American Federation of Labor and Congress of Industrial Organizations

The Foreclosure Crisis:Causes and Solutions

The housing market bubble

Source: S&P/Case-Shiller Home Price Indices

Unemployment is the leading cause of foreclosure

Source: Congressional Oversight Panel, March 2011

Homeowners are not to blame!The foreclosure crisis was caused by:

Wall Street GreedMortgage backed securities and subprime lending

Regulatory FailuresLack of government regulation of the financial sector

Unstable Economy Wages stagnated leading to greater household debt

Foreclosure rate heat map

Source: RealtyTrac, April 2011

Disproportionate impact on communities of color

Reverse redlining - Banks sold subprime loans to homeowners who qualified for prime loans

Subprime loans are more at risk - 21.26 percent of subprime fixed loans and 25.32 percent for subprime adjustable rate loans are delinquent.

What started as a subprime crisis now affects all Americans - 63 percent of all foreclosures are now fixed prime loans.

Advice for Homeowners: Tip #1: Start Early

The sooner you take action, the more likely you will be able to save your home.

Homeowners should take action when they first have trouble paying their mortgage

Help may be available even if you are still current on your mortgage payments

Do not wait for a foreclosure filing before seeking help – act now!

Advice for Homeowners:Tip #2: Seek Help

Seek help – you have a greater chance of success if you have an expert on your side

Work with a non-profit housing counselor who is familiar with loan modifications

Free help is available from government-qualified housing counselors

Be wary of scams offering help for a fee

Advice for Homeowners:Tip #3: Stick With It

The mortgage modification process can take a long time to complete

Keep copies - the bank may ask for the same document multiple times

Continue to seek a modification even if you also receive a foreclosure notice

Stay in contact with your bank and HUD approved housing counselor

Ask for a short-sale or deed-in-lieu of foreclosure

Occupy home payment free during foreclosure

Negotiate a mortgage modification with the bank

Three options for homeowners who are at risk of foreclosure

Ask for a short-sale or deed-in-lieu of foreclosure

Short-sale: you find a buyer for the home

Deed-in-lieu: you give the bank the home

The bank may forgive your unpaid loan principal

Hurts your credit score and you have to move

Occupy your home payment free during foreclosure

Banks often wait 3-6 months to initiate a foreclosure

Foreclosure takes 3-12 months (varies by state)

Homeowners can save cash for the future

Hurts your credit score and you have to move

Negotiate a mortgage modification with the bank

The goal of a mortgage modification is to reduce the monthly payment to an affordable level

Banks and mortgage investors have an incentive to avoid costly foreclosures

Getting a modification usually requires showing that the homeowner has an economic hardship

Homeowner keeps their home

Different types of mortgage modifications are available

Principal ForgivenessInterest Rate ReductionForbearanceTerm ExtensionRepayment Plan

Most Effective

Least Effective

Finding a housing counselor

Be wary of scams asking for moneyFree home counseling is available to

homeowners facing foreclosureU.S. Housing and Urban Development

provides a list of government-approved counselors

www.makinghomeaffordable.gov Hotline Number: (888) 995-HOPE

Finding a housing counselor

www.naca.com (888) 404-6222

www.ahcoa.org (888) 409-3557

www.unionplus.org (866) 490-5361

Questions?