recession. I’m still not sure how I’m going to make it.
I am more scared now than I was while serving in Vietnam. We need real mortgage relief for people in my situation — not the drop in the bucket of the recent settlement. Groups that actually help struggling homeowners, not take advantage of them, are critical, too. Otherwise, the housing crisis will continue to weigh down the U.S. economy.
Michael Lime, Avon Lake
As we’ve written before, the $26 billion foreclosure fraud settlement reached with the biggest banks barely scratches the surface of the nearly $700 billion problem. In addition, the Acting Director of the Federal Housing Finance Agency Ed DeMarco could singlehandedly act to resolve the mortgage crisis by reducing the principal on underwater mortgages.
For Michael Lime and millions of others, take action. Tell Ed DeMarco to address the mortgage crisis, or step aside for someone who will.
Tags: foreclosure, Housing, Ohio, veterans
CFPB Director Richard Cordray in 2008
The Consumer Financial Protection Bureau (CFPB), the agency created as part of the 2010 Wall Street reform bill, announced yesterday plans to change the way the mortgage servicing industry interacts with consumers.
“For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress,” said CFPB Director Richard Cordray. “It’s time to put the ‘service’ back in mortgage servicing.”
The Hill reports on the proposed changes:
Under the CFPB’s proposal, if a homeowner gets behind on their mortgage and is facing foreclosure, the servicer would be required to make a “good faith” effort to contact the borrower and explain the foreclosure process, as well as provide counseling options.
Remember all foreclosures that were approved through “robo-signing?” That means the banks didn’t verify the paperwork – or even check if they technically owned the property – before starting the process of foreclosure.
The CFPB is also considering requiring servicers to have staff dedicated to working with struggling borrowers either facing foreclosure or trying to avoid it. These employees would have easy access to the borrower’s records, as well as the ability to determine if a loan modification could be pursued to avoid foreclosure. A common complaint by struggling borrowers was their inability to discuss their plight with an employee with their servicer.
Right, because a discussion with the servicer might result in the bank having to check their records to see if the seizure of a home was, what’s the word, legal.
Homeowners and policymakers were also frustrated by error-ridden documents at many servicers. Under the CFPB’s plan, servicers would have to address found errors within 30 days, or an even shorter timeframe if a foreclosure or payoff is at stake.
Our response to all of this? Fantastic, and long overdue. And we can’t help but remember how savagely Wall Street and their political allies in Congress fought the creation of this agency, the appointment of its originator Elizabeth Warren as its director, and then again the appointment of Richard Cordray. Now we know why – Cordray is arming consumers with the ability to fend off these long-accepted predatory practices.
The dirty secret about our economy right now is the enormous drag of foreclosures and the inability of homeowners to modify their loans. Sure, there was that much-trumpeted national foreclosure settlement, which resulted in $26 billion in assistance for struggling homeowners. But there were two big problems with that settlement: 1.) you can’t fix $700 billion in negative equity with $26 billion and 2.) in some states (like Wisconsin) anti-worker corporate-backed governors (like Scott Walker) took that money and used it to pay for tax breaks, so homeowners didn’t actually get any of it.
Needless to say, the so-called settlement did very little to alleviate the enormous economic pain felt by homeowners stuck in mortgages with no recourse, owing more to banks and servicers than they could possibly come up with, even if they sold their house.
Edward DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), singlehandedly has the authority to reduce the principal on underwater mortgages. This would help families pay for mortgages that cost more than their house is worth. Two weeks ago, the Treasury Department offered to subsidize this process – but still no movement from DeMarco.
We’re very encouraged by what the CFPB is doing to protect future consumers, but we need to urge DeMarco to act – and help those who are struggling now. Sign our petition today.
Photo of Ohio Attorney General Richard Cordray from aflcio on Flickr, via Creative Commons.
Tags: CFPB, Corporate Accountability, foreclosure, Housing, Wall Street
At this week’s AFL-CIO Executive Council meeting, representatives from the organization’s member unions issued a strong statement laying out a vision for the economy and how to fix it.
The first step, of course, is admitting we have a problem. For years, the economy has been re-engineered in ways that benefited a tiny minority of the wealthy and powerful, rather than sharing prosperity broadly. Bank deregulation, outsourcing-friendly trade policy, shifts in the tax burden and the abandonment of the right to collectively bargain all had an impact on an increasingly unequal, and increasingly unstable, economy. Instead of wages that reflected their growing productivity, America’s working people relied on credit bubbles and mortgage debt to get by—and the financial sector grew ever further out of control as a result.
What’s worse is that, instead of changing gears and trying to build a stronger, fairer economy, many politicians are pushing to repeat the same old mistakes. This is true of some politicians in both parties, but it’s especially prevalent among the Republicans who won control of the U.S. House and many governors’ offices in 2010 and among the frontrunners for the Republican nomination for president. They explicitly look to arrest what progress has been made in reining in Wall Street, and to cut taxes even further for the very wealthiest, even as they look to erode the programs working-class families and retirees depend on. They’re pushing for cuts that would hurt health care, our schools and our infrastructure. The AFL-CIO statement says there’s a better path for our economy.
The statement offers these principles for what fixing our economy will look like:
• Public investment in infrastructure, energy, job training and education
• Tackling inequality by restoring the right to collectively bargain, increasing the minimum wage and making full employment the center of our economic agenda
• Restoring U.S. manufacturing and fixing unfair trade laws
• Reining in the financial sector so it supports the economy rather than risking another financial collapse
• Improving standards and wages for workers around the world to end the “race to the bottom”
Read the whole thing here. It’s a valuable summation of how we got here and where we still need to go.
Tags: economy, fiance, Housing, Jobs, tax fairness, taxes, Wall Street
There are very few people who could boost the economy on their own. But Edward deMarco could.
DeMarco, the acting chief of the Federal Housing Finance Agency, oversees Fannie Mae and Freddie Mac, which in turn own a large portion of the nation’s mortgages. And he could use these two organizations to “write down” the value of mortgages on underwater homes. But will he?
If you ask many homeowners’ advocacy organizations—and a growing number of public officials—he ought to, and if he won’t, he should go. California Attorney General Kamala Harris, for example, said this week that deMarco needs to act now to help out the millions of homeowners who are paying down mortgages that are way more expensive than the actual value of their home. She says he should reduce the principal on these mortgages and suspend foreclosures. And Reps. Keith Ellison of Minnesota and Raul Grijalva of Arizona, who head the Congressional Progressive Caucus, are the latest lawmakers to make the same call.
In a statement yesterday, Reps. Grijalva and Ellison made the argument well:
Underwater homeowners need justice. Write downs are about keeping families in their homes and saving taxpayers money by preventing foreclosures. Simple, straightforward principal reductions are a good way to prevent the foreclosure crisis anchor from dragging down the U.S. recovery.
DeMarco, a holdover from the Bush administration, may not listen. And given the unprecedented obstruction of presidential nominees by the Senate’s Republican minority, it will be challenging for Obama to replace him.
But given how disappointing the recent mortgage-fraud settlement with major banks was, it’s important to press forward on all fronts to fix the problems in the housing market. The enormous sums families are paying on underwater homes are holding back the economy, and the risk of foreclosure still hangs over millions of families.
And so we wait on Edward deMarco—who may just be the most powerful man you’ve never heard of.
Tags: Corporate Accountability, Housing
In case you couldn’t tell from the 20 debates, constant news coverage and firehose-like flow of ads, there’s a Republican presidential primary underway. But to listen to the candidates—particularly on the economy—you’d think they were running for president of a different planet, one eerily like ours but facing totally different problems.
Let us count the ways that the Republicans’ economic conversation is totally out of touch with actual reality here on Earth.
Clap louder, Mitt.
- Jobs. At Wednesday’s debate, the word “jobs” was uttered hardly at all, and zero times by candidate Rick Santorum. In a larger sense, when these candidates talk about “creating jobs” they mean one thing: directing more money to the very wealthiest and to big corporations—through tax cuts or through removing regulations designed to protect consumers and workers. This might make a little bit of sense if the biggest problem facing the economy were corporations not having enough money. It’s not. The problem is a lack of consumer demand, because too few people have jobs and wages are falling behind.
- Debt and Deficits. These aren’t the most important economic issue we face—continued too-high unemployment is. But by the standards of the Republicans’ own rhetoric, they’re important enough to serve as the basis for attacks and talking points. So it seems strange that the plans proposed by Romney, Santorum and Gingrich would increase the debt—and, more specifically, increase the debt by more than Obama’s proposals would. And they don’t build up this debt by investing in long-term needs: they do it by demolishing revenue through massive tax cuts aimed mostly at the wealthiest. Which brings us to…
- Taxes. The public consensus is overwhelmingly clear—to afford the things we need, we should be able to ask a little bit more from the very richest than the current historic low rates. All of the Republican plans do exactly the opposite. For example, Romney’s plan would deliver a $264,000 tax cut to the top 0.1%. As economist Justin Wolfers noted, “Romney’s new tax plan is massively regressive relative to current code. Most of the spoils are going to the rich” – and the same is true of the other Republican candidates. And even as they propose these massive tax cuts for the wealthy, they propose devastating cuts to Medicaid and other programs that working-class people rely on. It’s redistribution, upwards.
- Housing. In many ways this is the most baffling omission of all. In recent days, Republican candidates have been avoiding the subject entirely even as it’s clearly one of the most important factors in the financial crisis. A few months back in Nevada, Romney offered up “let it run its course and hit the bottom” as his solution to the foreclosure crisis (the housing version of “let Detroit go bankrupt”), though he softened how he talked about it in Florida a few weeks later. But mostly it’s been crickets and tumbleweeds. Forgive me if I’ve missed this, but has any Republican candidate, or even any Republican in Congress, weighed in on the mortgage-fraud settlement or the underlying issue of mass abuse of the foreclosure process?
Let’s not get into issues like the minimum wage, rebuilding infrastructure, keeping teachers in classrooms or protecting the freedom to form a union and collectively bargain—all issues that matter to our economy. We’d be naïve to expect this batch of Republican candidates to say anything constructive.
During Republican primaries, the candidates are pitching to a small audience, and their proposals are kept in line by harshly ideological enforcement mechanisms like talk radio’s Rush Limbaugh and the Wall Street-funded Club for Growth. But with their pledges and proposals now, they’re committing themselves to a totally fictional vision of the economy in the fall.
Out in the real world, Working America staff talk to around 20,000 people every week in neighborhoods across the country and stay in close contact with our members, so we have a pretty good sense of what a broad group of working- and middle-class people care about in this critical year. They want to make sure they can get and keep a good job, be covered if they get sick, send their kids to good schools, stay in their homes and retire with some security. I don’t know what world the Republican primary is taking place in, but it’s not the one where our members live.
(Image via Gage Skidmore on Flickr.)
Tags: Barack Obama, economy, elections, Housing, Jobs, taxes
San Francisco recently carried out an audit on a number of foreclosures. Their findings were released in a report this week that shows just how rampant mortgage fraud has been. From Reuters:
The audit of almost 400 foreclosures in San Francisco found that 84 percent of them appeared to be illegal, according to the study released by the California city on Wednesday.
Similar studies around the country show comparable results. These numbers are astounding. And worse, they’ve essentially gotten away with it.
In many cases during the housing bubble that burst in 2008, original mortgages were repackaged and sold to so many investors that it is now unclear who actually holds the loans. O’Brien could only find the current owners of the mortgages he studied in 287 out of 473 cases.
In the San Francisco study, which studied properties subject to foreclosure sales between January 2009 to November 2011, 45 per cent were sold to entities improperly claiming to be the owner of the loan.
“It is not impossible that there are homeowners who are alleged to have defaulted on loans to which they never fully agreed to and, further, are being foreclosed upon by lenders that might not even own such loans,” the report stated.
This should be unimaginable. Instead it is chilling – the story of a largely unregulated financial industry gone amuck. The consequences to homeowners and their families is devastating. Of course the most chilling aspect of the whole mess is that the banks have never admitted to any wrongdoing. There have been no prosecutions. No banksters are wearing orange prison jumpsuits as a result of their role in defrauding millions of US homeowners.
Seth is right. The banks did get off too easy in the foreclosure/fraud settlement.
Tags: economy, Housing