“Picture this: You build a home that’s a permaculture garden. A home that has chickens and beehives, rainwater catches, fruit trees and vegetables. And then you set it up as a tour, and you have kindergarten classes come to learn, you have university classes come to learn, you have clients and neighbors and friends come –”
That’s Ken Foster. The soft-spoken son of two Quaker parents, he has lived in Santa Cruz his whole life and in 1985 completed an apprenticeship with the UC Santa Cruz Center for Agroecology and Sustainable Food Systems (CASFS). Now in his 50s, Foster runs Terra Nova Ecological Landscaping, which specializes in creating “beautiful, ecologically-based living environments for public and private lands using permaculture techniques.”
When he bought his Westside home in 1999, Foster wanted to create a space that would serve as a living, breathing example of those techniques in action. For the last three years, however, he has been fighting to keep it.
“Picture this: The economy goes south and your business is flat-lined. I had to start making some tough decisions,” Foster said. “I had to make the choice of either keeping the business alive or making payments on my mortgage.”
On the advice of several friends, Foster decided to stop paying his mortgage until he could get a loan modification to keep his business afloat. Foster thought it sounded like a reasonable idea at the time, but over the past three years, he became so disillusioned with the process that he decided to take action.
Foster is a member of the Occupy Santa Cruz (OSC) Foreclosure Working Group (FWG). Formed shortly after the OSC camp at the courthouse was taken down, the Santa Cruz FWG is one of a number of similar groups cropping up in cities across the nation — from Tucson, Ariz. to Louisville, Ky. — all working to address and bring attention to fraudulent foreclosure practices.
Sitting in his bedroom and looking out over the backyard he has spent the last 13 years cultivating, Foster recounts a speech he gave in front of a Chase bank on March 11 during a rally organized by the FWG.
“So now, picture this: You start applying for a loan modification, and applying and reapplying, and applying and reapplying, over and over, for two years,” Foster said. “And then, November of last year, the house was foreclosed on and a trustee sale date was set for later that month. So I called them and said, ‘What’s up? You guys just set a date to sell my house five days from now.’”
Foster’s mortgage had been securitized, bundled up in a package with thousands of other mortgages and sold to an unknown investor. Chase no longer owned the mortgage it had issued to him, and as result it was no longer their call on whether or not to accept his petition for a loan modification. However, this last bit of information was only revealed to Foster after he had spent two years in negotiation with Chase, trying to get the loan modification.
“For 24 months, I talked to them,” Foster said. “They’d say, ‘Talk to this guy, get this form, we lost this, send us another,’ and then when it’s all over they say, ‘Well, your investor doesn’t do modifications.’”
Foster is not alone. Since 2007, there have been over 6,000 foreclosures in Santa Cruz County and over 8 million nationwide. A recent article by the Huffington Post found that the length of the foreclosure process nationwide has nearly tripled since 2007, going from an average of 253 days then to an average of 653 days now.
As these foreclosures make their way through the courts, they’ve ignited a series of legal battles at both the local and statewide levels, culminating in a $26 billion settlement last year among the five largest banks in the country and the attorney generals of 49 states.
Most of these foreclosures have their origin in mortgage-backed bonds, which lay at the heart of the recent financial crisis. In order to create these bonds, tens of millions of individual mortgages like Foster’s were packaged into groups, or “pools,” and then sold as investments.
This was made possible by the creation of the Mortgage Electronic Registration System (MERS) in 1995, “an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked,” according to its website. Until MERS, it was necessary to record on paper each time the deed to a house and its accompanying mortgage was sold, and to pay a fee to the county in which the sale occurred, a slow and potentially costly process when dealing with millions of mortgages.
To achieve its trademarked slogan of “Process Loans, Not Paperwork,” MERS allowed parties trading in mortgage-backed bonds to do all of the necessary record-keeping instantly and electronically. When the housing bubble burst in late 2006 and homeowners started going into foreclosure en masse, however, it became apparent that there were problems with tracking down who actually owned the titles of the mortgages that had gone through MERS. In addition, the MERS system greatly reduced judicial oversight of the foreclosure process.
“Given the numerous problems I see in nearly every non-judicial foreclosure case I preside over,” wrote Owen Panner, a federal judge in Oregon, in a ruling last year, “a procedure relying on a bank or trustee to self-assess its own authority to foreclose is deeply troubling to me,” he wrote.
Due to these legal and technical problems, delays and a lack of communication between banks and frustrated homeowners have become commonplace. Furthermore, a series of recent audits and lawsuits have thrown into question the legality of many of the loans processed by MERS, and by extension the foreclosures associated with them.
An audit last month by San Francisco Assessor-Recorder Phil Ting found that out of 400 recent foreclosures, 84 percent contained what appeared to be clear violations of the law, according to an article by the Associated Press.
Following last year’s $26 billion settlement with the banks, California attorney general Kamala Harris recently proposed a set of legislation, titled the “Homeowner’s Bill of Rights,” which would give greater protection to homeowners facing foreclosure. One of the proposed laws would put an end to “dual-track foreclosures,” referring to the practice of banks saying they are negotiating a loan modification while simultaneously moving forward on a foreclosure, much like what happened to Ken Foster.
Given the scale of the issue in Santa Cruz and across the nation, several members of OSC decided to get together and see what they could do about it.
“When the OSC camp was taken down and the dome was taken out and all of that, it became clear that we were going to have to approach things in a different way,” said Joy Hinz, a founding member of the FWG. “And so foreclosures seemed like the thing that was the most egregious and the most obvious to me, the thing that needed immediate work. So we formed the [Foreclosure] Working Group and started thinking about what we could do and how we could make a difference.”
Starting with a handful of OSC members, the FWG now has about 20 regulars who meet weekly to discuss foreclosures and plan ways of addressing the issue at the county level. Hinz sees moving forward on foreclosures as an essential part of Occupy’s overall goal.
“Many Occupy groups have done the same thing, so it’s actually a national thing, starting a foreclosure working group,” Hinz said. “And [they’re] moving forward on having foreclosures be a very significant part of what they’re doing, perhaps even the tip of the spear.”
Their first course of action was to start gathering signatures for a petition to Santa Cruz County Sheriff Wowak, asking that he abstain from carrying out evictions until the foreclosures he’s enforcing can be shown to be legal. The FWG is currently planning to meet with Wowak within the next week to discuss this.
Another plan has been to address the County Board of Supervisors and ask them to impose a moratorium on foreclosures in Santa Cruz until they have been subjected to the type of audit performed by Ting in San Francisco.
While the supervisors haven’t gone so far as to impose a moratorium, they have pledged their support of the issue. On March 6, John Leopold, First District Supervisor, announced that he would direct the Santa Cruz County District Attorney and the Santa Cruz County Administrator’s Officer to look into what could be done by the County to fight fraudulent foreclosures. They are due to report back to the Board of Supervisors on April 10.
Leopold also pledged his support of the proposed “Homeowners Bill of Rights,” and has asked the county’s legislative delegation to draft a letter supporting the bill, while also urging that the state laws “not prevent further action by local governments interested in enacting additional programs of support for vulnerable homeowners.”
“We have a crisis on our hands,” Leopold said. “I’ve been looking into it, and it’s a very difficult issue to address at the county level, but we need to do something.”
Ernesto Munoz, another member of the FWG, is well versed in those difficulties. A graduate of Cuyo University in Argentina with a degree in accounting and a doctorate in economics, he’s talked with Leopold at length about measures it might be feasible for the county to take, but has seen several ideas that appear promising be scuttled by complicated bureaucracy. This has led him to focus his efforts on more immediate concerns.
“When the crisis came, I started by giving some conferences explaining the economics of the financial crisis,” Munoz said. “But then I decided to do something practical. I had heard that there were a lot of people in Watsonville losing homes; I am a Spanish speaker, so I found my way there. I went to a meeting at a church, and there were like 40 or 50 families there. They were desperate, disoriented, the banks were turning them down, they were being abused by people who charged them money and didn’t help them, so I decided to start helping.”
Munoz said that many families in Watsonville were fighting a war on two fronts. In addition to dealing with the complicated process of getting a loan modification, many residents were being sold faulty legal advice by unscrupulous lawyers and realtors, who charged upfront fees and then either did nothing or quickly disappeared.
“For many people, especially in Watsonville, trying to seek help is like walking through a minefield,” Munoz said.
After becoming a Certified Foreclosure Counselor, Munoz began providing free assistance to families facing foreclosure in Watsonville. Working with Communities Organized for Relational Power in Action (COPA), Munoz has helped over 50 families receive loan modifications since then, mostly by guiding them through the process of filling out Home Affordable Modification Program (HAMP) forms.
HAMP is a federal program designed to help homeowners who are behind on their mortgages reach an agreement with their bank that allows them to keep their house and renegotiate their mortgage. Still, Munoz said, the program isn’t quite what it’s cracked up to be.
“Technically, [the process] shouldn’t take more than three weeks. In reality, it takes on average about a year,” Munoz said. “The banks, I would say, drag their feet. In my opinion, they are basically only doing the loan modifications because of pressure from the Treasury Department and the media. But the program was supposed to help 4.5 million people and so far they have given loan modifications to 900,000. So they have set up this system where things go very slowly.”
Mark Reed, a member of Occupy Monterey who has been working closely with the FWG in Santa Cruz, said he can attest to that.
“It’s very frustrating. Because you actually get all the paperwork together, and you know, we had it kind of planned out, we had the whole package,” Reed said. “And then they keep on losing paperwork and sometimes I think it’s on purpose, because it’s odd that they’d lose one piece out of all the other stuff that you sent. And then they need more paperwork and this and that, it’s always constant delaying action on the bank’s part.”
Reed went into foreclosure in 2010, after the construction company he’d been working at for 22 years made the decision to close its doors. After nearly a year of back and forth phone calls and faxing of paperwork between Reed and his bank, he was granted a three-month trial period, after which he would receive his loan modification.
“I made all my payments the first three months,” Reed said. “Then they said it was going to be a six-month trial period. I made all those payments. Then they said it was going to be a nine-month trial period.”
Reed said his experience, like Foster’s, has inspired him to speak out and try to do something about the state of the foreclosure process.
Reed participated in the same FWG organized march as Foster on March 11, and told his story to the crowd assembled outside of Bank of America that day. Numbering about 200, the marchers made their way through downtown Santa Cruz carrying signs and banners, and stopped in front of banks to put “foreclosure notices” on them.
The outcome of this and the other measures that the FWG is working on remain uncertain for now, like the petition to Sheriff Wowak and the county’s ongoing investigation into foreclosures. Reed and Foster’s situations are in a similar place.
Reed is still waiting for his trial period to end and his loan modification to go through. Foster is trying to arrange a sale of his house while he continues to negotiate with Chase, in the hopes that his investor might change its mind.
Munoz is confident that progress is being made.
“First of all, whether Occupy accomplishes any one specific strategy, is not that important. What is important is the pressure,” Munoz said. “The office manager here, Bank of America in Santa Cruz, he has no real power, but he can bring it to the central offices and say ‘Hey, I am having this pressure here.’ See, and if there is Occupy in Denver and Occupy in New York and Occupy in Reno, that are asking for the same, then the pressure starts building up.”