Group Brings 'Hope' to Mortgage Woes
CHERYL CORLEY, host:
I'm Cheryl Corley sitting in for Michel Martin, and this is Tell Me More from NPR News. Coming up, the nation's only court for veterans offers care over incarceration. We'll speak with the judge. But first, we wanted to give you an update on the housing crisis sparked by subprime mortgage lending. With foreclosures at record levels the Hope Now Alliance, a collaboration between the government, lenders, and non-profits set up to aid troubled homeowners, rolled out a plan yesterday for a standardized streamlined process for helping those on the verge of losing their homes.
Here to help us understand it all are Jonathan Kempner, president and CEO of the Mortgage Bankers Association and member of the Hope Now Alliance who joins us in our studio, and Kathleen Day, spokeswoman for the Center for Responsible Lending. Welcome to you both.
Ms. KATHLEEN DAY (Spokeswoman, Center for Responsible Lending): Thank you.
Mr. JONATHAN KEMPNER (President and CEO, Mortgage Bankers Association, Hope Now Alliance Member): Thank you, Cheryl.
CORLEY: All right. Well, Jonathan, why don't we start with you. Can you tell us briefly about the new guidelines to assist homeowners in foreclosure or at risk of foreclosure?
Mr. KEMPNER: Sure, Cheryl. As you said, it is a standard set of procedures to streamline the process. The whole purpose is to keep more homeowners in their homes, and there are certain elements that I think are important for the listeners to understand. First of all it will expedite the process. It establishes these uniform timetables for action on each mortgage servicer who's agreed to this so that there won't be a disparate set of approaches.
CORLEY: What does that mean exactly? That they have just a few days or find out more quickly?
Mr. KEMPNER: Well, everybody who comes forward, talks to their servicer, within five days they'll get an acknowledgment of their request, they'll be informed within 30 days of how the process is proceeding, and then within 45 days they'll get an answer, and hopefully a plan to accommodate them. Now very important to understand is that each person can be informed; there's free counseling. We would urge everybody who has any housing issues to come forward. They'll get guidance from an objective counselor which is important, someone that they could have full confidence in, and they will work with the servicer to try to work out a program that's best for them. There are different ways, of course, to handle housing issues. Some will get loan modifications where you permanently change the loan, some of the features. You'll maybe get a workout of some sort, which is a repayment plan where if someone's behind a couple months it gives them the ability to catch up. You can have temporary suspension of payments. There are a host of tools that could be used, and the most important point I can make, and I'll make it a few times while we're together, is that people have to reach out and call and contact their servicer.
CORLEY: So it's up to them?
Mr. KEMPNER: Well, it is, but we're aggressively going out to bring the borrowers in and to try to explain to them their alternatives. The whole idea is to get ahead of this as much as possible. No one benefits from a foreclosure. I know some people have this notion that what a bank wants to do is take back their house, nothing could be further from the truth.
CORLEY: Are there any projections on how many people will actually be helped by this new plan?
Mr. KEMPNER: Well, since July the Hope Now Alliance has helped almost 1.6 million households, and that's a lot, but it should be many more. And there's a full realization from the mortgage industry, the lender industry, that the more people we can help, the better it is, so there's no specific number because of course we don't know how people will react, but I'm sure if there's been 1.6 now that there would be hundreds and hundreds of thousands of more people that will be helped.
CORLEY: I want to bring Kathleen into this. The latest numbers, Kathleen, show that foreclosures are still soaring. Last month foreclosures compared to a year ago up nearly 50 percent with more than 261,000 homes getting at least one foreclosure-related filing. You're with the Center for Responsible Lending, you've been very critical about the process which got us in today's subprime mess, and I was wondering what you thought about the Hope Now Alliance plan. Is the alliance taking a step in the right direction?
Ms. DAY: Well, foreclosures are rising four times faster than every workout they claim to be doing, even if their claims work perfectly or exactly as they say, which we don't think they are. Their 1.6 million claim is very suspect because we have no details. They won't release details about their numbers, and most importantly, don't forget, these are the people who brought us the problem. They first told us there wasn't a problem, then they said it wouldn't be too bad, then they launched this program in July. And now every few weeks they have to announce something new about how we're fixing it, we're fixing it, because it isn't working nearly sufficiently enough.
Do we think every additional homeowner who can be helped is a good thing? Of course we do, but the fact is this is still a voluntary program from business, and there's all kinds of competing contradictory market forces that is keeping workouts from happening fast enough. It's just not keeping pace. The curve for foreclosures isn't just a slope, it's practically perpendicular. You wouldn't walk up that hill. You'd have to scale it. You know, you just - it is happening so fast and so badly that a voluntary program simply isn't going to keep up. And second of all - first of all, and they don't have the man power to do it. Now so the fact is that's why every few weeks they have to have one of these announcements.
CORLEY: Well, let's - Jonathan, looks like you want to jump right in there, go ahead.
Mr. KEMPNER: Kathleen and CRL has done some excellent work so I have a lot of respect for them and how they've helped a lot of people. A lot of this program is in response to the requests and the guidance and the advice from Kathleen and some other consumer advocates.
CORLEY: But what about the complaint, though, from her and other consumer advocates that it is a voluntary plan, and is there any way to make it something other than voluntary?
Mr. KEMPNER: Well, yes, it is voluntary because there's no law behind it. Let's remember of course that a mortgage is nothing other than a contract between a borrower and a lender, and what we're trying to do is help as many consumers as possible. I must say I would think that Kathleen would be applauding it that if ever CRL were to come and say that something solid has been done that this is something that they would strongly support.
Ms. DAY: Is it better than nothing? Yes, but is it doing enough? No. Because at the same time you're lobbying against the very fixes in Congress that would really help people. If you really wanted to keep people in these homes, your members would not have made these deceptive loans in the first place.
Mr. KEMPNER: Well, Kathleen, that's not...
Ms. DAY: You weren't underwriting, you weren't assessing whether people could repay, you were basing it on whether the home price would appreciate, so your idea was, oh, so if this person can't pay, they'll default and we'll take over the house. That was the business plan. It's ridiculous.
Mr. KEMPNER: Kathleen, I appreciate - your interpretation just isn't fair, but we can have that debate, we have had it for the past year, but it's not helping the listeners.
CORLEY: You say it's time to go forward?
Mr. KEMPNER: Well, let's go forward, and let's talk to the listeners out there who have pending housing issues or who are fearful that for whatever reason, perhaps there is bad health in the family, loss of a job, the economy is somewhat shaky...
Ms. DAY: Those are not the reasons for this problem.
CORLEY: Well, let me interrupt just a second. If you're just joining us, this is Tell Me More from NPR News. I'm Cheryl Corley. I'm speaking with Kathleen Day from the Center for Responsible Lending and Jonathan Kempner, a representative of the Hope Now Alliance about the guidelines the organization has released for homeowners. Kathleen, you pointed out in an opinion piece that you wrote for the Washington Post that minority families received a disproportionate share of subprime loans. If you can briefly talk about that, how were potential homeowners in minority communities treated differently, and what kind of steps do you think the mortgage industry should be taking in that regard? Should they be specifically aiming at these minority homeowners trying to hold onto their homes?
MS. DAY: What they should've been doing is trying to go out into communities that they have historically ignored or among populations they have historically ignored because of the person's skin color or gender. And they should have been finding people who were creditworthy, because there's many. Six out of every ten people who received a high-cost subprime loan would have qualified for a conventional lower cost, thirty-year fixed rate loan. And so, it's ridiculous that six out of ten people had to pay more. And if a disproportionate number of those people were black, Hispanic, Latino, that's just unfair.
The banks weren't doing their job. They should've been going out, and finding good people who are good credit risk. Instead, they were going out, and just flipping this stuff like burgers. Because of short, you know, they were looking over the short horizon, and the quarterly profits rather than long term viability.
CORLEY: But what does Mr. - Jonathan says though, that may have been the case. I'm not sure if he agrees with everything.
MS. DAY: But let's go forwards, we say go forward, too. So, why are they lobbying so hard against the most important thing that could happen is to allow bankruptcy judges to modify the terms to a fair market value.
Nothing that isn't fair. A fair market value, which is at least what the business would get in a foreclosure, they are lobbying against that. Bankruptcy judges right now can modify a contract on vacation homes, second homes, yachts, commercial property. They cannot modify the terms of a person's primary residence.
And, Jonathan's group, he says he represents hope now. It's really he represents industry, the lenders who brought us here. And they have been lobbying voraciously, this is their number one thing, not to allow this to happen. And they say, oh, it will raise credit costs. That is just bogus, it is a scare tactic.
CORLEY: Let's have Jonathan - can respond.
MR. KEMPNER: Well, again Kathleen your characterization is something that we disagree with, and apparently Congress disagrees with. There are lots of consequences of that legislation that you know are out there that you're not sharing with the listeners, but...
MS. DAY: Not true. I absolutely...
CORLEY: Let him finish.
MR. KEMPNER: Kathleen, I don't see it being productive for us. We can do that as a sidebar. That is a debate that you, and us and our groups have had, and we'll continue that debate. I think much more importantly is to - for you, and me to address the listeners out there on what we can do for them going forwards, something that you haven't addressed yet.
MS. DAY: Well, one thing they can do is go get help, quickly. I agree with that, and I did say I didn't dismiss the program. I said any person, any incremental step that helps anyone, we applaud, but this is a tiny, baby step. What people should do if they get in trouble...
MS. DAY: Immediately contact the lender, and then they should go and try to seek help, maybe legal aid. Get advice. Go to credit counseling.
CORLEY: All right, let me stop you there. She has a lot of points. What one thing do you want these people to do?
MR. KEMPNER: I want people if they have a housing issue to write down this phone number, 888-995-HOPE or go to the hopenow.com website, and we're there to help you with open arms.
CORLEY: All right, we'll have to end it there.
MS. DAY: But not enough people.
CORLEY: I'll have to end it there. Thank you so much Jonathan Kempner from the Hope Now Alliance, President and CEO of the Mortgage Bankers Association, which plays a large role in HOPE NOW. Kathleen Day, spokeswoman for The Center for Responsible Lending, she joined us from WAMU here in Washington. Thank you both.
MS. DAY: Thank you.