These days, the crisis in the sub-prime mortgage market and the subsequent rising rates of foreclosure are popular topics of discussion in New York. Thousands of poorly and abusively underwritten loans that were ultimately unaffordable and unsuitable for the borrowers who received them are going bust, and while Wall Street firms that invested in the sub-prime loan market are bemoaning the loss of profit as a result of these abusive actions, it is the homeowners facing foreclosure that are largely reaping what unscrupulous sub-prime lenders and brokers have sown for them. In fact, as New Yorkers, we are all paying a high price for this debacle in the form of neighborhood disruption and damage to the economy.
The question that many are now asking is, "What can we do about it?"
In answering this question, there are two approaches to consider: One, homeowners who have fallen prey to the frenzied lending (that is still taking place) deserve a chance to save their homes and receive assistance from qualified nonprofit organizations that provide homeowner counseling, legal assistance and other foreclosure prevention services. Two, the City of New York needs to take the necessary steps to ensure that future borrowers do not fall into the same traps.
As the profile of this issue has steadily risen, so too has the anti-foreclosure workload, shouldered mostly by the few groups who have proven themselves to be effective in this fight. Because of this increase in sheer number of foreclosures, some organizations have estimated that they turn away nearly 80 percent of the homeowners who come to them because they do not have the resources needed to handle such caseloads.
While elected officials and government agencies have recently begun to offer foreclosure prevention hotlines, competing initiatives of this kind ultimately just refer homeowners in distress to the same citywide network of organizations that has evolved over the years. What is needed now is not another telephone number to call, but rather for local politicians to acknowledge and support the work that is already taking place, rather than go it alone for a brief surge of publicity. The city needs to provide resources to these organizations to build their capacity so they can serve more people.
As it would be a smart move to invest in these groups as a way to fight foreclosures, so too would it be smart for the city to establish a Code of Conduct and a policy for disinvestment from businesses and Wall Street investors that actively engage in the discriminatory, abusive, and lax lending that has fueled the current foreclosure crisis. In order to truly stem the tide of foreclosures, we need to address its root causes. By continuing to invest in and ultimately support the companies that have brought on the foreclosure crisis, the city is implicitly endorsing the predatory nature of the sub-prime mortgage industry. City officials have the responsibility to cut off our city's flow of capital to institutions that hurt homeowners.
One other proactive measure that can be taken to prevent future foreclosures is the creation of a referral network that would connect would-be tenants with homeowners who are looking to rent out vacant units. For many homeowners who are currently in default, the income lost through vacant units in their homes, as well as delinquent and destructive tenants, has been the impetus to push them into foreclosure. The need to find decent tenants in a timely fashion is real, and the ability to do so would make a lasting impact on homeownership preservation in the city.
It is the hope of advocates who are currently engaged in these issues that city politicians and officials will use their positions of power and visibility to effectively address what can be done. There is a range of solutions that can be reached and city leaders should do what is within their power to protect both current and future city homeowners from predatory lending.
Eric Fergen, a Bronx resident, is the outreach coordinator at University Neighborhood Housing Program and a member of the New York City Anti-Predatory Lending Task Force.