For all workers, home ownership is a cornerstone of economic security. But the sense of security once represented by home ownership has disappeared. The rise in predatory mortgage lending and the collapse in the housing market have left many working families in California on the brink of disaster.

Whether facing foreclosure or a devastating loss in the value of one’s homes, California’s working families are the hardest hit in the nation. With over half a million foreclosures in 2008, California’s fore¬closure activity increased by 110 percent in just one year.

When a home is lost to foreclosure, a family is forced to relocate. In many cases, they have spent their life savings and destroyed their credit trying to meet monthly payments, making it difficult to qualify for rental housing. Children are taken out of school and communities are disrupted. Ten¬ants often get little notice of a foreclosure, forcing many into homelessness. Surrounding home val¬ues plummet, especially when foreclosed homes remain vacant and abandoned.

Widespread foreclosures are also destroying our state and local economies. The U.S. Conference of Mayors anticipates a loss of at least $4 billion to California cities in declining property, sales, and transfer taxes. This jeopardizes the jobs and services our members depend upon.

What is Being Done

The foreclosure free-fall has trapped families in home loans they cannot afford. The best way to keep families from losing their homes and to stabilize the housing market is to promote afford¬able loan modifications and to regulate mortgage lending to prevent this type of crisis from happening again

In California:

Keeping Families in Their Homes – AB X2 7/SB X2 7 (Lieu/Corbett) With the passage of AB x2 7, California enacted a foreclosure moratorium. This bill established a ninety-day moratorium on foreclosures for any lender that does not have an aggressive program for affordable loan modifications.

Protection from Predatory Mortgage Lending – AB 260 (Lieu) This proposed legislation will target one of the most abusive lending practices, largely responsible for the cur¬rent crisis, steering borrowers into risky, high-cost loans. This bill imposes a fiduciary duty on brokers to act in the best interest of the borrower and bans brokers from steering borrowers into more risky loans.

Transparency in Lending – AB 919 (Nava) This proposed legislation will protect borrowers by simply requiring a loan document to state every participant in the loan process, from the realtor, to the broker, to the lender. This protects a homeowner from abuse and makes it easier for the state to hold bad actors accountable.

Nationally:

Homeowner Stability Initiative. The Obama plan has several components to promote loan modifications to help keep families in their homes. The Obama plan lifts refinancing re¬strictions for homeowners who owe more than their homes are worth. It changes the incentive structure for servicers to eliminate incentives that promote foreclosures and create new incentives to reward servicers who make affordable loan modifications. It also permits bankruptcy judges to modify mortgage loans for homeowners. That change alone is expected to reduce foreclosures by as much as 20%.

Additional Resources

• Union Privilege “Save My Home” Hotline Union members, their parents, and their children can call for free, confidential advice 24 hours a day, 7 days a week, with counselors from a non¬profit, HUD certified housing counseling agency: 1-866-490-5361.
• Working America
• Center for Responsible Lending
• National Conference of State Legislatures (state-by-state bill tracking):
  Foreclosure legislation
  Mortgage Reform Legislation
• RealtyTrac (to find foreclosures rates)

Contacts

• Caitlin Vega, Legislative Advocate, California Labor Federation, (916) 444-3676 ext. 17