An ongoing drama is unfolding: a David versus Goliath tale of sorts that pits a Riverside, Calif., family fighting to stay in their home against the weight of that elephant, otherwise known as "Freddie."
Arturo de los Santos, his wife and four children have already been evicted from their home once, but now, with the support of Alliance of Californians for Community Empowerment, Occupy Los Angeles and Occupy Riverside, they've re-occupied the vacant house. Their supporters have placed boots on the ground and inside the house to serve as witnesses and shields if sheriffs should come knocking once again.
It's a rage-against-the machine story, but with a puzzling subtext: Santos is working and willing to make a deal, but Freddie has turned a deaf ear. Now, his plight has become the focus for on-going media attention, namely MSNBC and Huffington Post.
A native of Corpus Christi, Santos joined the Marines in 1991 and after finishing a stint on an aircraft carrier found his way to Santa Ana, Calif., where he found a job in the aviation industry. He rose to a position as supervisor, and he's still there. Together with his wife, Magdalena, they purchased a home in nearby Riverside that's provided a roof over the heads of four children.
When the global economy caved in 2008, his hours at the aviation plant were cut back and he asked his servicer, JPMorgan Chase, for a loan mod. According to Santos and his supporters, events then unfolded in true Kafkaesque fashion. He was denied a loan mod, re-applied, then given a temporary mod, on which he made timely payments, then denied, again, for a permanent modification.
Before he received his final denial, he learned that his house was going on the auction block. After questioning Chase about what was going on, the response, as he tells it, was "there's a modification department and a foreclosure department, and the foreclosure department decided to sell your home."
So the great foreclosure machine began to grind away, and because California is a non-judicial state, meaning foreclosures there don't need to go through the court system, the gears were greased to make eviction a whole lot easier.
In January, 2011, Cal-Western Reconveyance Corp. — a title company with a disturbingly sinister moniker — engineered a transfer of ownership to Chase, then to Freddie Mac. Santos protested that he made enough to enable him to continue to pay a modified mortgage. Freddie refused.
With foreclosure a done deal, the Santos family left the house.
Then a magic slingshot appeared, giving this David a tool to fight back. He signed up with Alliance of Californians for Community Empowerment to be one of those homeowners to participate in a re-occupy-your-foreclosure campaign and, with family in tow, took back his home last December.
Accusations have gone back and forth between Santos's supporters and Freddie spokespeople as an acrimonious backdrop to what has now become a court battle.
Last week, a California judge presiding over the case told Freddie to go back to the drawing board and come up with some legally palatable reasons why the family should be evicted for a second time.
Arturo de los Santos is one of those emerging soldiers in this war against homelessness, a committed fighter who refuses to submit to a foreclosure firing squad.
Your analysis is consistent with Edward DeMarco's position that principal reduction is not a workable strategy. However, now both FNMA and FHLMC (or Fannie and Freddie as we know them), have run the numbers and concluded that principal reductions do work. Further, there is no evidence that people flock to default on underwater loans. That's economic suicide for most folks. Instead, most people start stripping their other assets (including selling cars, other real property, gutting 401k's) to avoid getting behind on their mortgages. Right now, the housing market is so damaged that writing down values to current market would help put a floor on the slide. This was the outcome of FDIC writedowns in New England in the 1990's. Also, if banks foreclose on an underwater property, they are only going to get current market (or, more likely, distressed market value because comparables are affected by the foreclosures and short sales in an area). A lesser amount of principal reduction would probably get most homeowners back on track and save the banks the considerable expenses associated with going the foreclosure/short sale route.