The Financial Crisis Aftermath—Please Pass the Backhoe
By Consumers Union on Monday, September 19th, 2011
By Norma Garcia
Last week, Raj Date of the Consumer Financial Protection Bureau gave a speech in Philadelphia highlighting the lessons learned from the Financial Crisis. Marking three years to the day after Lehman Brothers filed the largest bankruptcy filing in our history, Mr. Date noted, “it’s useful to remember that not every disaster is a natural disaster. Some disasters are manmade. But whether they’re created by nature or by people, disasters are painful to live through and hard to clean up.”
Isn’t that the truth. Fortunately, like new flowers sprouting in a burned out forest, one good thing to emerge from the financial crisis is the creation of the Consumer Financial Protection Bureau. Before the CFPB, no single agency had their eye on the entire financial services marketplace, nor was any agency responsible for putting financial consumer protection first. The safety net for consumers was sorely missing and sadly, the financial services industry took full advantage of that. It looks like the CFPB is off to a good start to try to clean up the mess and goodness knows, we sorely need them to help steer this backhoe. Help us make sure the CFPB gets its chance to do this important job.
Talk about a Dirty Job! What does the aftermath look like? According to the CFPB, nationally, nearly 13 percent of all mortgages are delinquent or in the process of foreclosure. And if you want to know what the “Wall Street Wrecking Ball” is costing the people in California, the hardest hit foreclosure state, consider these grim statistics just released: Los Angeles homeowners collectively lost nearly $80 billion in home values as a result of 200,000 foreclosures since 2008; homeowners in San Jose, the heart of Silicon Valley, are estimated to lose $22 billion; Sacramento homeowners’ estimated loss is $17.7 billion, and Oakland homeowners are estimated to lose $12.3 billion. These numbers don’t even take into account how much is lost when foreclosures erode the property tax base and impact services for all. And they don’t take into account how much we lose when the economic recovery and job growth are undermined by foreclosures. These staggering statistics are spurring a new movement called Make Them Pay, to make Wall Street Banks pay back and be accountable to Californians, worth checking out
Besides the activities of the CFPB, there is another glimmer of hope for consumers in the form of a multi-state Attorneys General lawsuit filed against the big banks for robo-signing. That’s the practice of lender/servicers attesting to the truth of facts alleged in foreclosure filings when they don’t have independent knowledge of the accuracy of the information. That’s a crime costing homeowners plenty. The Attorneys General are in settlement talks with the banks and there could be news as early as this month. We’re rooting for principal write downs, one of the best ways to make sure homeowners can stay in their homes and that the banks charged begin to pay their debt to society. Here is a KGO-TV 7 news story from September 15th that details the latest developments.