A Victory for Homeowners

The other night, my son woke up with a bad dream. “I dreamed we had to move out of our house,” he told me in a worried voice. As I hushed him back to sleep, I thought about all the children for whom that is not just a bad dream.

Over the past 6 years, nearly two million Californians have lost their homes to foreclosure. That’s an awful lot of parents who have had to explain to their children that they could not stay in their homes. They’ve had to take their kids out of the schools and neighborhoods where they were raised and have friends and start over somewhere new and unfamiliar.

In many cases, these moves came after months or years of struggling to keep their homes as their rates went up and monthly payments doubled and tripled. As a result, some families went straight from home ownership to homelessness. Others were forced into overcrowded apartments with family members. Many had to leave behind beloved pets and family heirlooms in order to find shelter after a foreclosure.

There's a whole lot going wrong here. Millions of innocent families were steered into risky loans that were doomed to fail. When borrowers tried to modify their loans, they were given the run-around, handed off from one indifferent servicer to the next, never given a fair shot. While borrowers tried to get loan modifications, banks went ahead and sold their homes out from under them, meaning even those who would have qualified were just out of luck.  In fact, servicers were so overloaded with foreclosures that they stopped verifying documents or even checking to make sure a borrower was really in default.

As a result of all these reckless practices, thousands of families have lost their homes when a foreclosure could have — and should have — been prevented. All those kids whose lives were disrupted, all those families forced to give up their dream of home ownership, and all those communities destroyed by abandoned homes and blight — they were the collateral damage. California law simply offered no protections to keep these families from falling through the cracks.

But today is a new day. This week, the California Legislature passed the Homeowners Bill of Rights. Sponsored and championed by our state’s Attorney General Kamala Harris, this bill addresses the very practices that did so much damage to our families, our state and our economy. This new Homeowners Bill of Rights:

  • Prohibits banks from foreclosing until they give fair consideration to a loan modification.
  • Requires banks to give homeowners seeking a loan modification a single point of contact to make sure they don’t get the run-around.
  • Increases penalties for filing false mortgage documents.

This bill will not put an end to all foreclosures, but it will ensure that foreclosures are done only when a family cannot qualify for a loan modification. It will help to stabilize our housing market by reducing foreclosures. And it will, finally, hold banks accountable for the way they treat homeowners.

It is easy to think of the foreclosure free-fall in numbers:

  • 500 families lose their homes every day in California,
  • 700,000 are on the brink of foreclosure,
  • One-third are underwater on their mortgage,
  • Each foreclosure costs a local government $20,000.

These statistics are compelling. But for me, it’s not about the numbers. It's about the thought of taking your child’s drawings off the wall while telling him you cannot keep him in the place that represents safety and security. It’s the sense that you somehow failed as a parent because you could not keep your child’s home. All that suffering is even worse where a foreclosure was clearly preventable and unnecessary.

There is no good reason to foreclose on a family where a loan modification can work. Keeping that family in their home stabilizes home prices in the neighborhood and maintains local property tax revenue. It also prevents blight and associated increases in crime, saving local governments money and preserving essential services.

The truth is that reducing foreclosures is a critical step toward reviving our economy and ending this recession.  Over the past four years, the average family has lost 40 percent of their wealth, much of that due to depreciation of their home. We cannot rebuild our middle class, create jobs, or get Californians back to work until we tackle the crisis that has torn this state apart.  

This week, California made history in sending the Homeowners Bill of Rights to the Governor’s desk. We are now on the path to economic recovery and to putting the devastation of the past six years behind us. And hopefully, with these new protections, parents in houses up and down the state can say to their children that the threat of losing their home is just a bad dream. Now is the time to restore the California dream we all believe in, where everyone, even the big banks, must play by the rules.