LARSON Weekly Report - February 17, 2012

WI Senator Chris Larson, 7th District
BACKSTORY - February 16, 2012 - Weekly Report

Dear Friend,

This week you will find information on recent developments related to rehabilitating our communities and assisting victims of foreclosure. An update on important legislation from this week is also provided.

As usual, please feel free to contact me with any questions, concerns or opinions you may have about our community or our state.

Sincerely,

Chris Larson
State Senator, District 7
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Foreclosure Funds Raided, Victims Overlooked
Last week, we examined the positive affects that funds from the National Mortgage Settlement could have on Milwaukee’s housing market and those that fell victim to foreclosure as a result of fraudulent business practices. However, in a decision announced last Thursday, Governor Scott Walker and Attorney General J.B. Van Hollen once again continued the shocking trend of mismanaging federal money. Instead of distributing the foreclosure funds, they raided most of the $31.6 million in discretionary funds allocated by the federal government to help the victims of unfair mortgage practices.

The National Mortgage Settlement is a historic $25 billion, joint federal-state agreement with the nation’s five largest mortgage lenders aimed at bringing relief to borrowers harmed by dishonest mortgage practices. $140 million was allocated to Wisconsin, of which $31.6 million is discretionary. This money was intended to help fund consumer protection and state foreclosure protection efforts, according to the U.S. Department of Housing and Urban Development.

However, rather than assist the victims of foreclosure, Governor Walker is choosing to keep $25.6 million of the state’s allocated discretionary funds to fill the budget whole he created by providing tax breaks to big corporations. Homeowners and those who lost their houses in the most recent financial crisis are still in distress and are desperate for help. This money should be directed to programs that concretely and immediately provide help for those that were preyed upon by our country's largest mortgage providers.

This issue is of the utmost importance in our community as Milwaukee and its residents have been disproportionately harmed by the crisis as six of the hardest-hit zip codes are in Milwaukee. Additionally, the Milwaukee Journal Sentinel reports that Milwaukee is home to over 4,800 abandoned properties. These discretionary funds could have been put to good use rehabilitating or demolishing foreclosed homes, as well as increasing programs to help individuals avoid future foreclosure.

It is disappointing that Governor Walker continues to turn a blind eye to the needs of those in Wisconsin. The National Mortgage Settlement was a positive step forward in helping the housing market recover. Unfortunately, Milwaukee residents will not see the full benefits of its effect.

Rebuilding Our Housing Markets
The American dream of homeownership has been prevalent in our society since the Pilgrims landed on Plymouth Rock in 1620. We share a belief that everybody should be able to own a little piece of America and have a place to call home. The prospect of owning a home is an essential part of life, liberty, and the pursuit of happiness.

Unfortunately, for many this dream has been shattered since the housing market crash that began in 2007 as a result of fraudulent lending practices. Banks encouraged lax lending standards and the liberal use of adjustable rate mortgages to put debt obligations in the hands of people unable to repay such loans. As a result, most of us have family, friends, or neighbors who were led to believe they could manage the debt and now have been left financially strapped, in a spiral of homeownership debt, or facing the loss of their home through foreclosure.

Our community has been disproportionately affected compared to the rest of Wisconsin. Since 2008, 20,000 Milwaukee residents were notified that foreclosure action had been started on their homes. As a result of these housing foreclosures, costs have been shifted to Milwaukee taxpayers. Our neighbors cannot afford to have this happen again, therefore it is crucial that we work together to prevent similar housing market crashes.

In his State of the Union speech, President Obama introduced a new proposal to get our depressed housing markets headed in the right direction and provide those that were taken advantage of by dishonest mortgage lenders with much-needed assistance. Below, we will examine the main pieces of this proposal that address: refinancing, repurposing vacant homes, rehabbing neighborhoods and reducing foreclosure, and introducing a Homeowner's Bill of Rights.

Refinancing for Responsible Borrowers
Under current law, neighbors who have a loan backed by Fannie Mae, Freddie Mac, or the Federal Housing Administration can refinance their mortgage. However, if the cost of the loan exceeds the value of the home, the Federal Housing Administration is unable to support such a move. This proposal aims to provide all responsible borrowers who have been current on their mortgage for the past six months the opportunity to refinance, even if they have private loans or loans that exceed the value of their single-family home. It is estimated that this provision could save the average homeowner up to $3,000 annually.

Repurposing Vacant Foreclosed Homes
Many neighborhoods have experienced increased housing vacancies, which can be a hotbed for illegal activity. Therefore, President Obama's proposal will seek to improve these neighborhoods and their local economy by allowing Fannie Mae and Freddie Mac to sell homes they own through foreclosure to investors who agree to rent them out. These lenders currently own about 200,000 homes, only half of which have been put up for sale.

Rehabbing Neighborhoods and Reducing Foreclosures
Another provision in President Obama's proposal seeks to further rehabilitate our afflicted communities and reduce the number or foreclosures. The provision seeks to do this by expanding eligibility for the Home Affordability Modification Program, which can help homeowners lower their monthly mortgage payment by up to 31%. Another positive change that would help to rehab our neighborhoods and reduce foreclosures is increasing incentives for lenders to work with borrowers to help them rebuild their equity.

Homeowners Bill of Rights
-- To prevent something similar from happening in the future, this new proposal will also establish a Homeowner's Bill of Rights. Below are some items that would be written into this Bill of Rights:

-- Provide homeowners access to a simple mortgage disclosure form, so they understand the strings attached to the loans they take out

-- Fully disclose the fees and penalties homeowners might encounter
Create guidelines to prevent conflicts of interest that end up hurting homeowners
Support keeping responsible families in their homes and out of foreclosure

-- Protect families against inappropriate foreclosure through processes, including the right of appeal

-- Passing national legislation to implement these common reforms would be a positive step forward in assisting those that were knocked down by the devastating housing market crash and will help get our local housing markets and economies moving in the right direction.

Click here for more information about this proposal.