Ruby Brown of Minneapolis says that for the past four years, she has been “struggling to keep Bank of America from taking my home,” trying to convince the bank to reset the principal on her mortgage to its current market value. But the bank has refused, and she fears marshals will be coming to evict her any day now.
Kathy Busby has been fighting a similar fight to save her home in Denver. She has been negotiating with Wells Fargo to avoid foreclosure, and has paid $27,000 toward her mortgage costs in the past four years—only to have Wells Fargo assess tens of thousands of dollars in additional fees and interest, without explanation. “We’re being treated like animals that have no rights,” she said.
Brown and Busby were two of the underwater homeowners—people who owe more on their mortgage than their home is worth—who have signed up to be members of the Home Defenders League, a new organization designed to press politicians running for Congress to take a stand supporting mortgage resets, sometimes called mortgage write-downs.
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There are an estimated 15 million homeowners who are underwater on their mortgages, according to data collected by the Home Defenders League. “That’s a lot of voters,” Brown noted during a conference call today to announce the launch of the organization.
The League intends to reach out to those homeowners through phone banks throughout the country, particularly in states where the mortgage crisis has been acute—and which also happen to be pivotal states in the presidential and congressional elections, including Florida, North Carolina, Colorado, Nevada, Arizona and Pennsylvania.
“Home Defenders League members are calling on 2012 candidates to support their primary goal: resetting millions of mortgages to fair market value in an effort to stabilize home values for all Americans and jumpstart the economy,” says a statement on the organization’s website.
This is the same demand we have been making on Edward DeMarco, the head of the Federal Housing Finance Agency, which oversees the housing financiers Fannie Mae and Freddie Mac. DeMarco has opposed having Fannie Mae and Freddie Mac proceed with mortgage resets even though his own agency has studies that show such actions would be a net benefit to the federal government as well as homeowners. Several members of the Progressive Caucus have signed on in support of mortgage resets.
But now it is time to up the ante. What’s at stake is more than $1 trillion locked up in illusory, inflated home “value” that is unlikely to ever be realized in the foreseeable future. If this bubble-induced negative equity were erased from the the banks’ books and lifted off the shoulders of homeowners, that would allow homeowners threatened by foreclosure to remain in their homes, would stabilize communities and home values, and would free an estimated $71 billion to be spent by homeowners in their communities, thus creating jobs and boosting the economy.
President Obama has shown sympathy for the plight of underwater homeowners and has proposed some measures to help, but he has not taken the kind of forceful action that would lead to the kind of massive resetting of mortgages that is called for. But that is more than can be said for Mitt Romney, who early in his campaign for the Republican nomination famously said that the federal government should just allow the housing market, and for that matter homeowners, “to run its course and hit bottom.” Only when his campaign needed to pick up votes in Florida, one of the states hardest hit by the mortgage crisis, did he Etch a Sketch his previous position, suggesting that it would be better for mortgage lenders to “write it off and say they made a mistake.”
Romney’s reversal shows the potential for what the Home Defenders League can accomplish in congressional races: Faced with underwater homeowners organized into a potent political force, armed with the facts of the damage being done by bankers refusing to reset homeowner mortgages to their true value, politicians who would reflexively side with their Wall Street contributors would have to either Etch a Sketch their previous positions or find that their Wall Street campaign dollars are rendered worthless by homeowners who are mad as hell and are not taking it anymore.