Caught in the Crosshairs of Corporate Power. Part 5: Predatory Mortgage Lending
This is part five of a five part series.
When political candidates spend their time begging for cash from wealthy interests and legislating to prioritize private profits over the public good, regular people lose out. The corporations and superrich donors that dominate our elections have an outsized influence over who wins, what gets discussed in campaigns and what legislative ideas receive serious consideration.
The sweeping legislative package known as the For the People Act (H.R. 1) contains ethics, campaign finance and voting rights reforms that are essential to make our government work effectively and fairly.
To illustrate the need for reforms that reduce corporate influence and redistribute power to the people, Public Citizen compiled stories of five regular Americans whose lives have been impacted by corporate political power.
Corporate Power Spotlight: Predatory Mortgage Lending
“I didn’t realize that I myself had become a victim of subprime lending.”
Douglas Coleman, 53, Washington, D.C.
Douglas Coleman still has fond memories of buying his two-bedroom condominium with a skylight and a fireplace in Washington, D.C.
After getting the keys to the $220,000 condo on a snowy February day in 2007, he grabbed his dog, a portable stereo and an inflatable mattress and spent the night there — even before bringing in his furniture.
“I was so excited to move into the place,” he said.
More than a decade later, Coleman, 53, is still dealing with the financial aftermath. He had purchased his home by taking out a risky, no-money-down loan – the kind of loan that was common in the mid-2000s and led to the nationwide foreclosure crisis and Great Recession.
A New York City native and graduate of Howard University, Coleman worked as an information technology specialist for the Department of Housing and Urban Development. After going through a divorce, Coleman was skeptical about his ability to qualify for a loan. A friend connected him with a mortgage broker. Before he knew it, he was a homeowner.
“I was just so eager to get the property,” he said. “I thought I was never going to qualify.” In retrospect, he said, the lender asked for “very limited documentation, not nearly what enough for what I should have needed to qualify.” Despite working at HUD at the time, “I didn’t realize that I myself had become a victim of subprime lending,” Coleman said.
Coleman’s loan changed hands shortly after it was originated, and wound up being handled by Countrywide Financial, the infamous subprime mortgage lender. “I started seeing them on the news. That’s when I was like, OK, I think I’m in a very bad situation,” Coleman said.
At HUD, Coleman earned a six-figure salary. But after both his father and his sister became ill, Coleman wound up traveling back and forth between Washington and New York to take care of them. Coleman missed a lot of time at work and ultimately resigned from his position so he could take care of his family members, both of whom have since died.
A father of two, Coleman tried to get by on a patchwork of jobs, including a food truck business. But due to the reduction in income and his need to pay child support, he could not make ends meet. He wound up in foreclosure. “I was embarrassed to talk about it,” he said. “I didn’t really want to say anything. I watched many a friend lose their properties a result of similar loans.”
Coleman’s struggle highlights how African American communities were targets of predatory lending practices in the 2000s and suffered disproportionately from the foreclosure crisis. The black homeownership rate, which is well below that of other ethnic groups, has now fallen to about 43 percent from a mid-2000s peak of nearly 50 percent.
Around 12 years after getting his loan, Coleman still isn’t sure whether he can stay in his home.
With the assistance of lawyers from the Legal Aid Society of the District of Columbia, Coleman received a loan modification, but has not been able to restore his prior income. He now works as a customer support representative for a contractor that provides building services to an international development organization, where he earns about $45,000 a year.
Coleman supplements that modest income by driving an Uber, doing product demonstrations at health-food stores and working for an educational travel company. “I’m working four jobs just to try to make up for the income of the one that that I had before.”
Still struggling to get by financially, Coleman is behind on his mortgage, contemplating filing for bankruptcy and thinking about giving up his home.
“I would love to hold onto that property because that was always my dream to move in there,” he said. However, he said, “between the constant legal battles, dealing with everything and the emotional stress, it’s almost to the point where you’re like …I don’t know if it’s worth it to continue the fight.”
CORPORATE INFLUENCE AT WORK
The mortgage crisis could have been prevented. Despite numerous warnings about rampant predatory practices in the mortgage industry, lawmakers and bank regulators failed to crack down on predatory lending due an intense pushback from lenders.
In the late 1990s and early 2000s several lawmakers in Congress tried to stop subprime lending abuses but these reforms stalled. At the state level, tough predatory lending legislation in Georgia passed in 2002 but was rolled back a few months later amid an industry outcry. Corporate-friendly bank regulators appointed by the Bush administration failed to crack down on predatory lending. Several of the most-troubled institutions, including Countrywide Financial, IndyMac Bancorp and Washington Mutual, were supervised by the federal Office of Thrift Supervision, which failed to regulate those lenders and wound up being merged into another bank regulator. Federal regulators who tried to sound the alarm bell found themselves stymied.
Even after Wall Street and the big banks crashed the financial system with abusive mortgage loans, the industry’s influence persisted. The industry fought hard, though unsuccessfully, against the creation of an independent consumer protection agency, the Consumer Financial Protection Bureau. Once the CFPB was created, industry critics then worked to attack and undermine the CFPB through corporate-friendly lawmakers in Congress.
The Obama administration failed to fight aggressively for industry-opposed legislation that would have allowed borrowers to reduce their debts in bankruptcy. It also said no to other alternatives, such as a revival of a federal mortgage refinancing program from the 1930s. Instead, the federal government program that responded to the mortgage crisis helped far fewer homeowners avoid foreclosure than initially promised. Then, the Obama administration’s Department of Justice largely shied away from aggressively prosecuting Wall Street banks or executives and failed to break up the largest Wall Street institutions, leaving megabanks in place despite their threat to financial stability.
KEY FACTS:
The for-profit college industry has:
- Spent more than $168 million on lobbying in Washington over the past decade.
- Contributed nearly $45 million in campaign money to Congress over the past 30 years, with money coming from PACs and individuals tied to the industry.
- Contributed 55 percent to Congressional Republicans and 45 percent to Democrats.
SOURCE: Center for Responsive Politics.
LOBBYING AND CAMPAIGN CONTRIBUTIONS:
Top recipients of mortgage industry donations, excluding presidential candidates, include Rep. Spencer Bachus (R-Ala,) the former chairman of the House Financial Services Committee, with more than $370,000 during his career, followed by two former chairmen of the Senate Banking Committee, former Sen. Christopher Dodd (D-Conn.), who received $345,000 and Sen. Richard Shelby (R.-Ala.), who received $336,000.
ACKNOWLEDGEMENTS
The authors wish to thank the Center for Responsible Lending, Legal Aid of the District of Columbia, Alex Shebanow/Fail State and T1International for helping to recruit the people featured in this report. All photos are courtesy of those featured.
