Final Call/New America Media, News Report, Charlene Muhammad,
Editor's Note: This story, which originally appeared in the Final Call, was produced as part of NAM's Stimulus Watch coverage and was funded with a grant from the Open Society Institute.
Equity rich but cash poor black households hardest hit by the crippling subprime lending scheme have benefited less than predatory financial institutions from stimulus dollars meant to help them recover, fair lending advocates and loan modification analysts say.
President Barack Obama created the Making Home Affordable Program as part of his $787 billion stimulus package. The idea was to help about seven to nine million struggling homeowners keep their homes by allowing them to either refinance or modify their mortgages to lower terms.
Greg Akili, field organizer and national training director with the National Association for the Advancement of Colored People (NAACP), Los Angeles, said that’s easier said than done because the bailed out banks are still holding people captive.
“The money should have gone to direct payment to homeowners, just like they did with the banks,” Akili said. “They should have subsidized people who were close to foreclosure or in foreclosure so they could keep their homes right away.”
According to Realty Trac, foreclosures, scheduled auctions, bank repossessions, and default notices were reported for more than 315,000 homes in January 2010 alone. By contrast, very few struggling homeowners have received help.
“Supposedly the help is there but the problem is it’s in the pipeline, and the pipeline is a funnel, so the closer it gets to the bottom, the more it gets slower and slower,” Akili said.
According to ProPublica, an independent, non-profit news agency, Bank of America, JPMorgan Chase, CitiMortgage and Wells Fargo together account for more than 60 percent of the 3.4 million mortgages eligible for the Making Home Affordable program, yet they have only converted a small percentage for permanent modifications since the trials began three or more months ago.
“It’s not like … these organizations are being forced to undo these bad loans,” reduce interest rates, or lower loan amounts,” said Jeffrey May, principal with International Development and Planning, a New Orleans-based minority-owned planning and consulting firm. “Participation by the banks is voluntary.”
May said that like many of Obama’s initiatives, the foreclosure prevention program may have been his idea, but he had no control over the development, crafting, or execution of it. Beyond compromises made in Congress, he said, issues have also arisen in the agencies that oversee the programs. May predicts that at some point, there will be mass evictions of people whose homes have been sold out from under them.
Sharon Black, co-coordinator of the National Network to Stop Foreclosures & Evictions, said the number of clients her organization has helped since the foreclosure crisis hit has tripled. She is bothered that the federal government lacks incentives for big banks to reverse their bad practices. For instance, she argued, if banks foreclose on homes, Freddie Mae and Freddie Mac bail them out and take the loss for the full amounts.
“It’s a form of theft, like $1.9 trillion, that has been stolen from devaluing people’s property, particularly in the African-American community, which relied on their homes as wealth. There’s gotta be a change in mindset. That’s the people’s money. That money should belong to the people,” Black said.