On Wednesday, both the House and Senate took up bills aimed holding back the wave of foreclosures drowning homeowners. Just how bad is the crisis?
There is no reliable, centralized data charting the foreclosure rate, even as rising foreclosures have crushed the viability of banks and sunk the country -- and arguably the globe -- into a great recession. If the old adage is true -- that you can't fix what you can't measure -- foreclosures are bound to continue to rise.
The House bankruptcy-reform bill passed Wednesday by the Senate includes a provision that would require the industry to report foreclosures and would create a reliable, up-to-date metric of foreclosures and mortgage modifications. It remains to be seen if the measure will live through conference committee negotiations, where the industry will lobby to have it removed.
The lack of decent foreclosure data was highlighted in a recent report by the Congressional Oversight Panel, led by Elizabeth Warren, established to oversee the federal government's response to the financial crisis.
"The failure of federal banking and housing regulatory agencies to gather and analyze quality market intelligence is striking. The United States is now two years into a foreclosure crisis that has brought economic collapse, and federal banking and housing regulators still know surprisingly little about the number of foreclosures, what is driving the foreclosures, and the efficacy of mitigation efforts," reads the report.
A spokeswoman for the Mortgage Bankers Association rejected the report's conclusion, expressing confidence in the lobby group's numbers. And the bankers don't want any federal help counting. Rep. Brad Miller (D-N.C.) said that the industry has pushed back against his efforts to require accurate reporting of foreclosures. And he's losing confidence in the numbers they do provide.
"In the past those guys have worked on separate floors and didn't talk to each other -- their lobbyists, their public relations people, the guys who keep market data -- but I've become suspicious of their data," says Miller. "I think maybe they have started talking to each other, because they've heard their own statistics used by their opponents on policy issues."
Dean Baker, an economist with the liberal-leaning Center for Economic and Policy Research, thinks the banks like it just fine the way it is.
"The banks are probably not anxious for better information on foreclosures for the simple reason that it may provide more evidence as to how troubled their troubled assets really are. They are making their best effort to paint an everything-is-fine picture even though this is quite obviously not the case," said Baker.
Miller, who introduced his amendment with Rep. Elijah Cummings (D-Md.), has been pushing for foreclosure transparency for more than a year. The issue got some life last June, when John C. Dugan, comptroller of the currency, which oversees national banks, said his agency had found "significant limitations with the mortgage performance data reported by other organizations and trade associations."
For Miller, the data is important "so we can get a good handle on how many mortgages they really are modifying, what those modifications really consist of, what the re-default rate is and what the foreclosure rate is."
Banks often tell Congress, says Miller, that they have modified a sizable number of mortgages. What they don't say is that many of those modifications -- roughly half, according to one study -- modified the mortgage upward, making it more expensive, not less.
That explains why people are re-defaulting shortly after the alleged modifications. "An alarming trend has emerged where a significant number of homeowners are re-defaulting on home loans within just a few months of an initial mortgage modification," says Cummings. "To better guarantee that families will be able to stay in their homes, we need to understand what works and what doesn't when it comes to loan modifications, and we need to verify that lenders are providing the most effective and efficient assistance to borrowers -- particularly given the abusive practices that led many people into loans they can't afford in the first place."
Logically, if the homeowner couldn't make the pervious mortgage, he or she won't have much luck paying the upwardly modified one, either. But without accurate numbers, it's hard to know how often that's happening.
The media largely rely on data from the private firm RealtyTrac. But it has big problems, according to the report. "RealtyTrac publishes a monthly U.S. Foreclosure Market Report, which tracks foreclosures, not delinquencies or loss mitigation efforts. RealtyTrac's report is based on court filings and does not include information about the specific characteristics of loans. Moreover, RealtyTrac's methodology overstates the number of unique properties in foreclosure because it measures foreclosure filings, and there can be multiple filings for an individual property. Moreover, many foreclosures that are initiated result in cure and reinstatement, a workout, a short sale, or a deed in lieu. RealtyTrac also tracks completed foreclosure sales, although it does not publish these numbers, but these are a more reliable indicator of foreclosure activity, albeit with a significant delay."
The problem extends across the federal government. The oversight panel reported that it set out to survey what data was kept by the Departments of Treasury and Housing and Urban Development (HUD), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the National Credit Union Administration (NCUA), the Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC), and the Federal Housing Finance Agency (FHFA).
"The results of the survey were distressing," concludes the report. The report singled out the FHFA, which had sparse data even on mortgages held by government-sponsored enterprises under its domain. "The Panel is puzzled how FHFA can be performing its mission of overseeing the safety and soundness of the GSEs when it lacks basic knowledge of GSE losses," it reports.
In the midst of the foreclosure crisis, nobody's accurately tracking foreclosures. "No agency appears to have identified mortgage market intelligence gathering and analysis as its responsibility," concludes the oversight report.