U.S. Representative Maxine Waters and Congress’ Housing Subcommittee held a hearing Friday November 30 in Los Angeles to address California’s ongoing foreclosure crisis.
“First,” she told the meeting’s attendees, “with the respect to the ‘why’ of holding this hearing, it would be arguably derelict of this subcommittee not to hold hearings regarding the sub prime mortgage market and home foreclosure crisis.”
“This issue is not only the biggest story in the housing world that [we] operate in daily, it is currently the biggest economic story in the nation and perhaps the world,” she added.
“A field hearing in California is warranted given that our state lies at the epicenter of the foreclosure wave. [Our] rate of one filing for every 88 households ranked second highest among all states... eight of the top twenty cities in foreclosure filings are in California...”
In Los Angeles alone, Mayor Villaraigosa who attended the hearing said that home foreclosures due to subprime loan defaults rose to 1177 by September. The ten zip codes most affected were in South Los Angeles, which is inhabited largely by African Americans and Latinos. But the problem goes beyond families losing their homes, he urged.
“It leads to neighborhood blight, abandoned buildings and nuisance building cases... we need to begin a meaningful discussion with lenders about creating a process to offer foreclosed properties to the city and nonprofit organizations so that these properties can be converted into community profit and affordable housing. ‘We have to address the needs of borrowers who are currently at risk of losing their homes and we have to challenge the banking industry to accept the responsibility to be part of the solution.’’
Waters and her panel’s main solution involved H.R. 1852 a bill that would give government money to distressed homeowners and other “loss mitigation” services. Prevention measures included securing more government funds so that cities in California can provide counseling and education, especially for first time home buyers. Some suggested that the loan industry should operate with regulation and that there should be some way for unsuspecting borrowers snared by predatory lenders can get justice.
Waters’ fellow congresswoman Laura Richardson who is a Housing Subcommittee member is fighting for her district also. In the 37th, which encircles the South Bay area, 36 percent of the housing loans were sub prime, she said, predicting that one in five of them would end in foreclosure.
Financial experts say that sub prime lenders usually target low income consumers who have disadvantages when it comes to buying a home, like bad or no credit.
“These loans also often include adjustable rate mortgages with steep built-in rate and payment increases and more onerous prepayment penalties—and are usually approved with little or no income documentation required.,” said Richard Holober, executive director Consumer Federation of California earlier this year.
“Predatory mortgage lending drains family savings, eliminates the benefits of home ownership for a growing number of Americans. Recent studies estimate that predatory market lending costs Americans $9.1 billion each year...”