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The Subprime Foreclosure Crisis:Emerging Policy Responses
UC Center SacramentoJune 11, 2008
Kevin SteinCalifornia Reinvestment Coalition
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California Default Notices
0
50,000
100,000
150,000
200,000
250,000
300,000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
e
2008
e
2009
e
Record California Foreclosure Activity
Source: DataQuick Information Systems
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California Reinvestment Coalition
Top Higher Cost Lenders in CA: 2006Rank Lender Rank Lender
1 WMC/GE (closed) 11 American Home (BK)
2 New Century/Home 123 (BK) 12 Decision One (shut down)
3 WaMu/Long Beach (closed) 13 Countrywide Bank/BofA?
4Fremont Inv & Loan (cease &desist by FDIC) 14
Greenpoint Mortgage(Capitol One closed it)
5 Argent (Citigroup) 15Deutsche Bank/MortgageIT(closed retail)
6Countrywide HomeLoans/BofA? 16 Accredited (shut down)
7 Merrill/First Franklin (closed) 17 Fieldstone (BK)
8 BNC (Lehman shut it down) 18 Alliance Banc (BK)
9 Option One (no originations) 19HomecomingsFinancial/GMAC (withering)
10 Indymac Bank 20 First NLC Financial (BK)
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Chart 2. Distribution of Loans by Neighborhood Minority
Composition in Study MSAs, 2006
0.0%
25.0%
50.0%
High-Risk Lenders 40.8% 20.2% 21.0% 9.1% 8.9%
All Lenders 22.2% 15.4% 24.3% 16.3% 21.8%
80% - 100% 50% - 79% 20% - 49% 10% - 19% < 10%
Source: Table 1
Paying More for the American Dream 2:
The Subprime Shake Out and Its Impact on Low-Income and Minority Communities,March 2008
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Source: Credit Suisse
ARM Resets from January 2007
Outlook for Foreclosures: ARM Resets Provide Clues
2007 2008
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California Reinvestment Coalition
Loss Mitigation Surveys: Words vDeeds I and II
No long term loan modifications
Foreclosures most common outcome for B
Short sale next most common outcome
No outreach before rate resets Agmt? Servicers hard to work with
Survey III foreclosures, unaffordableloans and fraud, language issues, writedowns
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California Reinvestment Coalition
CRC Foreclosure Prevention Principles
Foreclosure Moratorium
Outreach and education, support for counselors Transparency of loss mitigation
LOAN MODIFICATIONS!
Rescue refinance products Nonprofits to buy foreclosed properties
Channel of communication
Outlaw bad lending practices Hold Wall Street liable
Make regulators accountable for enforcing law
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California Reinvestment Coalition
Opportunities: State Legislation
SB1137 amend foreclosure process
AB69 servicer reporting on loss mit
Servicer specific reporting is key
AB1830 - mortgage reform in flux AB2880 - brokers - dead
AB2359 assignee liability limited AB2740 servicing obligations - ?
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California Reinvestment Coalition
Opportunities: State Policy Governors Agreement with servicers Is it working? (Data) Can it be expanded?
Can it facilitate constructive dialogue on process REOs nonprofits buy foreclosed homes
Process and $ (Wells? Merrill Lynch?)
Funding for counselors - CHOPI, CalHFA, other? Tie counseling to problematic loans
Tenant protections notice, time, utilities, $
Servicers commit BofA/CW?
Trustees commit US Bank?
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California Reinvestment Coalition
Opportunities: Federal
HOEPA comments on high cost loans
Bankruptcy Reform Govt to buy distressed loans & rework them
$ for local agencies to buy properties Support for housing counselors
Anti Predatory Lending bills
Better disclosures on loan documents
Future of these bills unclear!