Tag Archives: mortgage legislation

State of Washington Fines Countrywide for $1 Million for Discriminatory Lending — Will Seek to Revoke Countrywide’s License to Do Business in State

Washington Governor Christine Gregoire today announced plans by her state to fine Countrywide Home Loans $1 million for discriminatory lending.

In addition, the company will be required to pay more than $5 million in back assessments the company failed to pay.

Gregoire also announced the state is seeking to revoke Countrywide’s license to do business in Washington for its alleged illegal activity.

Joining Gregoire at today’s announcement was Deb Bortner, director of consumer services at the Washington state Department of Financial Institutions (DFI), and James Kelly, president of the Urban League of Metropolitan Seattle.

“The allegation that Countrywide preyed on minority borrowers is extremely troubling to me,” Gregoire said. “And I hope to learn eventually just how much this may have contributed to foreclosures in our state. The allegation offers evidence that Countrywide engaged in a pattern to target minority groups and engage in predatory practices.”

“That’s why we intend to bring the full weight of the state on Countrywide to rewrite home loans for minority borrowers who may have been misled into signing predatory mortgages,” the governor noted. “My job is to protect hard-working Washingtonians, and protect them we will.”

DFI is required to examine every home-lender licensed in the state of Washington. The agency conducted its fair lending examination of Countrywide last year. At that time, DFI looked at roughly 600 individual loan files and uncovered evidence that Countrywide engaged in discriminatory lending that targeted Washington’s minority communities. The agency also found significant underreporting of loans during its investigation.

“The Urban League is seeing far too many families caught up in the mortgage crisis who are being steered into bad loans,” stated James Kelly. “Today’s announcement from the governor is consistent with her message of protecting Washingtonians from national mortgage instability.”

DFI sent Countrywide a statement of charges on June 23, notifying the company of the fine and the back assessments the state plans to pursue.  Washington says that the investigation continues.

We have written on the disproportionate impact that the mortgage meltdown and housing crisis has had on minorities.

Washington’s action against Countrywide comes on the heels of lawsuits for fraud, deception, and unfair trade practices filed against Countrywide by the states of Illinois, California, and Florida.

 

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More Housing Blues — U.S. Homeownership in Sharp Decline as Housing Crisis Forces More Families into Rentals

Even in the midst of the most serious housing and foreclosure crisis since the 1930s, the United States is still a nation of homeowners not renters. 

But recent data released by the U.S. Census Bureau show that Americans are now renting their living spaces at the highest level since 2002, and the percentage of households headed by homeowners has suffered the sharpest decline in 20 years

Households headed by homeowners fell to 67.8 percent from 69.1 percent in 2005. By extension, the percentage of households headed by renters increased to 32.2 percent, from 30.9 percent.

According to the New York Times, these figures “while seemingly modest, reflect a significant shift in national housing trends, housing analysts say, with the notable gains in homeownership achieved under Mr. Bush all but vanishing over the last two years.” 

“Many of the new renters, meanwhile, are struggling to get into decent apartments as vacancies decline, rents rise and other renters increasingly stay put. Some renters who want to buy homes are unable to get mortgages as banks impose stricter standards. Others remain reluctant to buy, anxious that housing prices will continue to fall.”

“We’re not going to see homeownership rates like that (the 1990s and the early 2000s) for a generation,” said Mark Zandi, the chief economist at Moody’s Economy.com.

“The bloom is off of homeownership,” said William C. Apgar, a senior scholar at the Joint Center for Housing Studies at Harvard University who ran the Federal Housing Administration from 1997 to 2001.  Apgar said the Joint Center had predicted an increase of 1.8 million renters from 2005 to 2015, given expected population trends. Instead, they saw a surge of 1.5 million renters from 2005 to 2007 alone. In the first quarter of this year, 35.7 million people were renting homes or apartments.

Zandi said minority and lower-income homeowners had been hardest hit. Nearly three million minority families took out mortgages from 2002 to the first quarter of this year. Since minority families were more likely to receive subprime loans, economists believe these families account for a disproportionate share of foreclosures.

As we’ve noted before, the collapse of the housing market and the rise in foreclosures have created an ideal market for apartment owners, especially in economically depressed regions.

As the demand for rental housing has increased, so has the cost of renting.  Nationally, rents are up about 11 percent from 2005.

Christopher E. Smythe, the president of the Northeast Ohio Apartment Association, which represents landlords in the Cleveland area, said the collapse of the housing market had improved the economic climate for apartment owners.

“Our apartment traffic is up, people are renting again and occupancies are up,” he said in a letter to members this year.

The Times also reports that in high-end markets like Los Angeles, the slump in the housing market has begun to push up vacancies as condominiums are converted into rentals.

On the other hand, “those new apartments are often out of reach of struggling families. And since many owners of rental properties are also going into default, the foreclosure wave has resulted in fierce competition for affordable apartments in some cities.”

In other words, the housing crisis is hitting the most economically vulnerable families the hardest. 

As we’ve discussed in an earlier post, minorities have been the most seriously affected by the subprime crisis and the bursting of the housing bubble.  Not surprisingly, the Census Bureau data shows that the percentage increase in renter households from 2005 to 2008 was nearly twice as high for Black families than for Whites.

We’re reminded of the old Billie Holiday song, God Bless the Child, written at the end of the Great Depression:

Them that’s got shall get
Them that’s not shall lose
So the Bible said and it still is news
Mama may have, Papa may have
But God bless the child that’s got his own
That’s got his own

Yes, the strong gets more
While the weak ones fade
Empty pockets don’t ever make the grade
Mama may have, Papa may have
But God bless the child that’s got his own
That’s got his own

 

 

Crisis Exposes Conflicts in Real Estate Industry as Apartment Sector Opposes Aid for Homeowners

Recent attempts in Congress to relieve the real estate crisis may not have produced much in the way of solutions, but they have certainly exposed the conflicting interests inherent in the real estate industry.

One such conflict is between individual homeowners (and the realtors who are allied with them) and the owners of multi-family housing.

In a joint statement issued on April 10, 2008, before the House Financial Services Committee, the National Multi-Housing Council (NMHC) and the National Apartment Association (NAA) took the opportunity to blame what they called the “misguided” national policy of “home ownership at any cost” for the current housing crisis.

According to the joint statement,“People were enticed into houses they could not afford and the rarely spoken truth that there is such a thing as too much homeownership was forgotten”

In sharp contrast to other sectors of the real estate market, the apartment industry has not suffered as a result of the current housing crisis.

As a recent NMHC press release observed, “The challenging economic times and financial market disruptions are having little impact on the apartment industry’s biggest firms.”

We think that the apartment industry is understating its gains from the real estate crisis.

The real estate crisis is forcing the lower end of the single-family housing market back into multi-family rental apartments.  People have to live somewhere; if they can’t afford to live in a house that they own, they will be forced to live in a house that someone else owns, such as multi-family apartment units. As homeowners suffer, apartment owners benefit.

The multi-housing and apartment sector therefore opposes pending legislation that would create a new tax credit for people who buy a new house or a house in default or foreclosure. 

According to a statement issued by Jim Arbury, Senior Vice President of Government Affairs for the NMHC and NAA Joint Legislative Program, “a home buyer tax credit does nothing to help people stay in their houses. The real problem in the housing market is not the oversupply problem, which the home buyer tax credit targets, but the liquidity problem. Investors have lost confidence in the mortgage market securitization process and until that confidence is restored, the housing market will continue to suffer. ”

“The unintended consequences of a home buyer tax credit should cause any lawmaker to pause and reconsider, Arbury said.  “In short, such a credit could actually increase foreclosures and accelerate house price declines…It would increase foreclosures because it creates an incentive for lenders to foreclose so that they can entice a buyer to use the government subsidy to take the house off their balance sheet… It would also accelerate the decline in house prices, specifically the house prices of fiscally responsible owners.  If these responsible owners want or need to sell their houses, they are now competing with new and foreclosed properties that come with a $15,000 taxpayer subsidy (the value of the proposed home buyer credit).  These responsible owners will be forced to lower their sales prices by $15,000 in order to compete.  Should the government be using taxpayer dollars to erode the equity of hardworking, responsible homeowners?”

Instead of a tax credit for home buyers, the apartment industry proposes measures that would “create more affordable housing for the people who are going to be displaced from their single-family houses in this market downturn” – in other words, incentives to build and invest in more apartments.