Stop the Foreclosures! Housing for All!

Stop the  Foreclosures! Housing for All!

The U.S. economy today remains mired in  what can only be accurately called a housing depression. Since 2007 there have  been more than 12 million foreclosures and more than 10 million of the 52  million mortgages in the U.S. are in ”negative equity,” i.e., “underwater,” with the market values of homes less than the mortgages.

Once producing residential housing at 1.5 million units a  year, the economy has since 2008 been producing housing units at less than  500,000 a year on average. Except for a small sign of growth in apartment  construction in 2012, residential housing remains virtually flat today after  nearly five years. Once consistently more than one million a year, new home  sales remain in a range of low 300,000—two- thirds below pre-2008 levels.  Meanwhile, home prices have fallen by a third, experiencing not two, but three, “double dips,” while homeowners have lost more than $4 trillion in home value  wealth.

In every one of the 11 previous recessions in the US since 1947, housing has led the  way in terms of recovery. After three-and-a-half years from the start of  recessions in the 1970s and 1980s, housing was growing at 32%–35%. Not so today.  In even the best months, housing sector growth has remained stagnant at  depressed levels at best.

For five years now, little to nothing has been done to  effectively revive the housing sector. Obama administration policies toward  housing since 2009 are an example of token neglect. For the first three years of  his administration — 2009 through 2011 — Obama policies have focused on  subsidizing mortgage lenders and mortgage servicers (e.g. big banks) rather than  on rescuing homeowners in foreclosure or underwater.

In 2009 housing recovery programs were barely funded,  mostly providing incentive payments to banks to lower interest rates for new  homebuyers while doing nothing for the millions in foreclosure. Policies were  aimed at getting homeowners out of foreclosed homes and getting new buyers into  the properties. Obama’s initial housing program, called HAMP, allocated $75  billion to housing recovery, but $50 billion was used as incentives to banks.  This took the form of government subsidies to lower their interest rates for new  homebuyers to purchase foreclosed properties. Supplemental programs provided  further tax credits to new home buyers, and no tax breaks to homeowners in  foreclosure or underwater. Token programs to assist existing homeowners in  stress were left totally voluntary, to be administered by the banks. What  refinancing of homeowners in foreclosure did occur was limited to temporary  interest reductions, and for a limited number of years. Virtually no reductions  in homeowners’ principal payments were introduced by the banks, despite their  $50 billion subsidy from the federal government.

In 2010 the ”robo signing scandal” erupted, in which banks  began illegally foreclosing homeowners in the 300,000 range each month and  seizing homes at a rate of more than 100,000 a month. This took place with bank  and mortgage company employees signing foreclosure documents without even  reading them. The Obama administration ignored the issue, allowing the states’ attorneys general to pursue legal claims. However, once it appeared the  attorneys general might actually obtain payments from the banks on behalf of  homeowners, the Obama administration intervened and forced a deal on the states  to limit bank liabilities for their illegal actions.

The policy of subsidizing the banks inherent in the 2009  HAMP program was replaced by the Obama administration in 2012 with a new program  called HARP 2.0.

This was part of a deal to indemnify banks from liability  actions by states attorneys general and homeowners. In return, the banks paid  the states $25 billion, a pittance compared to the liability potential.  Homeowners who were illegally foreclosed by the banks were to receive on average  no more than $1500. The banks, in turn, were required to provide refinancing for  underwater homeowners for the first time. But what is generally not known about  HARP 2.0 is that the federal government’s agencies, Fannie Mae and Freddie Mac,  will pay the banks that renegotiate underwater mortgages a refund of 5 points on  the loans. Congress will then have to reimburse Fannie Mae and Freddie the 5%.  In other words, the government will pay the banks tens of thousands of dollars  on average to refinance underwater homes, a major cash windfall for the banks at  eventual taxpayer expense.

The longer term human consequences of the continuing  housing crisis is that without a strong housing recovery, it is unlikely there  will emerge any kind of sustained general recovery of the U.S. economy.

In December 2007, at the start of the current recession,  there were 7.3 million jobs in construction. In June 2009, when the recession  was declared officially ended, there were 6.4 million. Entering office in  January 2009, Obama promised a million more jobs in construction once his  stimulus program was enacted. Today, as of June 2012, there are only 5.5 million  construction jobs in the U.S.

In addition to millions of American workers who once had  jobs in construction and their loss of income, the 12 million who have been  foreclosed, and the 10 plus million underwater—the ongoing housing crisis  continues to devastate families and average Americans in multiple additional  ways: in the coming years fewer Americans will be able purchase homes and those  fewer will do so later in life. Incentives for the housing sector, such as  mortgage interest deductions, will soon be significantly scaled back by Congress  after the November 2012 elections as part of a major remake of the U.S. tax code. More younger Americans  will have no alternative but to rent, as rent costs—already rising faster than  home prices—continue to escalate. More young Americans, in the 20-34 year range,  will live with parents and for longer periods. The role of housing in the US economy as a leading sector for  growth and for dampening recessions will decline.

The solution to the housing crisis is to take from the  banks and private financial institutions their key role as for-profit providers  of credit for housing. To prevent the chronic long run speculation in housing  and consequent housing booms and busts—and to return housing to its historic  role of the recession recovery sector—the government needs to stop subsidizing  banks and mortgage companies. The most efficient way to do this is to remove the  profit motive and the banker ”middle men” from residential housing by creating a  utility banking system that will provide loans to homeowners at the cost of long  term money based on the 30-year bond rate, today roughly 2.7%. Additionally, all  homeowners should be provided the equivalent of the 15% investment tax cut that  businesses enjoy by introducing a home improvement tax credit equal to 15% for  all home repairs and upgrades. Not least, the government agencies—Fannie Mae and  Freddie Mac—which now own the majority of outstanding mortgages in the U.S. — should immediately nationalize those mortgages, pay investors 25 cents on the  dollar, and lower both principal and interest payments to levels equal to the  30-year Treasury bond rate of approximately 2.7% today.

The labor movement needs to follow the example of the  People’s Organization for Progress in Newark, New Jersey, which held a daily vigil in  downtown Newark  for 381 days, demanding peace, equality, jobs, and justice. Among POP’s demands  were an immediate moratorium on home foreclosures for a minimum of five years,  reduction of principal of all “underwater” mortgages to market value, and  reductions in interest rates on all distressed mortgages to levels at which the  residents could meet the payments. For federally-insured mortgages (FHA and VA),  the President could issue an executive order to that effect immediately.  The government’s refusal to provide relief for distressed homeowners cannot be  blamed solely on the Republican opposition. The labor movement should  additionally demand the creation of a million new construction jobs and criminal  prosecution of the mortgage banks and their executives who created this  crisis.

How will these reforms be achieved? Only as a result of a  broadly based campaign, including those who face foreclosure and those who would  like to be restored to the homes they lost. The labor movement has the resources  to spark such a campaign, together with its community allies. In the course of  the struggle to take on the banks and mortgage companies, it will become more  and more evident that neither the Democratic nor Republican parties can lead the  way since they share responsibility for causing the crisis, which has victimized  so many millions. That is why a new political party — a labor party based upon  the unions — which demands “Stop the Foreclosures! Housing for All!” — is so  urgently needed today.

Issued  by the Emergency Labor Network (ELN)

For  more information write or P.O. Box 21004, Cleveland, OH44121 or call 216-736-4715 or visit our website at Donations gratefully accepted. Please make checks payable to the ELN  and mail to the above P.O. Box.

One comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s