Stop Wall Street from blocking local housing fix

This week, the Home Defenders League delivered a letter to all members of Congress asking them to stand strong in the face of repeated attempts by Wall Street lobbyists and their supporters in both chambers to preempt the ability of local communities to take strong action on their own to combat the continuing crisis of underwater mortgages and pending foreclosures. The Securities Industry and Financial Markets Association (SIFMA) is working hard with its allies in Congress to get the Federal Housing Authority (FHA) to alter its rules in such a way that they deny otherwise qualified buyers from access to FHA funds if their loan has been restructured using eminent domain. Worse, they are threatening to redline local communities that move forward with this plan to unlock the wealth trapped in underwater mortgages held in private label securities. 52 organizations and national networks have signed on to this letter urging Congress to reject these proposals and ensure that local communities can use all available tools to help rebuild their neighborhoods and help struggling homeowners. The text of the letter is below and you can download it as a PDF here.  


July 15, 2013   Dear Members of Congress,   We write out of deep concern over the financial industry’s effort to promote legislation or administrative action that would undercut the ability of communities to find local solutions to the continuing housing crisis. We urge you to watch for and reject measures that would mandate discrimination by federal agencies against mortgage loans made in communities that implement local principal reduction programs.   Predatory and irresponsible lending practices by the nation’s largest banks were at the root of the financial crisis that drove the country into the great recession and continues to hurt millions of families. The crisis has affected everybody and disproportionally hurt communities of color: underwater rates are approximately 50 percent higher among African American and Latino homeowners and in neighborhoods of color foreclosure rates are almost three times those in predominantly white areas.   A number of municipalities are now exploring ways to restore community wealth and inject money back into local economies by purchasing mortgages, through traditional eminent domain authority if necessary, and resetting the mortgages to fair market value so that homeowners can avoid foreclosure and begin rebuilding equity.  These cities – including El Monte, La Puente and Richmond, California – have large African American and/or Latino populations that were hit incredibly hard by the mortgage crisis.   In response to these local proposals, the Securities Industry and Financial Markets Association (SIFMA) has formally announced its intention redline any communities that make use of this authority.[i] After decades of redlining and years of predatory and discriminatory lending (i.e., reverse redlining), the Wall Street banks that are members of SIFMA are proposing steps that could once again deny credit to – or make credit more expensive for - communities of color.   Three of SIFMA’s allies in Congress have recently asked the Federal Housing Authority to alter its rules so as to deny qualified homeowners access to FHA loans if the homeowners’ cities have purchased their previous mortgage through eminent domain.[ii] SIFMA has also asked the Federal Housing Finance Agency to alter the regulations governing Fannie Mae and Freddie Mac so that those entities will not purchase new mortgages on such homes. [iii] In late June, SIFMA attempted to insert language into the appropriations bill for the Department of Housing and Urban Development that would mandate these discriminatory changes to FHA policies.   We urge you to reject any proposals mandating that HUD or the FHFA discriminate against homeowners in cities that make use of their eminent domain authority to achieve principal reduction. Introducing new policies to redline qualified buyers would undercut fair lending and housing laws and policies and have a disparate impact on communities of color. Such action Congress or federal agencies would be a slap in the face to the cities and towns that were hardest hit by the housing crisis and are now working with local citizens and tax payers to find democratic, local solutions to the problem.   Sincerely,

[i] See 7/19/12 SIFMA Press Release, at, stating that “SIFMA is issuing this statement today to introduce a policy regarding the interaction of eminent domain with TBA trading.  Loans to borrowers residing in areas that municipalities have initiated condemnation proceedings to involuntarily seize mortgage loans through their powers of eminent domain will not be deliverable into TBA-eligible securities on a going-forward basis.” Prohibiting the securitization of loans from these cities will raise interest rates and monthly payments on mortgages.   [ii] See 6/11/13 Letter from Representatives Ed Royce, Gary Miller, and John Campbell to Secretary of the Department of Housing and Urban Development Shaun Donovan, at   [iii] See 7/12/12 Email from SIFMA Managing Director Richard Dorfman to Acting Director of the Federal Housing Finance Agency Edward DeMarco, at

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