Residential and commercial foreclosures have emerged as a campaign issue in the Nov. 2 election, and the incumbent and challenger in the 35th Congressional District race are expressing disparate views on what action the federal government needs to remedy the ongoing challenge for Californians on the brink of losing their homes.
In a national television interview Oct. 13, Rep. Maxine Waters (D-Westchester) called for a halt of foreclosures in all 50 states. She also discussed pending legislation she has proposed to help resolve the ongoing housing concerns.
Earlier this year, Waters introduced the Foreclosure Prevention and Sound Mortgage Servicing Act to keep homeowners in their residences and ensure that foreclosure remains a last resort only after loan modifications have been explored.
The incumbent congresswoman said the time had come to “hit the pause button” and stop unwarranted foreclosures and other systemic problems in the mortgage servicing industry.
“With concerns about tens of thousands of foreclosures occurring in violation of standard procedures and possibly even illegally, and many American families wrongly losing their homes as a result, a nationwide suspension of all foreclosures is now urgently needed,” Waters, who chairs the Housing and Community Opportunity Subcommittee, said.
Her opponent, Republican businessman Bruce Brown, said the congresswoman’s approach could have an adverse effect on the housing industry.
“It doesn’t matter whether you are a Democrat or Republican, we all feel the plight of families who have lost their homes during this long recession,” said Brown. “But a call by Maxine Waters to shut down an industry may look appealing but it will have devastating, negative repercussions on future home buying and it absolutely will not solve the problem.”
Three of the nation’s largest mortgage lenders — GMAC, JP Morgan Chase and Bank of America — have suspended foreclosures in 23 states where courts have jurisdiction over foreclosures amid revelations that their employees had signed and filed thousands of affidavits in order to foreclose on properties without giving them appropriate review.
Waters wrote letters to the CEOs of major financial institutions earlier this year including Citigroup, HSBC, PNC, U.S. Bancorp and Wells Fargo, asking their mortgage units to suspend foreclosures until they can meticulously review their procedures.
Subsequently, Bank of America announced it would suspend foreclosures in all 50 states in order to further review and assess its practices and decisions related to foreclosures. But the bank then reversed its position Oct. 19 and announced that it would resume foreclosures on more than 100,000 mortgages beginning the week of Oct. 25 in the 23 states where court approval for foreclosures is required.
“I am disappointed by Bank of America’s rush to resume foreclosures after such a short review that calls into question how it could examine more than 100,000 mortgages so quickly,” Waters said. “There is ample evidence that homeowners have been harmed by wrongful foreclosures. Regulators need to initiate a full review of Bank of America, GMAC and other servicers because we cannot leave it to the banks to review and police themselves.”
To date, President Barack Obama’s administration has rejected issuing a nationwide moratorium on foreclosures. The White House believes it would further disrupt the housing market.
Steven Matilla, a Playa del Rey-based broker and owner of ERA Matilla Realty, also feels that a moratorium is a bad idea.
“It’s better to let the process of the marketplace go through its own machinations,” Matilla recommends. “Retail will be suppressed as long as there is inventory.”
The 35th Congressional District, which Waters represents, has suffered a large number of foreclosures, especially in South Los Angeles. But in Westchester, Playa del Rey and Playa Vista, several insolvent properties have come on the market this year.
Phillip Gilboy, a Westchester real estate broker with the Real Estate Consultants, acknowledged that there are foreclosures in the local area, but feels they have not had significant consequences on the real estate market in Westchester.
“Foreclosures are having very little effect in our local market. There are 80 homes for sale in Westchester and six are bank-owned,” Gilboy said. “And there are 37 homes in escrow and only one is bank-owned.
“The dynamics for other local markets are similar.”
That the Westside also has homeowners who are now “underwater” or insolvent merits further discussion, said Waters.
“It is assumed that the Westside is okay because (foreclosures) are not as obvious there,” the congresswoman told The Argonaut in an Oct. 18 interview. “That’s one of the reasons why we need to have this moratorium until we can review the legality of some of these mortgages.”
Brown believes the answer to the mortgage crisis lies in employment.
“The solution to the foreclosure situation is jobs, jobs and more jobs,” he said. “Get people to work so they can make their mortgage payments, not make it more comfortable to be broke.”
Gilboy joined Matilla in his belief that a foreclosure freeze would not help the housing situation.
“Most real estate professionals I know believe a federally mandated moratorium on foreclosures would only forestall the inevitable,” he said. “Even Treasury Secretary Timothy Geithner seems to think that a moratorium would have a negative effect on the housing market.”
Matilla said the housing market is “stuck in neutral” and many homeowners could be looking at a troubled real estate landscape into 2001. “The value of the loans on many homeowners’ homes is now higher than their property,” he said.
Waters disagrees that a halt would be detrimental to the housing market.
“I don’t feel comfortable with them saying, ‘If you straighten this out, it will disadvantage me,’” the congresswoman countered, referring to bankers and others in the financial services sector. “I don’t think that’s a good argument.
“This crisis was created by the financial services industry and was a very destructive element to our society and a primary cause of the economic recession,” Waters added. “And now there has to be a combination of mandatory loan modification and loss mitigation for homeowners.”
State legislators are also in favor of the moratorium.
“Major mortgage lenders have admitted their executives signed and certified foreclosure documents with no knowledge of what was actually in the documents,” state Assemblyman Ted Lieu (D- Marina del Rey) said. “They should be commended for taking these voluntary actions.
“However, these lenders, as well as other major lenders, should institute a foreclosure moratorium in California, which is one of the nation’s hardest hit states in sheer numbers of foreclosures.”
Lieu is the author of Assembly Bill 2325, which will force lenders to run a comprehensive loan modification program or face a 90-day foreclosure moratorium.
Brown reiterated his belief that putting people back to work was the best solution to the housing crisis.
“If we actually focus on solving the dilemma with work instead of a law, the problem could be solved by the time legislation goes through its cycle and
families would actually be helped as well,” he said. “That should be the first step in the process.
“Furthermore, if the economy could see policies that could be counted on to start growing, lenders will be more willing to wait a bit but they can’t in the face of the existing long-term uncertainty,” Brown continued. “We have a lot of problems resulting from the downturn, but unless we focus all our attention on growing the economy, nothing can be fixed.”
The congresswoman plans to convene a hearing of her subcommittee to further investigate the foreclosure crisis. The first hearing, tentatively scheduled for Nov. 18, will look into problems that have recently surfaced in the mortgage servicing industry, including improper and potentially illegal foreclosures.
“We have to come down on the side of hard working people, and not the people who caused this crisis,” Waters said. “And that’s what I plan to do.”