Hamline law professor and Housing Preservation Project (HPP) attorney Mark Ireland doesn’t believe that we’re going to get out of the foreclosure crisis any time soon. Speaking at a Center for Urban and Regional Affairs (CURA) forum at the University of Minnesota on Friday, Ireland spoke about incorrect assumptions about the foreclosure crisis, what went wrong, and what policy makers need to do to make sure that relief is given to the people that need it the most.
The lecture was partially based on Ireland’s article, “Bending Toward Justice: An Empirical Study of Foreclosures in One Neighborhood Three Years after Impact and a Proposed Framework for a Better Community,” which looks specifically at how the foreclosure crisis affected North Minneapolis in zip codes 55411 and 55412.
In his lecture, titled “Assumptions, Mistakes, Successes, and Moving Forward: An Empirical Analysis of Foreclosures in North Minneapolis and Foreclosure Policies,” Ireland outlined several incorrect assumptions that are made about the foreclosure crisis, including the assumption that it’s almost over. It’s “far from over,” Ireland said. While the subprime loans may have peaked, Adjustable Rate Mortgages (ARM loans), Alternative A-paper (Alt-A) loans and No Income No Job No Asset (NINJA) loans will continue over the next few years, according to Ireland. “The national foreclosure rates are skyrocketing,” he said. “There’s no way it’s going to come back down within a year.”
Other incorrect assumptions about the foreclosure crisis include the belief that lenders acted rationally, and that they properly underwrote loans. This country has moved away from the traditional bank model, according to Ireland, to a much more complicated private label securitization model, which has created a web of different interested parties that often have conflicting interests. Moreover, Ireland said, lenders often didn’t properly underwrite loans, and many people who were given ARM loans didn’t even make it past two years before their homes foreclosed.
Another incorrect assumption about the foreclosure crisis, Ireland said, was that mortgage servicers acted rationally. They didn’t, Ireland said. Instead, they sometimes didn’t modify delinquent loans at all, or if they did, sometimes would actually modify the loan to a higher monthly payment.
Other mistakes regarding efforts to fix the foreclosure crisis, according to Ireland, include a focus on homeowners, which ignores difficulties that renters face, and a misappropriation of resources away from areas of need. He said that while $17 million of federal money was given to the state of Minnesota to for the Neighborhood Stabilization program, only $9 million went to the Twin Cities. The money wasn’t getting to the impoverished communities that needed it the most, according to Ireland.
Ireland also said that there was a common assumption that “race has nothing to do with it.” Quite to the contrary, Ireland’s research shows that the foreclosure crisis has indeed affected people of color and those from impoverished communities far more than other populations. He stated that Community Reinvestment Act, which was passed in 1977 and was supposed to address issues of discrimination to low-income and moderate-income communities, failed to do what it was supposed to do.
Ireland did have some good news, fortunately. Some efforts are working, such as Minnesota’s Anti-Predatory Lending Act, and improved foreclosure notices. Minnesota has also increased protections for renters, and the state has good inter-governmental partnerships and counseling services for individuals facing foreclosure.
Ireland concluded his presentation by quoting Martin Luther King, saying that he felt the civil rights leader’s words could be used as policy makers look toward ending the foreclosure crisis. “We must massively assert our dignity and worth,” Ireland quoted. We must identify the basic challenges and structural impediments, and we must develop a program and commit to a path of structural change.