NLS-LA Foreclosure Prevention Housing Justice Network conference 3/7/10
Presentation by Stephanie Haffner, Supervising Attorney, Neighborhood Legal Services of Los Angeles County (NLS-LA) Summary of strategy by NLS-LA, One LA- IAF, and the Industrial Areas Foundation Content of this presentation may be replicated under the condition that NLS-LA, One LA-IAF and the Industrial Areas Foundation are credited
Our Approach Collaboration with multiple partners Train cohorts of borrowers Cohorts negotiate as a group with banks that service their loan Monitor modifications Make recommendations re: what will work
Collaboration With Multiple Partners NLS-LA (technical assistance) One LA-IAF & local parishes (organizers) New Economics for Women (HUDapproved counselors) Volunteer w/ banking background (expert)
Train cohorts of borrowers Meet with HUD-approved loan counselor Financial literacy Understand your mortgage Understand securitization: Servicer vs. Investor Types of loan modifications
Cohorts Negotiate As a Group With Banks That Service Their Loan Nearly 200 borrowers to date Four banks (servicers): Chase (includes WaMu & EMC) Wells Fargo (includes ASC) Bank of America (formerly Countrywide) One West (formerly Indymac)
Monitor Modifications
One LA Negotiations Results Summary as of March 23, 2009 TOTAL COHORT CHASE/WAMU/EMC Dec 6, 2008 WELLS/ASC Jan 17, 2009 COUNTRYWIDE Jan 22, 2009 Decline 21 17% 3 3% 1 6% 17 26%* In review 62 55% 23 79% 15 83% 25 38% Short-term forbearance 2 2% 0 0% 1 6% 1 2% All interim solutions payment jump in next 10 years Payment jump in 5 yrs or less** Payment jump in 5-10 yrs 22 19% 3 7% 0% 19 29% 19 16% 3 7% 0 0% 16 24% 3 3% 0 0% 0 0% 3 5% Long term fixed payment Principal reduction 10 9% 5 10% 1 6% 4 6% 0 0 0% 0 0% 0 0% Total borrowers w/known result 112 29 18 66
Make Recommendations Re: What Will Work Average Borrower Characteristics Current home value $307,002.80 Monthly income $4,197.46 Monthly payment $2,774.27 Total mortgage debt $450,000
Problems With Modifications Bank disorganization Modification is voluntary HAMP payment plans not finalized Foreclosures mid-negotiations Most modifications are short-term fixes: 5 years or less before payments jump by hundreds per month
Alternate Proposal Long-term fixed payment Reasonable interest rate Publicly funded soft second to secure affordable payment for more borrowers Principal reduction so borrower has equity & reason to keep paying Borrower to repay with share of equity appreciation
7 th Council District Foreclosure Prevention Pilot On May 13, LA City Council voted unanimously to establish a pilot for: Long term fixed payment Principal reduction Publicly funded soft second mortgage Future equity sharing by homeowner, investor, public
CD7 Pilot Example Current loan balance: $400,000 Home value: $250,000 HAMP offer: $150,000 deferred principal Pilot example: Public loans $50,000 (silent second). Investor writes off $100,000. On sale or refinance, borrower repays $50,000 plus 17% (proportionate share 50K:300K) of any equity.
Time Line Sept 08 - Project start Nov 08 - large meetings with borrowers Dec 08 secure NEW as partner Dec 08 Jan 09 Negotiations for first three cohorts (Chase, Wells, Countrywide) Jan 09 San Fernando High Assembly 1500 participants; federal, state & local elected officials
Time Line, Cont d Feb 09 LA City Council approves program idea March 09 to May 09 Indymac cohort, Countrywide II cohort May 09 LA City Council approves program September 09-present Implementation & bank negotiation Ongoing intervention for borrowers
Collective Negotiation: Pros & Cons Pros Increased leverage for borrowers Ability to quickly identify patterns of conduct Designated contacts to resolve disputes Cons Time and resource-intensive
Priest becomes savior in foreclosure crisis: http://www.cnn.com/2009/living/04/22/ foreclosure.priest/index.html http://www.cnn.com/2009/living/04/15/ foreclosure.phones/index.html#cnnstc Video
Stephanie Haffner Supervising Attorney, NLS-LA Housing/Consumer Advocacy Group stephaniehaffner@nls-la.org