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04/1/2016 | Restoring Community Wealth

People Before Profit: Winning Mortgage Relief for Homeowners

Since the 2008 financial crisis, millions of families have lost their homes due to Wall Street’s predatory practices. Many others still struggle every month to make their payments. But assistance is finally on the way. 50,000 families will soon be eligible for principal reduction on their mortgages — for the first time in the Federal Housing Finance Agency’s (FHFA) history.

Alliance of Californians for Community Empowerment (ACCE), New York Communities for Change, and other Center for Popular Democracy partners have fought the FHFA and called out Fannie Mae and Freddie Mac for their refusal to do principal reduction for years.

In 2012, ACCE and other partners passed the California Homeowner Bill of Rights and made big banks pay $25 billion in penalties and borrower relief. Between 2012 and 2014, four big banks were forced to pay $38 billion in settlements with the US Department of Justice — some of which went to homeowner relief. And in 2015, our partners secured improvements to the Keep Your Home California program, which helps homeowners qualify for financial assistance.

The new plan from the FHFA is the latest win for homeowners, but the victory has its limitations. First, homes eligible for relief would have to be “underwater,” meaning the purchase loan has a higher balance than the free-market value of the home. The homeowners must also be behind on their payments, and the outstanding principal must be under a certain amount. Additionally, the plan would also require that the lender would lose more money from foreclosing than from reducing the mortgage amount.

Because of these specific requirements for relief, the plan won’t have a significant impact on the national housing market. But it’s a step in the right direction. 

Over four million homeowners are still underwater and need relief. Some of the hardest hit, most vulnerable communities are still struggling despite financial relief plans like the new one the FHFA is rolling out. We won’t stop fighting until every owner has a fair shot to save their home.