Allowing for principal reduction would keep families in their homes,
contribute to community economic recovery in hard hit neighborhoods
Washington [July 10, 2014]— A coalition of faith, community, labor, civil rights and consumer organizations from throughout the country has sent a letter to Federal Housing Finance Agency (FHFA) Director Mel Watt asking him to take swift action to alleviate the ongoing foreclosure crisis in the United States.
The letter is signed by over 50 national and state-based groups, including the Center for Responsible Lending, the Leadership Conference on Civil and Human Rights, the ACLU, AFL-CIO, NAACP, and Americans for Financial Reform. The full text of the letter, with the list of signing organizations, can be found below.
“We write to you now on behalf of the millions of families who are still struggling with negative home equity, as well as those who are in danger of losing their homes through foreclosure, and the neighbors and communities hurt by foreclosures around them,” the letter states. “The need to swiftly reverse the government sponsored enterprise (GSE) policy on principal reduction remains a major priority for many organizations and community members.”
The letter is the latest in a series of actions in recent weeks calling on Director Watt to reverse policies that currently prevent the GSEs, Fannie Mae and Freddie Mac, from offering principal reduction and home buyback options to struggling homeowners.
“We will continue to urge Director Watt to do all he can to eliminate the hardships so many families are experiencing,” said Wade Henderson, president and CEO of the Leadership Conference on Civil and Human Rights. “The housing crisis remains real, years after it nearly brought the economy to its knees, and the so-called solutions offered thus far have worked well for the industry, but not so well for homeowners. It is time to resort to bolder measures.”
“Eight years since the onset of the housing and foreclosure crisis, Wall Street has fully recovered and the Dow Jones is at record highs. Meanwhile, working families, particularly those in communities of color, continue to struggle,” said AFL-CIO President Richard Trumka. “We urge Director Watt to take aggressive action to help struggling homeowners.”
“In 2012 Director Watt was among a group of CBC members and other progressive lawmakers that sent President Barack Obama a letter urging him to enact principal reduction and provide assistance to underwater borrowers,” said Rashad Robinson, Executive Director of Color of Change. “Now that he has the power to mitigate widespread suffering in Black communities caused by the housing crisis, we would like to remind him of his past support for principal reduction.”
“While the banks and Fannie Mae and Freddie Mac are back on their feet, there has been no recovery for millions of American families,” Rachel LaForest, Executive Director of the Right to the City Alliance and a leader in the New Bottom Line coalition and Home Defenders League. “In a heartbeat Director Watt can change that, improving lives and strengthening our communities. We are joining together to call on him to do just that.”
“We urge you to harness your agency’s powers, resources, and financial expertise to prevent more foreclosures and reduce negative equity, and to act expeditiously to revise FHFA policy against principal reduction in order to help American homeowners and communities,” the letter concludes.
A recent report, “Underwater America: How the So-Called Housing ‘Recovery’ is Bypassing Many American Communities,” published by UC Berkeley’s Haas Institute for a Fair and Inclusive Society, identified the nation’s most troubled hot spots: the cities, metro areas and communities where the highest proportion of homeowners still have negative equity, or are “underwater.” The report’s authors join many others in arguing that market forces alone will not bring recovery to these severely impacted communities, and call for interventions to reduce mortgage principal.