Members of the Regional Home Ownership Preservation Initiative, of which Woodstock Institute is a lead partner, sent a letter urging the Illinois delegation to the U.S. House of Representatives to vote against H.R. 839, The HAMP Termination Act of 2011, which would cancel funding for the Home Affordable Modification Program (HAMP). In the letter, Housing Action Illinois, Metropolitan Planning Council, Neighborhood Housing Services of Chicago, South Suburban Mayors and Managers Association, and Woodstock Institute told representatives:

Debate is brewing across the country about what shape our housing finance system should take in the years to come. As consumer advocates, we need to ensure that the system that emerges from these discussions meets the needs of  low-wealth people seeking affordable and sustainable housing.

The new housing finance system must support broad access to the products that made home ownership, the primary means of building wealth for many Americans, a reality for communities that otherwise would have been overlooked. It’s worth noting that, from the aftermath of the Great Depression to the beginning of the new millennium, government-sponsored entities (GSEs) like Fannie Mae and Freddie Mac ensured the flow of responsible credit to underserved communities and considerably expanded homeownership opportunities.

Loan servicers, who typically steward homes through the foreclosure process, came under scrutiny several months ago for problems ensuring the validity of foreclosure documents. Many of the country’s largest servicers allegedly employed “robo-signers,” often underpaid and under-trained employees who signed thousands of statements testifying to the accuracy of the foreclosure paperwork without actually ensuring that the statements were true. When some files were scrutinized, it was found that the servicer may not have had the right to pursue foreclosure because the mortgage debt had not been properly transferred. After a ruling by the Massachusetts Supreme Court that declared two such foreclosures invalid, the legality of thousands of foreclosures has been called into question.

Lack of credit availability is a key concern for the housing market recovery. As we discussed in our latest report, lenders are tightening standards as foreclosures and other recession-related negative credit events are taking a hit on many borrowers’ credit scores. For example, the Federal Housing Administration recently changed their policy so that they will only insure loans to borrowers with a credit score of 580 or higher for their standard lending program. However, reports have shown that some FHA-approved lenders are requiring even higher standards for FHA loans. The National Community Reinvestment Coalition, on whose board our president Dory Rand sits, is taking issue with that practice. NCRC recently filed fair housing complaints with federal regulators alleging that many top FHA lenders have underwriting policies that disparately restrict people of color from access to credit.

Credit-default swaps. Derivatives. Collateralized debt obligations. Mortgage-backed securities. How many people on the street do you think could accurately define these terms? These financial “innovations” play a critical part in the story of the financial crisis, but average Joes—even above-average Joes—struggle to understand the role these instruments played. At our screening and discussion last week of “Plunder: The Crime of our Time,” journalist Danny Schechter proposed a framework for discussing the financial crisis that relies less on financial wonkery and more on a moral narrative.

A couple weeks ago, we wrote about some new Treasury data that found that most borrowers whose HAMP modifications were cancelled have not yet lost their homes. We decided to dig a little deeper into the data and look at what individual servicers are doing with borrowers they did not approve for a permanent modification (click for larger chart):