Responses from community groups and advocates to the robo-signing settlement announced Thursday ranged from “good first step” to “sell-out to Wall Street.”

The Woodstock Institute emphasized the significant precedent of requiring banks to write down principals for homeowners who owe more than their homes are worth – an approach lenders have generally avoided taking until now.

The settlement “won’t end the troubles of homeowners” but is a “significant step in the right direction,” said Dory Rand.  She said resources need to be targeted to the hardest-hit communities. She called it “a real victory for homeowners.”

The $1 billion in homeowner relief expected for Illinois “will not suffice to restore all of homeowners’ lost wealth” but “it can potentially turn back the tides of default in hard-hit communities,” she said.

Woodstock estimates that 400,000 Chicago-area homeowners are underwater on their mortgages, together owing nearly $25 billion more than their homes are worth.

Rand reiterated Woodstock’s call on the Federal Home Finance Authority to stop blocking Fannie Mae and Freddie Mac from writing down principals in mortgage modifications.

Paltry restitution

In contrast, a coalition of community groups said the settlement “let banks off the hook.”

“Our elected officials completely sold out the people again to their Wall Street friends,” said IIRON, a regional network including Northside POWER and Southsiders Organized for Unity and Liberation.

IIRON emphasized the paltry sums given in restitution to homeowners who lost their homes due to fraudulent foreclosure practices.  They stand to receive up to $2,000 each.

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President Obama’s State of the Union announcement of a new investigation into bank fraud represents a victory for community groups, said National Peoples Action on Wednesday.

“We’ve been calling for a full investigation for over a year,” said Liz Ryan Murphy of NPA.  “This is a big win, but we still need to see results.

“We need a complete investigation to get to the bottom  of what they’ve done, with penalties and restitution that are commensurate with the crimes.”

The Woodstock Institute also hailed the announcement.  “Making it clear that criminal activity in the financial sector will not be tolerated is necessary to restore confidence in the mortgage market and the broader financial system,” said Tom Feltner.

Obama announced that New York Attorney General Eric Schneiderman will head a new task force looking into abuses in the mortgage origination and securitization sector.

Schneiderman’s appointment came as NPA and other groups (including IIRON in Chicago) expressed concern that the administration was pressing for a settlement in the robo-signing scandal that would release banks from legal claims covering a sweeping range of misconduct.  Schneiderman was among state attorney generals said to be raising similar concerns

Principal reduction

If it is narrowly focused on relieving claims arising from fraudulent foreclosure filings, a settlement could begin to bring relief to hard-hit communities in the form of loan modifications which reduce principal to reflect depressed home values, Feltner said.

Principal reduction is “a critical missing piece in the response to the foreclosure crisis,” he said.

NPA has argued that homeowners have lost billions of dollars of equity since the housing market collapsed due to the malfeasance of big banks, and that wholesale principal reduction would constitute a massive economic stimulus.

Both groups have called on the Federal Home Finance Authority to direct Fannie Mae and Freddie Mac, which own 70 percent of home mortgages, to allow principal reduction.

Murray said Obama should replace Edward DeMarco, acting director of the FHFA, who has ruled out principal reduction.

The president “should consider a change in leadership” at FHFA, Feltner said.

Community groups confronted HUD Secretary Shaun Donovan and Illinois Attorney General Lisa Madigan on Monday over a foreclosure fraud settlement the groups say is entirely inadequate.

Protestors sang, prayed, and testified outside a room in the O’Hare Hilton where Donovan and Justice Department officials were meeting with staff from state attorney generals to urge them to sign on to a settlement in a case arising out of the “robo-signing” scandal of October 2010 (see 10-21-10 Newstip).

The groups object to the deal with the five largest mortgage services – including Bank of America and JPMorgan Chase — as a “slap on the wrist” that would shield them from legal liability for a wide range of foreclosure misconduct.

(Van Jones of Rebuild The Dream and George Goehle of National Peoples Action spell out some concerns at Huffington Post.)

“President Obama and Attorney General Madigan must choose,” says Rev. Marilyn Pagan-Banks of Northside POWER. “Will they settle for a deal that benefits the 1 percent and lets the big banks off the hook? Or will they stand with the 99 percent and fight for accountability and a solution that will help millions of people?”

The O’Hare meeting may have been called to create an aura of inevitability around the settlement, Firedoglake reports, but none of the state attorney generals who have criticized its provisions were expected to attend.

Dissension in the ranks

Attorney generals of New York, California and other states have opposed provisions of the settlement that would give banks blanket immunity for misconduct and shut down ongoing investigations in New York and elsewhere.

Last week attorney generals from a dozen states (not including Illinois) met in Washington DC to discuss coordinating investigations — and their displeasure with settlement talks, according to Huffington.

Madigan is on the committee that is negotiating the settlement. After 50 state attorney generals began an investigation in 2010, the Obama administration began pressing for a settlement. (At Politico, Simon Johnson calls the case the administration’s “last chance” to stand up to banks.)

Several weeks ago members of the regional organizing network IIRON met with Madigan staff to express their displeasure with the deal. “They seemed surprised that we didn’t think the settlement is a great thing,” said Kristi Sanford.

When they learned of the meeting Monday, they organized a rally at the State of Illinois building – and upon learning the meeting’s location, a contingent set out for O’Hare.

There a couple dozen members of community groups from across the city asked a Madigan staffer if the attorney general could spare a few minutes to talk with them. The aide never returned – but police came to ask the protestors to leave, Sanford said.

The groups want banks to agree to write down underwater mortgages, and they say there must be a full-fledged investigation of bank misconduct. Criminal behavior by banks in the scandal is alleged to include perjury, filing false documents, illegal foreclosures, and investor fraud.

The civil rights movement, the Occupy movement, and community organizations will come together for a series of events marking Martin Luther King’s birthday this week, including a demonstration Monday at the Federal Reserve led by African American clergy including Rev. Jesse Jackson.

At the time of his assassination, King was organizing an “occupation” of Washington D.C., and after his death thousands of people occupied Resurrection City there from May 12 to June 24, 1968, demanding jobs, housing and an economic bill of rights.

In other King Day activities, housing rights groups are stepping up the drive to occupy foreclosures, and teachers and community groups are demonstrating against school “turnarounds.”

Over a thousand community activists are expected for an Occupy the Dream event (Sunday, January 15 at 3 p.m. at People’s Church, 941 W. Lawrence), where elected officials will be called on to support jobs and tax reform, including closing corporate tax loopholes and instituting a financial transaction tax.

It’s sponsored by IIRON, a regional organizing network that includes Southsiders Organized for Unity and Liberation, Northside POWER, and the Northwest Indiana Federation. Occupy Chicago has endorsed the event.

“We are organizing in the tradition of the civil rights movement,” said Rev. Dwight Gardner of Gary, president of the Northwest Indiana Federation.

“In Dr. King’s very last sermon, he warned us not to sleep through a time of great change like Rip Van Winkle,” he said. “This is a moment of great change and we must put our souls in motion to occupy his dream.”

At the Fed: National Day of Action

Monday’s action at the Federal Reserve (Jackson and LaSalle, January 16, 3 p.m.) is part of a national day of action to “Occupy the Fed” by the Occupy the Dream campaign, with African American church leaders moblizing multicultural, interfaith rallies in 13 cities.  They’ll be emphasizing racially discriminatory practices by banks which have resulted in high foreclosure rates, as well as the issue of student debt.

“There needs to be economic equality, there needs to be jobs for all, there needs to be opportunities for the next generation,” said Rev. Jamal Bryant of Occupy the Dream.

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A federal agency’s legal challenge to the city’s vacant properties ordinance is “astounding,” said Braden Listmann of Action Now.

The group is one of several community organizations making up the Foreclosure Convening, the coalition that earlier this year won a new provision holding lenders and servicers responsible for maintaining vacant homes following foreclosure.

The Federal Housing Finance Authority filed a lawsuit Tuesday arguing that Fannie Mae and Freddie Mac are exempt from local supervision or regulation.  The two corporations, which are supervised by FHFA, hold mortgages on over 250,000 Chicago homes and use over 200 banks and mortgage companies to service the loans.

Listmann said that Fannie and Freddie’s contracts require servicers to abide by state and local laws and ordinances.

He points out that Fannie and Freddie have refused to modify troubled mortgages with principal reductions.  “Instead of writing down $20,000 on the principal and getting the rest back over 30 years, they’re foreclosing on homes,” he said.  “After the buildings become vacant and fall apart, they’re selling them for $10,000 or $20,000 – enough to cover the servicers’ fees.”

“And now with this lawsuit, the FHFA is admitting that they don’t even want to take care of the vacant properties that result from their policies,” he said.

Mayor Emanuel has vowed to defend the ordinance – and Wednesday morning, Cook County commissioners unanimously passed a similiar measure.

“These abandoned vacant properties are left to deteriorate and attract drug and gang activity, violence, graffiti, garbage and debris,” according to a statement from the Foreclosure Convening.

“They threaten the safety of children, neighbors, police and firefighters, lower the property values of surrounding homes and drain the city’s budget. Taxpayers shouldn’t be forced to pick up the bill for Fannie Mae and Freddie Mac’s negligence.”

Just as the Occupy movement gives voice to the widespread perception that our economic system isn’t fair and  doesn’t work for ordinary people, the growing movement to occupy homes responds to a foreclosure crisis caused by banks that are unresponsive and unfair to homeowners.

Case in point:  Sherri Norris.  She’s one of thousands of homeowners who’ve made good faith efforts to deal with mortgage troubles and been stonewalled and misled by banks.

Thursday she’ll announce that, with the support of her neighbors and of Communities United Against Foreclosure and Eviction, she’s staying in her home, despite an eviction order.

The announcement is scheduled for 6:30 p.m., Thursday, December 8, at her home at 2029 S. 17th Avenue in Broadview, a near-west suburb.

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Abandoned homes being occupied in Belmont Cragin and Auburn Gresham on Tuesday – part of a national day of action called by Occupy Our Homes – underscore the failure of banks to deal with the foreclosure crisis.

In Belmont Cragin, Communities United Against Foreclosure and Eviction are moving two homeless sisters and their children into a single family home that was abandoned sometime after foreclosure was filed in 2009.  The group couldn’t determine whether a final disposition has been made on the property.

They think it could be one of the thousands of “red flag” properties, where banks and loan servicers “may choose to reduce the costs associated with a long-term vacant home by walking away from the foreclosure process instead of completing it” in order to evade the costs and legal reponsibilities of ownership, according to a Woodstock Institute report (see earlier post).

In Auburn-Gresham, kicking off its “Homes for the Holidays” drive, the Chicago Anti-Eviction Campaign is moving a family which lost its home to foreclosure into a home that was abandoned by a longtime resident after JP Morgan Chase refused to consider a loan modification.  The owner gave the keys to AEC, which like CAUFE has done signficant repairs on the building.

Foreclosures have continued to climb over the past two years, since the Obama administration promised to help millions of troubled homeowners.  But because their program allowed for voluntary participation by banks – instead of requiring institutions that had been bailed out to give affordable modifications to qualifying homeowners – it has helped only a small portion of those initially targeted.

Meanwhile lenders widely noted for being unresponsive to homeowners have now acknowledged extensive fraud in foreclosure filings.

In Austin, South Austin Coalition is taking over and boarding up an abandoned building that’s hosted extensive criminal activity less than a block from May Elementary School.  The building was foreclosed on by Citibank, said Elce Redmond of SAC.

“We’re going to go after the bank to pay for the boardup,” Redmond said.  “Longterm we want to pressure the banks to turn these homes over to community organizations and churches so we can rehab them and put families in them.”

“We have so many unemployed people and so many vacant properties,” said Willie JR Fleming of AEC.  “It’s obvious we need to put people to work rehabbing them so we can put families back in them.”

Fleming emphasizes that “we are enforcing the human right to housing.  We are not asking for human rights.  We are enforcing them.”

Occupy Our Homes reports similar actions “to stop and reverse foreclosures” in 25 cities on Tuesday, as “the Occupy movement joins with homeowners and people fighting for a place to live.”

Two families facing eviction due to foreclosure – one scheduled for eviction the day after Thanksgiving – are refusing to leave, and Communities United Against Foreclosure and Eviction is mounting a public campaign to pressure their lenders to give them mortgage modifications.

CUAFE has posted Youtube videos asking people to call lawyers for HSBC Bank and IndyMac/OneWest Bank to consider offers the group says banks have ignored.

Arturo Martinez and Remedios Sanchez have lived for 25 years in their Albany Park home, now shared with a daughter and several grandchildren.  Martinez began struggling with his mortgage after his hours were cut at work; because of a mix-up when court papers were served, he didn’t know his home was in foreclosure until after it was sold, according to Chris Poulos of CUAFE.

They were recently informed that they’re scheduled for eviction Friday.

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