The announcement yesterday of a policy by Freddie Mac of 12 months forbearance for unemployed homeowners facing foreclosure is a breakthrough of much needed protections. Fannie Mae will announce a similar policy next week. In July, a 12-month forbearance policy was announced by the Treasury Department for securitized mortgages and by HUD-FHA for FHA-insured mortgages.

Extended unemployment is the main cause of foreclosure. The economy can't recover without a strong housing market and that has been severely hampered by the glut of foreclosures. If implemented well, these forbearance policies will greatly lessen foreclosures and add to our economy recovering.

President Obama said in July that housing remained the "most stubborn" problem facing the country and conceded that a raft of federal mortgage aid programs were "not enough, and so we're going back to the drawing board."  Last month, he said, "We're going to keep pushing [the big banks] to provide more time for unemployed homeowners to look for work without having to worry about immediately losing their home.”  These forbearance policies go a ways to realizing these objectives.

Who played roles in making these new policies happen? 
Decisions were made by FHFA, Treasury Department, and HUD for these forbearance policies, but with critical assistance from community groups and some members of Congress:

1. PICO Leaders:  Since the fall of 2009, the PICO National Network has repeatedly raised the issue of extended unemployment causing foreclosure and the need for a 12-month forbearance policy to save unemployed homeowners from foreclosure. PICO leaders have met multiple times with Treasury and White House officials including meetings with former White House NEC Director Larry Summers, Treasury Secretary Timothy Geithner, and with current White House NEC Director Gene Sperling. 

This was a long road with many "nos" along the way, but that did not deter PICO and allies from pressing the crucial need for a forbearance policy to protect unemployed homeowners.

2.  Civil Rights and Labor Allies:  Allies who worked on this effort and added important contributions were the Leadership Conference on Civil Rights, the National Council of La Raza, and the AFL-CIO.

3. Support from Congress:  Members of Congress also pushed FHFA (which oversees Fannie and Freddie), the Treasury, and the White House on these issues.  Rep. Elijah Cummings (D-Md.), Rep. George Miller (D-Calif.), and Rep. Barney Frank (D-Mass.) were such leaders that helped along the way.

4. Administration:  The White House National Economic Council, and staff at the FHFA, Treasury, and HUD have responded over time to move on forbearance policies. We thank them very much for responding.

What’s next?

The announcement of yesterday’s forbearance policy is a big step forward if implemented well. PICO and allies will continue to organize to protect unemployed homeowners by:

1. Clarifying with FHFA, Fannie, and Freddie that banks/servicers must grant this forbearance and don't have any leeway to refuse homeowners who request it.
2. Intense outreach to educate the public, the banks/servicers, and nonprofit foreclosure prevention counselors so these policies are implemented thoroughly to save unemployed homeowners from foreclosure.
3. Continued work to apply these policies to underemployed people, the homeowners amongst these 7 million who may face foreclosure because they cannot get 40 hours of work in this tough economy.

The big additional needed policy area is principal reduction to help the almost one-third of America's homeowners whose homes are underwater or whose value is less than their mortgage payments.

The biggest obstacle to principal reduction is the Federal Housing Finance Administration that now runs Fannie Mae and Freddie Mac and is headed by Acting Director Edward DeMarco.  Community groups and members of Congress are trying to move Mr. DeMarco on developing a principal reduction policy because the bulk of mortgages in this country are those of Fannie and Freddie. PICO has asked the Obama Administration to step up on this issue and to replace Mr. DeMarco, an appointee from the Bush Administration, if progress is not made. PICO and allies are also wary of a possible settlement with the big banks by the 50 state attorneys general and the U.S. Justice Department that is rumored to include an inadequate relief program on principal reduction.

   

 PICO National Network is the largest grassroots, faith-based organizing network in the United States.  PICO works with 1,000 religious congregations in more than 200 cities and towns through a network of 48 member federations and 10 state networks.  More information at www.piconetwork.org.