After 18 months and more than 700 sworn testimonies, Congress' Financial Crisis Inquiry Commission wrapped up its hearings last September with three unscheduled witnesses—a last-minute plea from a lawyer got them included, for five minutes each, at the tail end of the commission's hearing in Sacramento.
A relative helped 79-year-old Lovie Hollis to the microphone. She testified (pdf) that she and her husband Grafton had raised five daughters in their Sacramento home and had paid off their mortgage but had to sell in 2006 when Grafton could no longer get up the stairs. She did not understand the terms on their new home and was unable to pay when the monthly rate suddenly adjusted upward to nearly three times the original mortgage. She answered an ad offering loan modification help. "Tom" operated out of an office in Hollis's neighborhood. He told her to stop making loan payments while he worked on her case, took her money (and her car), and fled. Hollis, now a widow, lost her home.
Nia Lavulo, a young Fijian-American, was nervous speaking to a room full of suits. She testified (pdf) that she lost her childhood home when CitiMortgage, Inc. foreclosed without notice. She had signed an agreement with the bank for a trial period of modified loan payments after her partner, Bernard, was laid off. They'd been paying their modified loan on time and in full right up until they were foreclosed, but that didn't seem to matter to Citi.
Allen Carpenter, a former contractor, marched down the aisle as though on a mission when it was his turn. He testified (pdf) that as the housing market slowed and his income began dropping in 2007, he refinanced his home three times to try and make ends meet. He had not understood the risks involved in taking on an adjustable-rate or interest-only mortgage. First, he went bankrupt. Then he lost his home. He and his wife now live on his social security check and her income as a sales clerk. In a tone of barely controlled anger, he told the commissioners they'd been through a "nightmare."
"The federal government and the banks are not doing nearly enough to protect consumers like my wife and me," Carpenter said. "Wells Fargo and other big banks got bailed out even though they are a big reason for the financial mess we are all in."
The room grew quiet. Chairman Phil Angelides thanked everyone and quickly brought official business to a close. (The commission's final report—now compromised by Republican members who released their own 'preliminary findings' when Democratic members refused to excise the words "Wall Street," "shadow banking," "interconnected," and "deregulation" from the document—is due to Congress and the president Thursday.) After hearings in 19 hard-hit cities across the nation, these three homeowners were the only actual victims of the mortgage meltdown to be heard.
The Okies' promised land has become a wasteland of vacant storefronts and bank-owned homes. The itinerants of Lange and Steinbeck's day are today's "chronically unstable." But unlike their forebears, they have nowhere to go in search of work.
The numbers are familiar by now. In normal times, banks foreclose on approximately 100,000 homes annually, but from January through September 2010, almost 2.7 million homeowners received foreclosure notices. September alone saw more than 100,000 bank repossessions. According to the Special Inspector General for the Troubled Asset Relief Program, "at that pace, foreclosure notices will have been sent to more than 3.5 million homes" by year end 2010.
California has been hit with more foreclosures than any other state. The 19 counties in its Central Valley region all show up in a bruised-red hue on foreclosure trend-spotter RealtyTrac's national foreclosure map—indicating high-density home loss.
I wondered what was happening on the ground, to the people who had gone into default or had actually lost their homes. I was also struck by the fact that during the last massive economic crisis to hit this country, this very region was the place to get out of hock and despair.
Back then, drought, farm failures, and foreclosures in the Plains forced hundreds of thousands to move west in search of work. Many of these Dust Bowl migrants followed the harvests in the fertile Central Valley—an odyssey captured by Dorothea Lange, working for the Farm Security Administration, in the 1930s.
Today, when you travel Lange's 1939 photographic route up Highway 99—as photographer Lucy Gray and I did for four months last spring—you come face to face with the 21st century version of social collapse: Kern County, home to the Weedpatch labor camp made famous in John Steinbeck's The Grapes of Wrath, has an unemployment rate of 15.4 percent. In Tulare it's 16.8 percent; and in Merced County, whose largest city, Stockton, was deemed by Forbes the second "most miserable city in the US," nearly one in five [18.6 percent] can't find work. The Okies' promised land has become a wasteland of vacant storefronts and bank-owned homes. The itinerants of Lange and Steinbeck's day are today's "chronically unstable." But unlike their forebears, they have nowhere to go in search of work.
The foreclosure crisis has many causes, from impotent government programs to shadow banking, securitization, predatory lending, borrower overreach, and simple market correction. But the most persistent culprit has been a weak economy that has led to massive job losses and wage cuts. Many families could have survived an ARM in good times but were felled by a pink slip, reduced hours, or unforeseen medical bills.