So I agree that you do want to help those who have kept up with their payments and continue to struggle nevertheless. But that just doesn’t get at the entire problem or the root of the problem. It certainly doesn’t help the individuals who have lost their homes because of [predatory lending] from, roughly, 2006 to 2008. It also doesn’t help the neighbors who are now living in communities that have been devastated since the foreclosure crisis.
TR: In terms of those neighbors, the other piece of Obama’s plan takes a stab at improving communities by allowing Fannie Mae and Freddie Mac to sell foreclosed homes to investors who maintain them as rentals. By repurposing and filling vacant homes, wouldn’t that help raise the value of neighborhoods?
AH: It’s a good policy to get people in those homes as a start. I’m not sure if there’s been enough analysis on how the mixture of rental versus resident-owned property will impact the neighborhood. Over time, hopefully businesses and services that have left will also come back. And even if we assume that eventually that will happen, we don’t know how long that will take.
The problem is not simply that the homes are vacant. It’s that they don’t have in many of the communities access to the kind of public and private sectors that should make a neighborhood strong and desirable.
TR: What more comprehensive solutions do you think the government should be taking up?
AH: One of the things that I talk about in my book is community problems that have been created by the foreclosure crisis. In the state of Illinois, the state attorney general has a lawsuit against Wells Fargo that is ongoing. If successful, she wants the money from the lawsuit that involves civil rights and consumer-law violations to help rebuild some of the devastated communities.
But as we’re restoring these communities, I think we’ve got to look at issues that existed before the foreclosure crisis, and that’s an endemic lack of private and public services. One of the specific services [the communities] lacked was financial services. There was no adequate competition in the communities so that an individual could say, “I don’t like the loan that Wells Fargo has offered me, so I’m going to go to another bank and get a different kind of loan.” When payday-loan operations and check-cashing services at best is all you have, that causes communities to suffer.
But there were other things that were missing even before the crisis, like food outlets. All these things are going to have to be looked at if we’re really going to restore neighborhoods. Otherwise, you’re going to re-create the situation that made them vulnerable to the fraud that was going on. I’m not saying we’re going to be able to rebuild them all overnight, but there needs to be attention paid to a systemic problem as opposed to just a quick fix for the foreclosure crisis.