Harvard Law’s foreclosure taskforce tackles housing crisis

BY DAVID HALLER

Owning a home has always been part of the American Dream. Throughout the 1990s and the first years of this decade, tens of thousands of families who had never been able to even dream of purchasing a home took out mortgages and moved into their own places. Tragically, this push toward increased home ownership has led to terrible individual suffering and the destruction of our economy and many neighborhoods.

Many people took on mortgages that they could not afford-frankly it matters little whether they were duped into these loans by unscrupulous borrows or were simply being irresponsible. Capitalism broke down because risk and reward were split. The lenders bore no risk because they sold the mortgages to third parties. The borrows were fine stretching beyond their means because so long as the value of the home increased, they were able to refinance and “afford” a mortgage that should have been beyond their reach.

Then the bubble burst and trillions of dollars of wealth disappeared. Houses that were mortgaged for $500,000 were suddenly worth half that amount. People were no longer able to make their payments and banks begin to foreclose.

Many banks have refused to acknowledge the drop in prices. They buy back the houses at foreclosure auction, paying the value still owed on the mortgage because no one else is bidding. They become proud owners of collateral that’s actual value is hundreds of thousands of dollars less than its paper value. Not to mention their collateral is buildings full of people and in desperate need of repair.

This is where the Foreclosure Task Force, a partnership between the Harvard Legal Aid Bureau and other HLS and community-based organizations, comes into the picture. As a general policy, the banks are choosing to empty the foreclosed properties of tenants (i.e. evicting both former owners and former renters) before putting them on the market. Aside from the debatable prospect that the houses are easier to sell when empty, the policy inflicts horrible damage on individual tenants, the community, and local government. Individual families face homelessness, property values decrease as vagrants, squatters, and inattention destroy the homes, and the tax base of local governments is decimated.

We are pushing the banks to allow tenants to pay rent and remain in the properties until they are sold. This is not a radical idea. As the greatest damage to individual and communities results from abandonment, keeping someone in the homes has to be the top priority. Yet so far it has remained an elusive goal. Banks are able to intimidate tenants-either through outright lies or small “cash-for-keys” offers-into leaving their homes without a fight. Of the more than 1,000 foreclosures each month, banks are forced to go through the legal eviction process in less than one hundred cases. The other 90% of people leave without exercising the legal rights they are guaranteed under Massachusetts’ landlord-tenant law.

We have begun a campaign-“No One Leaves”-designed to dramatically decrease the number of vacated post-foreclosure properties in Boston. No One Leaves uses direct door-to-door outreach to inform tenants and former owners of foreclosed properties of their legal rights, providing these individuals with resources to fight evictions and increase communication with banks. The door-to-door aspect of the campaign is made possible by an army of university students, whose presence in the communities affected by the foreclosure epidemic increases our contacts within communities and helps to convince more people to stay in their homes and fight eviction. If we can dramatically decrease the number of people who leave without a fight, we can increase the cost of evictions and thereby change the dynamics of post-foreclosure situations.

The ultimate goal of this campaign is not simply to increase litigation costs in order to persuade banks to desist from evicting tenants and former owners. Rather, it is to open space to negotiate and change the incentives of the banks’ decision making. With a lot of hard work and a little bit of luck, we may be able to change this current crisis into a huge gain. The thousands of families who became homeowners under the dubious subprime system may yet have the opportunity to repurchase their homes at more realistic prices. If you are interested in learning how you can be a part of these efforts, please contact Nick Hartigan (nhartigan@law.harvard.edu) and Tony Borich (aborich@law.harvard.edu).

Comments