Foreclosure Relief Under the Obama Administration April 16, 2010 Goldman School of Public Policy Kevin Stein California Reinvestment Coalition

Outline: Foreclosure Related Issues Context – surveys, Redlining report HAMP Tenants – PTFA Whats Left/Needed: – Judicial Modification – Financial Regulatory Reform – CFPA – CRA Modernization – Protest

Banks Not Helping Borrowers: CRC Statewide Survey Findings Foreclosure most common outcome Loan modifications - rare, short term Principal write downs - rare Obama Plan – Servicers aren’t working w/ borrowers – Disparate outcomes??!!!

From Foreclosure to Re-Redlining CRC Report February 2010

From Foreclosure to Redlining Report: CRC 2010 Redlining Steering/Predatory Lending Concentrated Foreclosures Inadequate and Uneven Loan Modifications Re-redlining

Foreclosure Filings by Neighborhood: Oakland 2008

Loan Mods to REO Ratio: Worse in CA Cities Than US California Reinvestment Coalition: From Foreclosure to Re-Redlining

Prime Loans Shift to White Neighborhoods California Reinvestment Coalition: From Foreclosure to Re-Redlining

Making Home Affordable Plan 1.Home Affordable Refinance 2.Home Affordable Modifications 3.GSEs to Lower Interest Rates

Home Affordable Refinance Predicted to help 4 to 5 million Borrowers May have limited impact in CA: Must have GSE owned or guaranteed loan Must be current Must be less than 105%, later 125% LTV Who fits this category?

Home Affordable Modifications Predicted to help 3 to 4 Bs $75 Billion to incent servicers, investors, Bs For owner occupants and 1 st lien loans Target 31% income for front end ratio Must pass net present value test Incentive to work with borrowers at-risk

HAMP #s March 2010 Source: The Atlantic,

HAMP: CRC Critique Poor performance – 200,000 permanent mods Not mandatory Pays servicers to do what they should do Principal reductions not a part, but.. Not much help for unemployed, but… Little transparency – npv test, denials, but… No meaningful way to appeal, but… Race data collected, not public, but… No enforcement, accountability, (no but)

Bankruptcy Cramdown: Judicial Modification Could have helped 600,000 borrowers directly Would give borrowers leverage Passed the House, Killed in Senate Senator Durbin – – the bankers “frankly own the place (Congress)” Where was the President? (in his platform)

CFPA Agency to protect consumers No regulatory race to the bottom – Ex. OTS Strong proposal by President Strong opposition from industry Key issues – Rule making and enforcement authority – Where does it reside? – Exemptions

Community Reinvestment Act Modernization CRA is the one law that works! Paying More for the American Dream III study – CRA lenders more likely to make prime loans But CRA needs to be strengthened – Include race, not just income – Include all areas where loans are made. Ex: CW – Report data on which banks are helping – Cover mortgage, insurance, Wall Street firms – Don’t dilute public input!