The Center for Responsible Lending estimated that 2.7 million US families (3.4 percent of the US population) with loans originated between 2004 and 2008 had lost their homes to foreclosure by the end of February 2011,¹ and 785,000 California families (8.2 percent of Californians) had lost their homes by the end of 2011.² Almost that many more people will go through foreclosure before this crisis is over.³

This translates into a rate of just over 500 families losing their homes in California every day.  This is roughly 13 families per day per million population. Santa Clara County is roughly 1.8 million people, which means that approximately 24 families are losing their homes in Santa Clara County alone assuming Santa Clara is comparable to the rest of the state.  (These daily averages include Saturdays, Sundays and holidays. Per work day, over 700 families have lost their homes, 19 per million population.)    

These numbers are sufficiently large that they could change the political landscape in the US if someone could find a way to convince the people impacted, their friends and supporters to educate themselves on the real causes of this crisis. Very likely, one major contributor to this crisis is the fact that the mainstream commercial media (especially ABC, CBS, NBC, CNN, Fox) would lose advertising revenue if they provided the public with too much information about how this crisis was manufactured and what could honestly be done to fix it. The leading finance executives who created this crisis and have benefited the most from it also control advertising budgets and have options on how they spend that money. Few people like like feeding the mouths that bite them, and finance executives are no exception.

One major reason there has been so relatively little political action on this so far is that the people most impacted are often in shock, depressed, overwhelmed, and ashamed of having been caught by this. After all, they did sign loan applications and accepted money and repayment terms that brought them to their predicament. Of course, few understood the full implications of what they were signing. The loan officers and mortgage brokers who convinced them to sign those loans are in many cases guilty of fraud. However, they are not likely to get their day in court unless enough people get sufficiently involved to force elected officials at all levels to pay more attention to the public than to the major bankers and others who control major budgets for advertising and political campaigns.

Notices of Default are published. A clear, compelling vision of how we can fight this crisis could help recruit a small army of volunteers to find the people most impacted.

This article outlines three different but complementary ways in which people are currently trying to fight foreclosures: (1) Financial counseling and frugality. (2) Legal support. (3) Changes in law and administration. Unfortunately, the success so far has been quite limited. This discussion includes links to documents describing how distressed homeowners can better collect and organize the information about their problems to achieve a better outcome in each of these three areas. It may be possible to increase the success rates in each area through following these procedures individually and collectively, with the work in each area increasing the effectiveness of work in the other two. There are opportunities for volunteers to help.

Three Pronged Attack on Foreclosures

1. Financial Counseling and Frugality. Project Sentinel is a leader in this approach. Their web site includes forms for their clients to complete to make it easier for counselors to help people learn how to improve their financial situation.⁴ More generally, most people who are not financially independent can help themselves and their neighbors by improving how they manage their personal finances. If they do any business with a major bank, they can move their money to credit union and move their other business to more responsible financial institutions.

2. Legal Support. In 84 percent of foreclosures studied in the February 2012 San Francisco Foreclosure Audit by Aequitas, the investigators "identified what appear to be one or more clear violations of law."⁵ If 84 percent of the estimated 24 foreclosures every day in Santa Clara County involve clear violations of law, this should provide ample grounds for 20 of those 24 victimized families to fight back: We want rule of law. And beyond the "clear violations", a foundation of contract law is a "meeting of the minds".⁶ If it can be established that a written contract was obtained by deceit, that contract becomes unenforceable; the "meeting of the minds" takes precedence. The web site of attorney Thomas Spielbauer offers advice on "How to do your own loan modification".⁷ Unfortunately, it has been difficult for many homeowners to obtain this kind of competent legal advice in part because some companies have advertised foreclosure assistance, charged substantial fees, and delivered nothing; a few in this category have been challenged by the "Fair Housing Law Project" of the Law Foundation of Silicon Valley.⁸ There may also be opportunities for political action to pressure district attorneys to prosecute the "clear violations" identified in the San Francisco Foreclosure Audit.

3. Changes in Law and Administration: Several organizations are working to change either the law or how it is administered. These include the Alliance of Californians for Community Empowerment (ACCE),⁹ Homeowners for Justice,¹⁰ and People Acting in Community Together.¹¹ A "Homeowner Bill of Rights" proposed by California Attorney General Kamala Harris was recently enacted and signed into law by Gov. Brown, largely as a result of a major lobbying effort by these and other organizations. This is an important achievement but may have little impact on the lives of the 500 families each day who are probably still losing their homes in California unless we can convince these people that they must not meekly accept their fate but rather seek financial counseling and legal assistance as well as working in the political arena as well.

There are also opportunities for greater integration of these three prongs: People who helped secure the passage of the California Homeowner Bill of Rights can also help find people in financial distress and help convince them to seek financial counseling and legal assistance. Experts in family finance and the law can produce lists of data to be collected by families in financial distress that can help identify "clear violations of law", so families improve their abilities to manage their finances and defend themselves more effectively against foreclosure efforts.

What Distressed Homeowners Can Do

1. Financial Counseling and frugality: Download and complete the financial self help forms from the Project Sentinel web site or from some similar program. Then take the completed forms to Project Sentinel or some similar financial counseling service. If possible, find a (volunteer) mentor with whom you can meet, e.g., weekly to help you learn new habits and new ways of thinking about finance so you can better manage your finances to get more of what is most important with less financial stress.

2. Legal Support: Download the "How to do your own loan modification" procedure from the web site of attorney Thomas Spielbauer and follow those instructions. Discuss Spielbauer's issues with a financial counselor and a (volunteer) mentor. Spielbauer says he gets better results in court for people who establish a separate "escrow" account at a bank or credit union and regularly deposit money into that account representing the amount they could afford to pay if they could only get a loan modification so that amount represented, e.g., their monthly payments on a traditional 30-year mortgage.

3. Changes in Law and Administration: Enter your information into the database of the experiences of people facing foreclosures being compiled by ProPublica. Then connect with one or more of the organizations pressing for changes in law and administration in this area such as the Center for Responsible Lending (CRL), Alliance of Californians for Community Empowerment (ACCE), Homeowners for Justice, People Acting in Community Together, and ProPublica. After reviewing what you find on their web sites, decide which one(s), if any, that seem most relevant to you and try to work with them.

What Others Can Do

There are substantial opportunities for volunteers to help with this. These include using the published Notices of Default to identify people in financial distress, then helping those people work through the forms and procedures described above. It also may include mentoring people with financial problems to help them make better decisions every day to improve how they manage their finances to get more of what they want out of life with less financial stress. Many of people currently facing foreclosure are not aware of the options they have and could benefit from being informed about them.

If the foreclosure crisis is only half over, then roughly one in twelve California families will likely face foreclosure in the next few years. Canvassing of various kinds with appropriate literature might be very effective in growing a movement. Beyond this, volunteers can help prepare literature and organize events to discuss these issues further.

A Foreclosure Summit¹² is currently being planned to try to improve the collaboration between the different organizations fighting foreclosures. The vision is to make these different groups more effective in what they do both individually and collectively.

For further information about this coordination effort, contact Spencer Graves (spencer.graves at structuremonitoring.com).

p.s. Banks reportedly make more money by foreclosing on people than they would from accepting loan modifications. Otherwise they would not continue the behaviors that generate the bad publicity they are getting from it. The discussion above could be improved with a brief outline of how this happens with solid reference(s) citing which laws are involved, etc.

1Debbie Gruenstein Bocian, Wei Li, Carolina Reid, and Roberto G. Quercia, "Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures", Center for Responsible Lending (p. 4/49, "www.responsiblelending.org/mortgage -lending/research-analysis/Lost-Ground-2011.pdf ", accessed 2012.07.21). There were 78,633,000 households in the US in 2010, according to US Census Table F-1 (www.census.gov/hhes/www/income/data/historical/families). This means that 2.7 million is 3.4 percent of the total number of households. It's also 3.4 percent of the population (not just the households) assuming the size of households does not vary dramatically across the US.

2Center for Responsible Lending, "California Foreclosure Statistics: The Crisis is Not Over", April 2012 (www.responsiblelending.org/california/ca-mortgage/research-analysis/California-Foreclosure-Stats-April-2012.pdf). The US population in 2010 was 310,000,000 (www.measuringworth.com/datasets/usgdp/result.php). Dividing 310 million people by 78.633 million households produces an average of 3.94 people per household. If California has roughly the same size households as the rest of the nation, then 785,000 California households corresponds to approximately 3.09 million people. This is 8.2 percent of California's 37.7 million population (Wikipedia, "California").

3Center for Responsible Lending, "Lost Ground, 2011", and "California Foreclosure Statistics".

4Project Sentinel (http://housing.org).

5Aequitas, "Foreclosure in California: A Crisis of Compliance", Feb. 2012 (www.sfassessor.org/Modules/ShowDocument.aspx?documentid=1018 )

6Wikipedia, "Meeting of the minds".

7Thomas Spielbauer, "How to do your own loan modification (www.spielbauer.com/LoanMod.htm).

8Law Foundation of Silicon Valley "Fair Housing Law Project" (www.lawfoundation.org/fhlp.asp ).

9www.calorganize.org

10http://hofj.org

11www.pactsj.org

12"Foreclosure Summit", occupy.pbworks.com (http://occupy.pbworks.com/w/page/54238941/Foreclosure%20Summit ).