NAACP Support Court Supervised Loan Modifications for Families Facing Foreclosure

WHEREAS, currently in America there are on average of 6,600 foreclosures a day; that is one every 13 seconds; and

WHEREAS, home foreclosures have hit the African-American community especially hard: for decades predatory, sub-prime loans (which have led to many of the foreclosures) were targeted at African-Americans and other racial and ethnic minorities. In 2006 and 2007, at least half of all the home loans sold to African-Americans and at least 40% of all the home loans that Latinos received where subprime. These disparities occurred even when people of color had similar qualifications to white applicants; and

WHEREAS, conservative estimates are that communities of color will lose an estimated $213 billion of wealth as the result of foreclosures due to abusive subprime lending; and

WHEREAS, we clearly need a multi-pronged approach to solving our nation's foreclosure crisis and getting many of these homeowners into sustainable, long-term mortgages that accurately reflect the true market price of the home; and

WHEREAS, one way to do this, at no cost to U.S. taxpayers, is to enact a minor reform of our nation's bankruptcy laws. Currently, if an individual files for bankruptcy, a judge cannot require a financial institution which is foreclosing on that person's home to renegotiate the loan to attempt to make it more reasonable and sustainable so that the person, and their family, can stay in their homes; and

WHEREAS, the subprime lenders who created this foreclosure crisis are able to seek relief through bankruptcy as well investors, but homeowners trying to save their primary residents cannot; and

WHEREAS, court supervised loan modifications are a major solution to help families avoid foreclosure while still paying a market-rate mortgage for their home. It is estimated that if enacted closing this loophole could reduce coming foreclosures by 20% amounting to 1.8 million homes at no additional cost to taxpayers or investors; and

WHEREAS, many foreclosures today could be avoided, although this is not happening because we are currently relying on lenders to voluntarily enter into modification negotiations. As a result, only 3.5 percent of the delinquent subprime loans received modifications in August, 2008-and in many cases, these ―modifications‖ actually increased the borrowers monthly payments; and

WHEREAS, many of the impending foreclosures are necessary because the home owner could afford to pay a market rate mortgage, for the full current value of the house- an outcome that is far preferable to foreclosure for home owner and mortgage lender alike; and

WHEREAS, current voluntary efforts to avoid foreclosures are insufficient, we need to give judges who are dealing with homeowners facing foreclosure more power.

THEREFORE, BE IT RESOLVED, that the NAACP support efforts to change current law and allow bankruptcy judges to require loan modifications on mortgages when homeowner is facing foreclosure; and

BE IT FINALLY RESOLVED, that the NAACP supports legislative efforts, such as H.R. 200 and H.R. 1106, both offered by Congressman John Conyers (MI) and S.61, offered by Senator Richard Durbin (IL) which would allow bankruptcy judges to require loan modifications on mortgages when a homeowner is facing foreclosure.