Foreclose This!

Screwed by the mortgage companies, blasted by the real estate bubble, and hung out to dry by the government, angry Boston homeowners are banding together to fight back. They've got foreclosure-happy banks trembling—and their movement is spreading.

By Catherine Elton | Boston Magazine |
foreclose this

Photo by Kelly Creedon

The moving truck, empty and waiting, is parked around the corner from the house, because between the protestors and the police cars, there is no longer any room for it in front of 197 Normandy Street. Inside the stately brick duplex, which sits in a foreclosure-ravaged section of Dorchester, Drusilla Francis has packed only a few bags, hoping against reason that, somehow, at day’s end she will still be living in the home she’s owned for 22 years. Today, U.S. Bank is evicting her after foreclosing on her loan.

The only thing standing between Francis, a 66-year-old foster mother, and her place among the swelling ranks of displaced homeowners is the public relations nightmare that’s currently unfolding for U.S. Bank in front of her home: Some 80 placard-waving, slogan-chanting protestors from City Life/Vida Urbana, a local nonprofit, are jamming the sidewalk and spilling into the street, demanding that, rather than kick Francis out, the bank sell the house back to her at a reasonable price. Several volunteers, willing to risk arrest, are ready and waiting to form a human barricade across Francis’s front walk. Over and over, the protesters chant, “The banks get bailed out, the people get moved out.”

Across the street, Burton Malkofsky, a constable hired by U.S. Bank’s attorneys to oversee the eviction process, is waiting with a rolled-up white paper in his hand. It’s Malkofsky who called the police to this eviction. He’s been anticipating trouble for some time now, especially since seeing the yellow “We Shall Not Be Moved” signs — written in English, Spanish, and Haitian Creole — that were hanging in windows during prior trips to the house to serve Francis notices. Actually, Malkofsky knows City Life’s tactics quite well. A few years ago, a disabled protestor chained his wheelchair to the front gate of a house where Malkofsky was trying to serve an eviction. The police had to come with bolt cutters to snip the chain. “I don’t have anything against City Life,” Malkofsky says. “They have a job to do protecting homeowners and tenants. I am hired by the attorneys to do evictions. That’s my job.”

Malkofsky may not have a problem with City Life, but the group has been making his job pretty difficult lately, having pioneered something it calls the “sword and the shield” — a unique approach to battling foreclosure that combines intense lawyering, bold activism, and strategic financing from a local nonprofit. The goal is simple: to keep people in their homes and provide stability to foreclosure-ridden neighborhoods in the city.

That’s more difficult than it sounds. During the past five years, 4,132 homeowners in Boston have gone into foreclosure, with the vast majority living in poor and working-class areas such as Dorchester, Roxbury, Mattapan, Hyde Park, and East Boston. So far, though, the sword and the shield have helped nearly 90 property owners in the city and nearby communities buy back their homes after foreclosure. The group has also been exporting its tactics — which have been dubbed the “Boston Model” — to other community organizations in cities across Massachusetts, and outside the state in places like Oakland, New York, Los Angeles, and Chicago. Boston, in fact, has been deemed by some as ground zero in the anti-eviction movement, with one attorney calling it the “last place a lawyer wants to try to evict someone.”

Last year, the Open Society Foundation, a nonprofit group started by George Soros, awarded City Life a $400,000 grant to spread its work beyond Boston. “I have met with practically every single housing-counseling agency in the country,” says Solomon Greene, one of the group’s senior program officers, “and I have never seen anything like it.”

 

It’s a tuesday night in August, and about 70 people are seated in rows of folding chairs in a large room at City Life headquarters, part of Jamaica Plain’s converted Sam Adams brewery complex. Protest placards painted with slogans such as “We Shall Not Be Moved” and “Reduce Principal Now” hang on the walls around the room. A newcomer named Juan stands up and tells his story, which involves a missed mortgage payment, an unforeseen illness, “begging letters” sent to the bank, loan-modification negotiations cut short by the lender’s surprise decision to foreclose and sell the property to an investor, and unreturned calls and letters. He speaks of meeting with other groups and organizations, to no avail. Now, he says, he’s ready to fight for his home.

At the front of the room stands Melonie Griffiths, an energetic, powerfully built woman with close-cropped bleach-blond hair. She’s one of the group’s lead organizers. In 2004 Griffiths bought a two-family home in Dorchester for $470,000. At the time, she says, she insisted to her mortgage broker at Zeus Funding that the monthly payments for the house were going to be a stretch on her salary as a teacher in the Boston public schools. She says the broker assured her that she’d be able to refinance at a lower rate two months down the road. She never got the refinancing, and after struggling to make her mortgage payments, she fell behind, eventually going into foreclosure.

While Griffiths was in foreclosure, Attorney General Martha Coakley was in the process of suing Zeus Funding for deceptively giving mortgages to people who couldn’t afford them. In 2009 the company was barred from doing business in the state, but that didn’t help Griffiths. After exhausting her options in housing court and visiting as many local politicians as she could, she, her three children, and her downstairs tenants were facing imminent eviction.

City Life had launched a program around that time to help tenants and homeowners being forced out of their homes. Founded in 1973 as the Jamaica Plain Tenants Action Group, the nonprofit’s early work focused on renters, addressing divestment, neglect, and even arson-for-profit by landlords. In the decades that followed, it fought to establish rent control, to develop affordable housing, and to organize tenants in Boston apartment buildings so they could negotiate stable rents. When the foreclosure crisis hit a few years ago, City Life realized that if it was going to successfully promote housing stability in Boston’s poorest neighborhoods, it was going to have to embrace people in foreclosure as well.

That’s because research has shown that foreclosures create a ripple effect of problems, resulting in even more people losing their homes. Crime goes up in neighborhoods where lots of bank-owned houses sit empty — one study found that every one percent increase in the foreclosure rate resulted in a 2.33 percent jump in violent crime — and property values go down. As Ingrid Gould Ellen, a New York University professor of public policy and urban planning, notes, “These reductions in prices can create something of a downward spiral as reduced prices put other owners at greater risk of foreclosure, because as prices fall, owners are more likely to find themselves with underwater mortgages. Similarly, as crime increases, property values may fall, yet again putting more owners at risk.”

Steve Meacham, City Life’s wiry, silver-haired organizing coordinator, had witnessed all of this up close. He asked Griffiths if, rather than simply accept her eviction, she’d be willing to let his group blockade her home in an attempt to shame her bank, Ocwen Financial Corporation, into either reducing her principal or collecting rent from her, which would prove that she was willing to pay to stay in the home and wasn’t just looking for a free residence. She agreed, and when Constable Burton Malkofsky showed up in early 2008, he was greeted by City Life, Griffiths, her friends and neighbors, some local politicians, and the news media. After a few hours of protesting, Ocwen agreed to temporarily call off the eviction. “I couldn’t believe that a group of people were able to do what my legislators couldn’t do for me or what the courts couldn’t do for me,” Griffiths recalls.

The victory marked a turning point in City Life’s fledgling work on the foreclosure crisis, and led to a rash of eviction blockades in the months that followed. Griffiths even began volunteering at City Life and attending rallies at other homes. All the while, though, Ocwen kept up its efforts to evict Griffiths. Despite another successful blockade at her house, she and City Life were unable to convince the bank to modify her loan. Griffiths eventually decided that the fight was putting too much strain on her children. There was no end in sight. So she ceased fighting the eviction, left her home behind, and took a full-time job at City Life.

Standing now at the front of the room during the City Life meeting, Griffiths asks Juan whether he’s still living in his home despite the bank’s efforts to sell it.

“Yes, I am,” Juan replies.

“Stay there!” the crowd shouts.

Someone asks which bank holds the mortgage. “Bank of America,” Juan says.

The crowd erupts in a chorus of boos, howling, “Bad for America.”

A City Life employee passes Juan a cardboard sword.

“You said you wanted to do what?” he asks Juan.

Juan lifts the sword. “Fight for my home!”

“Then we’ll fight with you!” the crowd shouts.

 

It’s no surprise that the sketchiest lending behavior during the real estate boom occurred in the areas that today have the highest foreclosure rates. It was in these neighborhoods that the financial institutions aggressively marketed a series of exotic mortgages — adjustable interest rates; no money down; no income documentation required — to consumers with poor credit scores. The lenders no longer cared about the possibility of a default because, rather than hold the mortgages and collect the monthly payments, they sold them to Wall Street, which combined them for sale as securities. The lenders, in other words, simply passed along the risk. With property values magically rising without end, thereby boosting the value of the mortgage-backed securities that were flooding the market, writing new mortgages was a guaranteed source of profit, so the lenders just kept pushing the product.

Unfortunately, most home prices stopped rising in 2006, just as lots of those adjustable mortgages were resetting at higher rates. Many homeowners were unable to afford the new, higher payments, and since the market had begun dropping, they couldn’t refinance or sell their house. Hordes of borrowers went into foreclosure, crushing the banks and leaving the American and global financial systems teetering on the verge of collapse. The federal government bailed out financial institutions to the tune of $700 billion, but the few programs launched to help homeowners have for the most part failed. This past September, for example, the $1 billion Emergency Homeowners’ Loan Program, which was supposed to assist the unemployed with their mortgages, shut down after aiding fewer than 15,000 households and spending only about half of its funding. Meanwhile, the Home Affordable Modification Program (HAMP) — designed to help borrowers rework their loans and avoid foreclosure — turned out to be a good idea without any teeth: Mortgage companies kept right on foreclosing over the wishes of the feds. According to federal statistics, only 2.4 percent of the roughly 3 million loans that were either seriously delinquent or moving toward foreclosure in the second quarter of 2011 got a HAMP modification.

foreclose this

Photo by Kelly Creedon

It’s into this vacuum that City Life stepped, along with two strategic partners: the Harvard Legal Aid Bureau and Boston Community Capital, a local nonprofit lender. Collectively, the three groups make up the sword and the shield — attack with blockades, rallies, and media attention while defending with legal representation and financial assistance for the homeowner.

Harvard Legal Aid is a student-run law firm dedicated to helping low-income Boston-area residents. The organization’s strategy for dealing with foreclosures is simple: Dig through the chain of titles on a home in search of legal problems or sloppy transactions that took place as mortgages changed hands before landing in Wall Street securities. If lenders didn’t follow the law when securitizing the mortgages or when filing for foreclosure — for example, the widely reported incidents of mass robo-signings — the foreclosure process can be invalidated, and the eviction stopped. Some critics write these tactics off as merely searching for technical errors to nullify a process that justly holds borrowers accountable for their actions, but David Grossman, the faculty director of Harvard Legal Aid Bureau, says such mistakes by the banks are actually symptomatic of a dangerously flawed system. “The whole securitization mess is what got us where we are now, and that is what we are going after,” he says. “These aren’t just clerical errors. The whole thing was built on fraud, recklessness, and incompetence. That is what we are trying to expose.”

But while the Harvard students are sometimes able to stop evictions, at least temporarily, and the City Life protests and blockades can cause embarrassment for the bank or home investors, it’s the third leg of the effort, Boston Community Capital (BCC), that provides a long-term solution.

As it works with homeowners facing foreclosure, City Life examines their cases and occasionally decides to refer certain people to BCC, a 27-year-old nonprofit lender that provides grants to foster community development. If BCC then determines that the homeowner is a good credit risk, it will approach the mortgage holder and offer to buy the home in question at the current market price — typically less than the amount of the underlying loan, but higher than what the mortgage holder can expect to get for the property by foreclosing on it and selling it at auction. Banks are often gun-shy about cooperating with BCC, because they fear that everyone with a home will start demanding reduced mortgages. But if the mortgage holder and BCC can come to an agreement on price, the nonprofit buys it, then turns around and issues a new mortgage to the homeowner, allowing the family to permanently remain in the house.

The sword-and-shield alliance is clever in that it provides a financial lifeline for people who’ve been buried by the collapse of the real estate market, while also giving BCC leverage in its negotiations. “One of the biggest problems we have when we try to negotiate with banks is getting them to pay attention to us and our offer,” explains Jessica Brooks, BCC’s vice president of development and communications. “Lenders are more likely to respond to us when they are feeling the pressure City Life exerts, and they know the papers have been called to the scene of a protest.”

One irony is that although BCC works with borrowers that other lenders are unwilling to touch these days, it conducts far more due diligence than the mainstream banks ever did during the real estate boom. It will not just give money to anyone with a pulse. BCC examines the terms of the homeowner’s previous loan, looks into why he got in trouble in the first place, and determines what he can realistically pay each month. It’s a thorough process, and Meacham estimates that fewer than half of the applicants referred by City Life get approved for new mortgages — which are 30-year loans with a fixed interest rate of around 6.38 percent. BCC also tacks on about 25 percent to the price, with the surplus used to cover any defaults in the program. And to keep anyone from making a quick buck by getting the property on the cheap in a bad economy and then selling it at a profit when the market recovers, BCC takes a percentage of the appreciation when a house is eventually sold. To date, BCC has made 88 loans, which have kept more than 135 families in their homes. (Many of the properties are two- or three-deckers.) So far, just one borrower has been sent a foreclosure notice.

Prabal Chakrabarti, the director of community affairs at the Federal Reserve Bank of Boston, calls it a triple win. “The bank does well because it is able to recover the market value of the property more quickly,” he says. “The borrower does well because they get to stay in their home and avoid a forced move, which can be very hard on children. And the neighborhood does well because they don’t have a vacant or deteriorating property that is badly boarded up and could be a magnet for crime or bring down neighboring property values.”

The Home Affordable Modification Program was supposed to act like a federal version of City Life, calling for reducing the principal on mortgages that are for more than a house is currently worth. But the truth is that banks almost never do it. They worry that following the government’s recommendations would simply give deals to some homeowners who would have otherwise stuck it out — and even encourage people to default on loans just so they can get a reduction.

But while the government isn’t willing to force the issue, City Life has stepped up. In late September, City Life members were among the 3,000 people who protested in front of the Boston office of Bank of America, demanding principal write-downs. “Our view at City Life,” Steve Meacham says, “is that if you want the government to take action against such powerful actors, then you better have a powerful movement on the street, because they are not going to do it otherwise. And that’s what we’re trying to build.”

 

Back at Drusilla Francis’s home in Dorchester, City Life continues its protest throughout the hot morning. Down the block, meanwhile, an intense legal debate is taking place. Lee Goldstein, a lawyer from Harvard Legal Aid, has demanded to see the 48-hour eviction notice — a judge-signed document authorizing the eviction. Constable Burton Malkofsky doesn’t have it, though, insisting that all he actually needs is the court order to evict. Whipping out his smartphone, Goldstein begins quoting Massachusetts law. Malkofsky decides to make a few calls to locate the disputed paperwork. As all of this is going on, the police inform the two men that, given the size of the protest in front of the house, they don’t have the manpower just then to enforce an eviction, anyway. The action is postponed.

Melonie Griffiths races to the steps of Francis’s house and raises a bullhorn to her lips. “That’s right,” Griffiths hollers, echoing the crowd’s steady chants, “the banks get bailed out and we get moved out! But not all the time. Not if you fight back.” When she announces that the police have called off the eviction, the crowd erupts in cheers. They have saved Francis’s house — at least for today.

The next day, the protestors return in case the constable comes back. He never shows. Later that day, U.S. Bank, which hasn’t been willing to sell the property to BCC, finally names its price. BCC accepts: They’ll buy back the home for $210,000 and sell it to Drusilla Francis and Sandra Douglas, her new roommate she’s met through City Life, for $294,000. In early October, Francis, Douglas, and BCC closed on the property. After 22 years of living in her home, Francis will be able to stay.

Even before she got the official news, Francis had a good feeling. “They said the constable might be back the next day, but after that blockade, something inside me told me that I wasn’t leaving this house,” she says. “I knew we had won.”

After the crowd has cleared and the street is quiet, she grabs a bag of her belongings from her car. She carries it upstairs. By the time the day is over, everything is back where it belongs.

Source URL: http://www.bostonmagazine.com/2011/11/foreclose-this-boston-homeowners-fight-back/