NAACP Calls on Secretary of The Treasury, Henry Paulson, to Use the Power and Provisions of the Bail-Out Legislation to Prevent Foreclosures
The community reinvestment act is key to neighborhood stability
Under the massive financial services bail out legislation that passed Congress and was signed by the President on October 3, 2008, the US Department of the Treasury was given broad authority to create a plan to mitigate foreclosures and encourage servicers of mortgages to modify loans.
The NAACP is calling on the Treasury to aggressively use all its new authority to stop foreclosures. Specifically, we are urging the Secretary of the Treasury to:
- place a moratorium on home foreclosures for at least 9 months to allow homeowners time to find and take remedial action;
- require a homeowner or servicer to pursue specific loss mitigation activities such as waiving late fees and other charges, establishing an affordable and sustainable repayment plan or loan modification, forbearance or a short refinancing before a home may be foreclosed;
- vigorously apply Community Reinvestment Act requirements to any bank merger that may arise as a result of the bail-out;
- buy servicing rights, so that Treasury can break the modification logjam presently created by understaffed and sometimes uncooperative servicers;
- buy and modify at-risk whole loans where possible;
- continue and expand efforts to modify loans within the control of Fannie and Freddie Mac;
- encourage servicers to engage in more sustainable modifications, including conditioning purchasing of securities only from lenders/servicers meeting these standards;
- use the new guarantee authority to provide guarantees to sustainable modifications; and
- purchase second mortgages to gain control of them, so that they can be consolidated with the first mortgages and restructured.
The American foreclosure crisis is being driven by the high number of predatory loans made within the last few years, and numerous studies have shown definitively that African Americans of all income levels were more than twice as likely to receive high-cost loans. This means that, though no community has been exempted, African Americans and other racial and ethnic minority Americans are being disproportionately affected by the foreclosure epidemic; it is hurting our families and our communities at a much greater rate. In order to effectively address the unacceptably high foreclosure rate we must give homeowners more protection and control; we must level the playing field between homeowners and financial institutions. We have seen that when financial institutions are not required to negotiate loan modifications they do not occur at a rate necessary to adequately address our national problem. We need to mandate that lenders enter into negotiations that may result in a modified loan in which homeowners are obliged to pay a reasonable, sustainable market rate for their mortgage.