Mortgage and Foreclosure

In Bank of America v. Miami the Supreme Court held 5-3 that local governments have “standing” to bring Fair Housing Act (FHA) lawsuits against banks alleging discriminatory lending practices. But to win these claims local governments must show that their injuries were more than merely foreseeable. The State and Local Legal Center (SLLC) filed an amicus brief in this case on the side of the City of Miami.    

Miami claims that Bank of America and Wells Fargo intentionally issued riskier mortgages on less favorable terms to African-American and Latino customers than similarly situated white customers in violation of the FHA. Miami further claims these discriminatory practices caused foreclosures and vacancies which harmed the city by decreasing property values, reducing property tax revenue, and increasing costs to the city.  

CSG Midwest

Three years in the making, a new Ohio law is being lauded as a possible model for states across the country looking for ways to deal with the problem of abandoned, blighted properties. HB 390, which took effect this fall, establishes a “fast track” foreclosure process. According to The Columbus Dispatch, the process has sometimes taken two or three years, during which time the vacant property can become a problem for surrounding homes and an entire community.

While the economy and the housing market has improved since the recession, some states are still recovering. Many states are focused on helping homeowners who are falling behind to help them avoid foreclosure. States like Florida, Georgia and Washington have found success in programs to help homeowners avoid foreclosure.

As reported by Nick Timiraos of the Wall Street Journal, more than half of all houses bought last year and so far in 2013 have been bought with cash rather than mortgage financing. Indeed the number of houses bought with cash has jumped tremendously since the Great Recession.  

According to CoreLogic’s recent negative equity report, in the first quarter of 2013, 9.7 million or 19.8% of all residential properties with a mortgage were still underwater, or in negative equity.

The Consumer Financial Protection Bureau (CFPB)*released today the “Ability-to-Repay” rule, which is designed to assure the reliability of mortgages – making sure that lenders offer mortgages that consumers can actually afford to pay back. According to CFPB, features of the new rule include:

The foreclosure crisis has touched every state and continues to be a drag on the national economy. House prices have fallen nationally an average of 33 percent from their 2006 peak, resulting in about $7 trillion in household wealth losses. At the same time, an unprecedented number of households have lost their homes to foreclosure or are close to losing their homes.The most recent data available from RealtyTrac shows that one in every 706 housing units in nationwide received a foreclosure filing in October 2012.

On November 26, I had the opportunity to present to the 2012 Kentucky House Task Force on Foreclosures in Frankfort, Kentucky about the steps other states are taking to mitigate the damage of the foreclosure crisis and, if possible, prevent another one from occurring.  Representative Joni Jenkins, who chairs the Task Force, explained that the group was designed to explore the effects of foreclosures on Kentucky households and what is happening nationally.

States - excluding Oklahoma - received $2.5 billion as a part of the $25 billion National Mortgage Settlement with the country’s five largest loan servicers. Most of the money is intended for homeowner relief and programs aimed at preventing future foreclosure abuse. Some states, however, are using the settlement money to offset existing costs rather than creating new programs to aid homeowners.

Since the Great Recession, states have been hit hard by high foreclosure rates and those higher rates continue to hamper economic recovery. But those rates have varied significantly over the past several years, depending upon which state you are discussing. For example, more than 6 percent of Nevada housing units (one in 16) had at least one foreclosure filing in 2011, giving it the nation’s highest state foreclosure rate for the fifth consecutive year. Arizona and California are also still seeing extremely high rates, despite a significant drop in foreclosure activity over 2010. On the other end of the spectrum, foreclosures in North Dakota are much less common: just one in 39,687 units were in the foreclosure process in April. Check the map from RealtyTrac below to see the most recent foreclosure rates for your state.