By Gerald Korson
Voice correspondent

A nationwide grassroots campaign aimed at helping millions of families avoid foreclosure of their homes has gained traction here in the East Bay.

Several hundred homeowners met with bank and government representatives Oct. 27 at Holy Rosary Parish in Antioch for what was billed as the largest-ever meeting of citizens on the mortgage foreclosure crisis that has accompanied the collapse of U.S. financial markets. More than 20 national PICO affiliates also participated in the event via webcast.

CNS photo/Kevin Lamarque, Reuters

Sponsored by the PICO National Network and the local Contra Costa Interfaith Supporting Community Organization (CCISCO), the campaign urges lenders to help struggling families keep their homes by restructuring their mortgages to reflect an affordable monthly payment.

“The basic principle is that lenders and borrowers come to the table with an emphasis on keeping the family in the home by modifying the loan so that it is economically feasible,” said Adam Kruggel, CCISCO executive director.

Holy Rosary is one of several Catholic parishes among the 20 area churches that comprise CCISCO. Each congregation has teams that meet regularly to identify and prioritize community issues and develop strategies to address them.

Most families who face foreclosure are victims of subprime loans and adjustable-rate mortgages (ARMs), which begin with a low monthly payment that escalates or balloons after a few years. Often the new payments reach 50 percent or more of a homeowner’s monthly income.

PICO proposes that the U.S. Treasury Department and financial institutions that benefit from the recent federal bailout adopt broad-based loan-modification protocols similar to those implemented by the Federal Deposit Insurance Corporation (FDIC) after it took control of the failing IndyMac Bancorp in July.

Specifically, PICO calls for lenders to modify subprime and ARM loans for home-owners threatened with foreclosure so that their monthly payments do not exceed 34 percent of their income. The means to accomplish this include converting to a conventional mortgage and cutting interest rates — and, if necessary, writing off part of the principal.

In August, IndyMac sent letters to 10,000 delinquent homeowners offering a new mortgage with a lower interest rate and a reduced monthly payment. Most have accepted these offers, which have cut monthly payments by an average of $430, according to a PICO report.

The plan represents “an extraordinary win-win situation” for both borrowers and lenders, Kruggel said, saving investors 87 cents on the dollar for every foreclosure that is averted compared to only 23 cents for a nonperforming mortgage. “The investors and lenders will still get a return on their investment, and it will save families tremendous hardship,” he told The Catholic Voice.

Some 2.1 million families will face subprime foreclosures through the end of 2009, according to the Center for Responsible Lending, while the financial firm Credit Suisse says 6.5 million families holding ARMs could lose their homes within five years. Twenty-eight percent of all foreclosures this year have been in California; in some neighborhoods in Antioch and Richmond, up to 35 percent of single-family homes have been foreclosed and abandoned.

In a settlement with 10 state attorneys general, Bank of America has said it would seek to renegotiate mortgage terms with some 400,000 struggling Countrywide Mortgage borrowers, 125,000 of whom are California residents. A few lenders have modify loans on a voluntary, case-by-case basis. While Kruggel applauds such efforts, “They’re not being implemented on a scale large enough to have a meaningful impact,” he said.

Loan modifications benefit the wider community, he noted. Multiple vacant homes invite vandalism and other crimes along with a drop in property values.

CCISCO also is pushing for a local “foreclosure divergence program” similar to one adopted in Philadelphia, where city officials work with borrowers, lenders, and the courts to negotiate a loan modification. Of the 552 homes that came up for foreclosure in a recent three-month period, 230 were saved from foreclosure and 200 others had theirs delayed.

The foreclosure crisis is “kind of like capitalism run amok, the worst excesses of the abuses of the financial markets,” Kruggel said. “Families are at the center of our communities and our economy, and we’ve seen so many families exploited by subprime loans. We need to recognize that mistakes have been made, that an overwhelming amount of greed has driven this crisis, and modify these loans as quickly as possible.

“It’s literally not only a moral imperative, but an economic necessity.”

home