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OpEdNews Op Eds    H3'ed 11/4/09

The Trillion Dollar Bank Job Continues Under Our Noses

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Our communities have been devastated by the foreclosure crisis. American families have lost $6.1 trillion in homeowner wealth since 2006.7The average homeowner has lost $110,000 in equity.8 In a vicious cycle, foreclosures cause property values of neighboring homes to decline, making it more difficult for neighboring homeowners to refinance their loans, in turn causing them to fall into foreclosure as well. Every thirteen seconds another American home goes into foreclosure.9

According to the New York Times, a recent survey by the Mortgage Bankers Association found that "six million loans were either past due or in foreclosure in the second quarter of 2009, the highest level ever recorded by the group. 10 By 2011, nearly half of all Americans will be underwater on their mortgages.11In parts of California, Nevada, and Florida, the number will be over 90%.12

For most Americans, our home is a major source of wealth for our families. This is a staggering loss of wealth that most of our families will likely never recover.

Unfortunately, banks are not doing their part to help fix the problem. A study by the Federal Reserve Bank of Boston shows that banks are not modifying loans to help homeowners avoid foreclosure because "Loan modification is not profitable for lenders. According to the Boston Globe, the study found that "only 3 percent of seriously delinquent borrowers "those more than 60 days behind "had their loans modified to lower monthly payments. 13

Industry insiders say that the reason banks are reluctant to modify loans is that delinquent loans allow the banks that service the loans to collect fees from the homeowner "late fees, fees for insurance, appraisals, title searches, and legal services.14 Because mortgages are typically sold off to third-party investors who absorb the losses when a house goes into foreclosure, the banks that service the loans often do not have a vested interest in avoiding foreclosure.15 In fact they are able to maximize their profits by charging fees as homeowners fall behind on their payments and slowly slip into foreclosure.

According to an attorney at the National Consumer Law Center quoted in the New York Times, "Servicers thus have an incentive to push homeowners into late payments and keep them there: if the loan pays late, the servicer is more likely to profit. 16

According to the Treasury Department's first monthly report on loan modifications in August, Bank of America and Wells Fargo were the worst performers among the big banks when it came to loan modifications.17 Despite the fact that the two banks have taken $70 billion in direct TARP funds and posted over $13 billion in profits in the first half of this year,18 they still are not doing their part to help the very taxpayers who bailed them out to stay in their homes.

Rising Unemployment

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)
 

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