On Wednesday President Obama unveiled a housing plan to help more pinched homeowners, calling on Congress to make it easier to refinance for "responsible" people who are current on their mortgages. Since earlier refinancing efforts have fallen short of White House expectations, this updated version would allow eligible homeowners to refinance into loans guaranteed by the Federal Housing Administration, paid for with a fee on the nation's largest banks.
It was the latest in a string of actions related to the foreclosure crisis, including a $335 million Department of Justice settlement with Countrywide Financial Corp. for unfairly steering black and Latino families into subprime loans, and the creation of a special federal unit to further investigate abusive lending practices.
"Government must take responsibility for rules that are fair and fairly enforced," Obama said on Wednesday at a Virginia community center, where he announced the plan. "Banks and lenders must be held accountable for ending the practices that helped cause this crisis in the first place."
But for Anita Hill (yes, that Anita Hill), professor of social policy, law and women's studies at Brandeis University, the president's plan is simply inadequate. Having explored the crippling effect of the subprime crisis on African-American communities in her latest book, Reimagining Equality: Stories of Gender, Race and Finding Home, she told The Root why she thinks his remedies are merely a starting point, the more holistic solutions that the White House ought to be considering and why criminal prosecutions for corporate fraud must be put on the table.
The Root: Do you think that Obama's new housing plan, making it easier for "responsible" homeowners who are current on their mortgages to refinance, is an improvement on his previous efforts?
Anita Hill: I see it as an extension of one remedy, of opening up to more people who are in need. It's a good one. But this eliminates a lot of people who are behind on their mortgages. I reject the idea that those individuals are not responsible people. They are trying to live up to their obligations. A lot of people who are behind, for example, haven't just decided to walk away from mortgages.
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.
TR: Earlier you mentioned people who lost their homes in the foreclosure crisis. In December the Justice Department reached a $335 million settlement with Countrywide on behalf of 200,000 black and Latino families that were steered into subprime loans, regardless of their financial situation. How should the government compensate families that lost their homes this way — is this the right model?
AH: In terms of the numbers, the most someone will recover will be $10,000. Anyone who has gone through the process of having their credit wrecked knows that probably will not get them back to where they should be. And $335 million is a lot of money.
But are we really talking about a "make whole" remedy? For an individual who was defrauded, who lost their homes and their credit rating, what does it take to make them whole? The work of looking into those questions has not been done.
TR: Is that something that can be calculated into a dollar amount?
AH: I don't know what the solution should be. I don't know if it will involve people being able to go back and clear up their credit records, or exactly all that it will take. I'm willing to say at this point, if I were going to do research on it, I would start out with the premise that $10,000 is not enough.
TR: On a broader scale, the Obama administration is days away from finalizing a larger settlement with the nation's largest banks over foreclosure abuses. Many advocates call the settlement a slap on the wrist, arguing that people should be prosecuted and jailed. What do you think would hold banks accountable?
AH: When I was out on the road talking about my book, I also got to hear from people about this issue. The sentiment out there — not just from housing advocates, but in the general population — is that banks should be held liable criminally. There are investigations going on, and last week the president announced new investigative activities on this from the Justice Department. I hope [criminal suits] are forthcoming, and I hope the settlement will not impact their ability to do that.
TR: Going back to the president's new housing proposals, the changes require legislation from Congress. Do you think this has any chance of passing?
AH: Politically, I'm not sure. I do know there have been pieces of legislation that were passed in times when they were strongly challenged. If you look back at the Civil Rights Act of 1964, there was a lot of contention, but it was worth it. That's the nature of government. We can't simply say, "If it's going to be hard to get something passed, then why should we even be talking about this?"
I certainly have heard that nothing is going to get passed in this Congress. My feeling is that if we keep that attitude, then it keeps us from trying to envision something better. And we just can't afford it.
Cynthia Gordy is The Root's Washington reporter.