It’s
a simple set of questions: “How many foreclosed properties are there in
the country? What zip codes are they in? What factors sent people’s
homes underwater?” For policy makers, journalists or anyone trying to
size up or address the years-old housing crisis, these questions present
the natural place to start. But their answers don’t quite exist.
In
Chicago, for example, the city’s official vacant property count, which
relies on the banks’ reporting, hovers just under 5,000. The Chicago Tribune estimates 18,000. Housing activists say there are well over 100,000.
Vacant
homes in Chicago are so destructive to their neighborhoods and wider
communities—dragging down property values, preventing the stabilization
of markets and becoming havens for violent crime—that Mayor Emanuel
recently announced that the city would spend $4 million finding and
demolishing just 200 foreclosed properties.
Foreclosures
are happening en masse all over the country, and Chicago is not unique
in having absolutely no comprehensive list of in-progress or completed
foreclosure properties, hampering any attempts to rehabilitate vacant
homes or aid people being hit by the crisis.
Nationally,
there is not a single federal agency that has taken the initiative to
track foreclosures comprehensively, a massive information gap that
prevents the work of journalists, advocates and policymakers alike.
The
government is instead relying on the expensive, potentially biased and
seemingly inaccurate information amassed by mortgage bankers, real
estate hawks and credit reporting agencies. How this happened is a story
of congressional warnings and broken promises, of lack of funding, and
ultimately, the increasing dependence on the for-profit sector to
quantify and analyze our lives. In this sense, it’s not only a story of
the government’s failure, but also of Wall Street’s almost unquestioned
power to determine not only value, but reality itself.
The
story begins in March 2009, near the peak of the foreclosure crisis,
when the government admitted that it was being blindsided.
"The
failure of federal banking and housing regulatory agencies to gather
and analyze quality market intelligence is striking,” the Congressional
Oversight Panel reported. “Absent more complete and accurate
information, legislators, regulators, and market participants are flying
blind."
At this point, the government was still
scrambling to collect information about how the crisis had happened in
the first place and relying on for-profit information providers;
companies such as RealtyTrac and industry insiders like Mortgage Bankers
Association of America. For the public, that meant it was nearly
impossible to access information about the housing crisis without
pulling out a credit card, since the majority of these third-party
providers charge high fees for their information and withhold their raw
data, precluding any public accountability.
“Housing data in general is a huge problem,” says Bill McBride, who writes the blog Calculated Risk.
For
one thing: none of the available sources match up, making it impossible
to aggregate the data into a comprehensive set or to make comparisons
across different databases.
A piece
McBride posted in March quoted
one company’s estimate of 91,000 January foreclosures along with
another company’s estimate of 71,000 for the same month, exemplifying
the information gap.
“Centralized data on
foreclosures would help,” McBride says, “but that would just be a start.
I was hoping we’d see a new emphasis on housing data following the
housing bubble, but it hasn’t happened.”
Richard Neiman, a member of the Congressional Oversight Panel,
stated the problem explicitly
in 2010: “Improved intelligence on the mortgage market is critical to
preventing future crises… Currently, Congress, banking regulators,
consumer advocates, and other policymakers are left with incomplete or
unreliable data purchased from third-party vendors or with limited data
provided voluntarily by the industry.”
Part of the
Dodd-Frank Act, signed almost exactly two years ago, mandated the
creation and maintenance of a foreclosure database. But the project
seems not to have started in any meaningful way.
“Currently,
HUD lacks the funding necessary to create the database and lacks the
statutory authority to compel reporting to HUD of information necessary
to compile the data,” said Lemar Wooley of HUD. “Congress has not
appropriated funds for this project.”
A
spokeswoman for the new Consumer Financial Protection Bureau could not
report any updates on the foreclosure database mandated two years ago,
which came with no legislated deadline.
Meanwhile,
the government’s vision of the foreclosure crisis might be on the verge
of going even blinder. The House of Representatives
recently voted to end the
American Community Survey, used by the Census to help the federal
government decide how to distribute some $450 billion per year in
funding.
Rather than holding predatory mortgage
lenders and industry actors accountable, the House legislative response
to budget shortfalls -- exacerbated by the economic collapse caused by
Wall Street and the government’s inability to regulate it -- was to turn
to that same private sector to measure that very sector’s failure.
The
majority of what foreclosure data is available comes from private
vendors, many of which stand to profit from foreclosures and some of
which, the facts suggest, may have engaged in practices that contributed
to the housing crisis in the first place. These include Realtytrac,
which calls itself “the leading online marketplace of foreclosure
properties,”
Lender Processing Services, CoreLogic, and the Mortgage Bankers Association of America.
Several agencies recently took enforcement actions
against Lender Processing Services, which provides HUD with mortgage
delinquency rates. A standing cease-and-desist order remains in effect
by the Federal Reserve, the FDIC and other agencies against LPS since
April 13, 2011, for, among other things, "
executing assignments
of mortgages containing inaccurate information”—probably not a quality
one looks for in their data provider. Two months ago, the Federal
Housing Administration
publicly questioned
an LPS report showing 63,000 April foreclosures when FHA’s data showed
19,000. A HUD staffer who spoke on the condition of anonymity said LPS
sells the agency information covering about 80 percent of the market for
around $300,000 each year.
RealtyTrac, used by
the likes of National Public Radio, HUD and even people testifying to
the House of Representatives on behalf of homeowners, has received a
series of complaints for defrauding customers and
providing inaccurate data.
Another
popular source of information is the HOPE Now Alliance, a group of
lenders representing about two thirds of outstanding mortgages in the
United States. In 2008 the group said they had helped one million
homeowners save their homes; the Office of the Comptroller of Currency
said that HOPE had vastly overstated their work and helped less than
200,000. Given the lack of an authoritative housing information
database,
experts simply threw up their hands at the discrepancy.
Nationally,
homeowners continue to suffer an average of 40,000 foreclosures every
month (or so the industry says), and accurate information is necessary
for states to allocate the aid from the recent $26 million settlement to
underwater homeowners. Meanwhile, urban planners and local governments
are struggling to save hard-hit neighborhoods without having
comprehensive pictures of the problem.
“It’s like
this secret they just don’t want you to know about,” said Kathryn Clark,
a former urban planner and artist who was so astonished by the lack of
foreclosure data that she has begun mapping the foreclosures onto quilts
in order to represent the crisis. “It’s crazy what you have to pay to
access it. It’s frustrating. It’s shocking. It amazes me.”
Citizens
used to be able to look to the USPS Administrative Data On Address
Vacancies, made available through HUD for vacancy data; however, USPS
and HUD
decided to renegotiate their
data sharing agreement -- right in the middle of the housing crisis --
and as a result, now only allow official governmental entities and
non-profit organizations to access the data.
“I
think it would be good if the government itself could actually collect
loan performance data,” said the HUD staffer. He said he has hope that a
Dodd-Frank regulation requiring the use of universal loan identifiers
will make it easier to merge databases and create a clearer picture of
the crisis. The CFPB is currently writing rules for this tool, but the
enforcement mechanism is unclear.
More than simply
helping us to cope with the crisis, accurate housing information is
necessary if we are to avoid another bubble.
The
HUD staffer explained that predicting housing bubbles relies on the
government knowing whether homes are being purchased for immediate
residential purposes or for future, speculative profits. By 2005, for
example, nearly 30% of all houses were being purchased as unused
investments, not homes. Had the government known that, perhaps it could
have predicted the spectacular collapse only three years later.
At this rate, the government won’t be able to predict the next time, either.
“To
get a handle on when growth in prices in a housing market is not due to
actual demand for housing to be lived in, or supported by growing
incomes – that’s the hard thing to detect,” said the HUD staffer. “And
that’s kind of the definition of a bubble.”
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