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New Jersey people's forces demand mortgage write-down

By David Hungerford

Protest in Trenton

Trenton, NJ – People gathered here to rally and hold a press conference, March 29, on the need for uncompensated write-down of overpriced mortgages contracted during the housing bubble, the period after 1997. The event marked a court hearing aimed at elimination of ‘robo-signing,’ foreclosures undertaken by banks that cannot prove ownership of the mortgage.

Participating organizations included the People's Organization for Progress (POP), the Irvington Branch of the NAACP, the Newark Teachers' Association, New Jersey Citizen Action (NJCA) and the Fair Share Housing Center.

Robo-signing is a terrible abuse. Rally participants all said it must be ended. But the end of robo-signing will prevent no one from being foreclosed. In fact the stated aim of the court hearing was to make the foreclosure process in New Jersey more efficient.

In the hearing a court-appointed attorney presented an agreement he had worked out with six of the largest mortgage lenders. The essential point is the banks agreed to proceed only in foreclosures based on “personal knowledge and accurate business records.” Several homeowner advocates objected that the agreement was vague or that it was procedurally inadequate to protect homeowners. Judge Mary C. Jacobson found in favor of the agreement. Whether or not it eliminates robo-signing will have to be seen from experience.

The people's forces said at their press conference that what really has to happen is enforced write-down of overpriced mortgages to the level of true market value at the time they were contracted. A POP statement was read by Debby Strong. It said the banks had harmed millions of people. They didn't care at all about the terrible risks into which they dragged home buyers. Lenders lured borrowers into mortgages they knew full well the borrowers could not pay. They did things like sell a house for $300,000 when it was only worth $180,000. The banks have been rewarded for it and the victims have been left without help.

POP announced that it will launch a mass campaign to enlist victims of the housing bubble to demand that New Jersey Attorney General Paula Dow prosecute mortgage lenders for manipulation of the housing market. Penalty upon conviction will be write-down of mortgage principals to reflect true market value by an objective and uniform standard.

Kathleen Witcher of the Irvington NAACP gave a vivid picture of the suffering caused by the housing bubble. She said that 40% of the houses in Irvington have been foreclosed and the rate may go as high as 80%. Drastic rates in property taxes have resulted. Many homeowners cannot pay the higher taxes, which creates another risk of loss of homes.

Phyllis Salowe-Kaye of NJCA noted that all 50 state attorneys general have submitted an “Accountability Proposal” to resolve the ‘robogate’ problem, but without any requirement for principal write-downs in programs like the Home Affordable Mortgage Program (HAMP.) The AGs set no specific goals or quotas for write-downs. They need to institute mandatory measures for loan servicers. 60% of homeowners could remain in their homes if the mortgage was reduced to the actual market value. “Allowing significant principle modifications would stem the flow of foreclosures and reduce the uncertainty about the housing market and mortgage securities, giving more time to devise approaches to the messy problem of clouded titles and faulty loan conveyances,” she said.

A basis for legal action in existing law and practice was given by people’s attorney Bennet Zurofsky. He said, “The lenders and investors were the ones in the best position to know that they were profiting from a bubble that they themselves were inflating. The law calls this unjust enrichment and the New Jersey Attorney General has the power to do something about it by bringing a lawsuit against the lenders and the investors on behalf of the people of New Jersey to return the riches they have unjustly obtained from the people of New Jersey.” He noted that actions have been brought against persons who benefited from the Bernard Madoff ponzi scheme on the basis of unjust enrichment.

A POP member said that there is a power that can act effectively against entities as powerful as big banks. It is the power of the people! Not even the administration of reactionary New Jersey Governor Christopher Christie can ignore the will of the people who have been harmed by the housing bubble, once they are aware and united. It was also noted that the total overvaluation of the housing market was about $2 trillion, and that no recovery from the depression is possible until this burden in removed.

Cries of “power to the people!” and “mortgage write-down now!” rang out. It is clear that the people of New Jersey can make write-down their issue and their demand and create a powerful mass movement for it.

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