Next Tuesday morning, Asm. Ted Lieu (D-Torrance) will be dropping by to take some of your questions. In addition to being a friend of Calitics, Lieu has been focusing on fighting the housing and banking crisis. You can find his assembly site here to get more information on his legislative agenda.

Obviously, as ground zero for the foreclosure boom, this is a very important issue to California, one where there has been spirited debate.  Asm. Lieu, who is also one of the many candidates for California Attorney General, will be here on Tuesday morning at 11:30 to answer your questions about the housing crisis and anything else you have on your mind.  Feel free to post your questions here or just ask them on Tuesday.  

Last week I took a look at the growing Bushville on the American River in Sacramento, which has been garnering national attention as a powerful symbol for these troubled economic times.  It was clear at that time that the city government led by Mayor Kevin Johnson needed to do something to ameliorate the situation.  The decision has been made.

Sacramento Mayor Kevin Johnson promised to first make alternative shelter space available for the estimated 150 men and women who inhabit the squalid encampment near the American River, at the edge of the city’s downtown.

Johnson, who toured the area with California Governor Arnold Schwarzenegger a day earlier, said he hoped to have the ramshackle settlement cleared of tents and debris in the next two to three weeks.

“We want to move as quickly as we can,” he told a news conference, insisting the city was determined to treat the tent dwellers with compassion.

“They are people out there. We have to do whatever we can do,” he said. “We as a city are not going to shy away from it. We’re going to tackle it head-on.”

Advocates for the homeless applauded the mayor’s action. Municipal authorities in Sacramento have been debating the fate of the tent city for weeks.

150 seems like a very low number, when news outlets have reported as many as 1,200 homeless staying in the encampment.  Of course, that could simply be a matter of media overhype (local shelter organizers apparently fed this as well).  However, even if the numbers are correct, finding shelter space for 150 deals with those made homeless as of today.  With unemployment skyrocketing, there will be more left homeless tomorrow.  And next week.  And next month.  While most in the encampment did not fit the profile of the “recession homeless” (a closer look reveals that the tent city grew out of multiple closures of other shelters, which is probably because of the recession anyway, so we can go around and around on this), such a group does exist and will need help over the next year as the state struggles.  The fact that so many homes lie vacant and are owned by Fannie Mae and Freddie Mac, i.e. the US taxpayer, suggests there are solutions to this problem beyond the short term if creative solutions are made.

I first wrote about an Ontario-area Bushville, a tent city of foreclosed Americans, almost a year ago.  At that time, it became too big to sustain itself, as people from across the country moved to the tent city to live.  The city required that only residents of Ontario be allowed to stay.

Now there’s an even larger Bushville rising in Sacramento, on practically the same spot as a Hooverville in the 1930s.  From The New York Times:

A tent city is burgeoning in Sacramento, Calif., prompting local officials to consider whether such an encampment should be made permanent, with plumbing and all.

The primitive settlement sits in the shadow of the state capitol and is home to about 300 people who have no toilets or running water, creating unsanitary conditions that advocacy groups worry could promote diseases like cholera. With the downturn in the economy and more working-class people losing their jobs and their homes, the tent city is expanding […]

This tent city is in a place of great natural beauty, between two rivers, with birds and open sky and a relatively mild climate. Homeless people have lived there for years, largely unseen, but as more working class people move in, the tents are multiplying and becoming harder to ignore.

The official count of homeless people in Sacramento is 1,226 people, and they are spilling out to the tent city because the housing shelters are full; one of the shelters is turning away more than 200 women and children a day.

Perhaps the most unbelievable part of this is that 10% of rental housing units in Sacramento, and almost 5% of owned units, are VACANT.  We have nobody in the houses and people living in the tents by the river.  And yet the housing owned by the Sacramento Housing and Redevelopment Agency is maxed out.  It’s very upside-down.  

I agree with Charles Lemos that this is a test of our humanity and values as a people.  Fortunately, the generosity of ordinary people is extending beyond the policymakers.  Since a story on the tent city appeared on Oprah and the Today show, donations have been pouring in.  Portable toilets and a dumpster have been installed.

But that’s a temporary solution.  While $2.3 million is coming into Sacramento to deal with homelessness through the federal stimulus package, that’s not going to be enough if foreclosures continue to rise.  In February, the number of homes threatened went up 30% year-over-year and up 6% since January, despite several large banks agreeing to a temporary moratorium.  Five of the top seven areas for foreclosures are in California – Stockton, Modesto, Merced, Riverside-San Bernardino and Bakersfield.  While the first wave of subprime failures has already occurred, with unemployment still soaring we are starting to see unemployment-based foreclosures as a second wave.  So I don’t see any letup anytime soon, and Sacramento is going to have to meet this challenge of dealing with the wreckage of the Bush regime.

This week, Barack Obama announced the details of his plan to save up to 9 million homeowners facing foreclosure from losing their residences.  The goal is to place a floor on foreclosures and help people whose rates have reset to work out loan modifications with their lenders.  The federal legislation that passed the House which would allow bankruptcy judges to modify the terms of loans, which gives homeowners a powerful stick to force the lenders to pre-empt a cramdown from the judge, will also help this.

Unfortunately, the class of homeowners who would be left behind in this plan are those who are “underwater” on their homes; that is, they owe more on the principal of the home than the current value.  And that’s an accurate depiction of a very large segment of California homeowners.

The Obama administration’s plan to stave off foreclosures could fall flat in California, where nearly one-third of mortgage holders are underwater on their loans — many of them by amounts that would disqualify them for government-sponsored refinancing.

The problem is likely to be especially acute in areas like the Inland Empire, where homes have lost more than 40% of their value in the last year and nearly half the homeowners owe more on their loans than the properties are worth.

“They’re underwater by six figures in many cases,” said Greg McBride, a senior analyst with Bankrate.com. “Many homeowners in Southern California are left to twist in the wind.”

Under the Obama plan, people who are current on their mortgages could obtain new loans with lower rates for as much as 105% of the value of their homes. That means people could borrow $315,000 against a home worth $300,000.

The problem is that in California, many people owe far more than 105% on their homes, McBride said.

The thinking may be that stopping the worst foreclosures from occurring and lowering the overall rate will stop the dramatic slide in home prices and give those who are underwater a chance to make up the difference.  But we may not have that kind of time, as so many are drowning in debt with seemingly no hope to dig out.  In addition, the 10.1% jobless rate here (and rising in February, to be sure) will mean that a substantial number of honeowners will simply be unable to pay no matter what kind of modification can be worked out, and so the wave of foreclosures will continue.

Into this troubling situation has stepped Ted Lieu, the legislature’s point person on the housing crisis.  He is calling on the Obama Administration to do more.

“Many distressed homeowners in California are underwater by more than 5% on their home loan, which makes them ineligible to apply for refinance assistance,” said Lieu, author of a state foreclosure moratorium law that Gov. Arnold Schwarzenegger signed last week.

Lieu said he would meet next week with administration officials to discuss his proposed changes […]

Lieu said that whatever its flaws, the Obama plan addresses a root cause of the nation’s economic woes by trying to help homeowners rather than “following the Bush administration policy of just throwing money at the banks.”

Nonetheless, he said, the refinancing limit should be raised, perhaps to 115%, to help more people obtain cheaper loans.

“Otherwise, you’re just going to end up helping a lot of people outside California,” Lieu said.

It’s just hard to put a single national standard on the plan when the circumstances are wildly different depending on the region.

Let’s also note that Lieu’s own housing legislation will begin to kick in shortly.  This is from a press release:

My legislation, the California Foreclosure Prevention Act, will now compel a lender to modify a loan well before a homeowner should need to seek a solution from a bankruptcy court.  Beginning in May, California will impose a 90 day foreclosure moratorium unless a lender offers a comprehensive loan modification program based, in part, on criteria set forth by the Federal Deposit Insurance Corporation. By adding a strong disincentive if a lender refuses to modify home loans, California’s action not only compliments the President’s plan, but gives him another stick to stabilize the real estate market and this economy.

It’s worth praising those lawmakers who are taking the lead, especially on a problem of this magnitude which is such a major contributor to the overall economic meltdown in California.

Late last week, Democrats temporarily shelved a bill that would allow bankruptcy judges to modify the terms of mortgages on primary residences (also known as “cram-down”).  Moderates who put the hold on this legislation, particularly former Wall Street investor Ellen Tauscher, crowed about it to the media.

This hardly amounts to a breakthrough win for party moderates – or a major concession by the speaker. But it was a consequential moment in the minds of moderate leaders who often find themselves marginalized in a caucus dominated by liberals.

“It shows we have bench strength, and it shows we can flex,” said California Rep. Ellen O. Tauscher, who chairs the New Democrat Coalition and played a central role in negotiations over the bankruptcy bill […]

Moderates worry Pelosi is routinely staking very liberal positions to push House versions of big bills as far to the left as possible to enhance their standing in negotiations with the historically centrist Senate. This might be a smart tactic, but it often hurts Democrats who rely on Republican votes to win reelection. Put bluntly, it makes them look too liberal […]

That prompted lawmakers, like Tauscher, to limit the scope of the bankruptcy bill as much as possible, even though this measure is only loosely related to the president’s broader proposal.

Tauscher’s New Democrat Coalition teamed with their natural allies in the Blue Dog Coalition to impose 10 significant changes, including requirements that bankruptcy judges use federal guidelines to determine the fair market value of a home and that modified loans must be “unaffordable and not just underwater” to prevent wealthy homeowners from taking advantage of the process, according to a widely distributed e-mail from Adam Pase, executive director of the New Democrat Coalition.

This, of course, angered some liberals. “The New Dems’ position is the banks’ position,” a senior Democratic aide involved in the bankruptcy negotiations complained on Friday. “New Democrats are shills for the banks.”

It’s confounding that any New Democrat thinks their constituents give a ring-a-ding about banking industry concerns, and are not in fact the very people struggling to keep their homes that this legislation would help.

More, including Tauscher staffers lying to bloggers, on the flip…

When Chris Bowers used Tauscher as the face of the moderate backlash against working people facing foreclosure, her office responded by saying they supported the rule on the bill (HR 1106), and that their changes would “strengthen” the bill, and that they didn’t meet with anyone in the financial services industry about it.  But David Waldman explains why that, simply put, is a crock – she voted for the rule because it incorporated the changes she wanted to make.  And if that was the only hurdle, why didn’t the legislation get a vote last week?

Now, that amendment was approved by the Rules Committee last Wednesday night, the 25th of February, and the rule was adopted on Thursday morning, the 26th. That locked in place that the voting on the bill would include a vote on an amendment incorporating Tauscher’s list of changes.

So why, if she supports the bill, would work on it be suspended on the afternoon of Thursday, the 26th? She “supports the bill,” and voted for the rule that locked in a shot at making the changes she proposed to the Judiciary Committee, and yet here we are, waiting over the weekend for… what, exactly?

Ellen Tauscher supported the rule because it made an amendment in order that would incorporate her list of demands. That’s all. But she must clearly want more changes, because even after winning these concessions, the bill is still stalled, and the news reports on the stall have Tauscher’s name all over them.

Jane Hamsher has a lot more on Tauscher, who is clearly putting banking industry interests ahead of her constituents’.  She doesn’t have to necessarily talk to anyone in the financial services industry personally, because Adam Pase, the chairman of the New Dmocrats, works out of her office:

Pase is is a former lobbyist for the Twenty First Century Group, whose client, the Coalition for Fair & Affordable Lending, is an astroturf group, financed by the banking industry, that lobbied on behalf of. . . you guessed it. . . sub-prime lenders. Contrary to what you might hear on Morning Joe, it was national civil rights leaders who joined together to fight the Coalition’s predatory lenders as they tried to pass the Ney-Kanjorski bill, which would have enabled banks to get around predatory lending laws and make more bad loans. This they justified based on the oh-so-high-minded need to provide loans to low income and minority borrowers. It was true scumbaggery.

Pase was also the senior policy adviser for Dennis Moore when Moore organized Blue Dogs to oppose mortgage write-downs on behalf of the banking industry in 2007, and he is evidently the one driving policy on this one for the New Dems. But one has to wonder — what is Tauscher thinking? Her district is one of the hardest hit by the mortgage crisis, as you can see from the map. Why is she trying to limit mortgage write-downs to subprime loans only, on behalf of banks, when every foreclosure brings down the value of all houses in a neighborhood? Her claim to care so very much about people still struggling to pay their mortgages rings hollow.

Shaun Donovan, the HUD Secretary, is headed to the House today to whip support for the bill.  This legislation would save perhaps 800,000 families from foreclosure without one penny of cost to the taxpayer.  All the bill would do is give leverage to homeowners who have been screwed by their lenders at practically every step of this process.

Homeowners burned by Blue Dogs and New Dems like Tauscher are not likely to forget the treachery.  Firedoglake has some action items.

We’re asking you to do two things:

Write a letter to the editor of your local papers (just enter your zip code) saying you expect your Member of Congress to represent you, not the banks, and you’ll be watching to see if they oppose Tauscher and her bank lobbyist cronies.

Sign a petition to Nancy Pelosi telling her not to “buckle” to pressure from bank lobbyists working through greedy corporatist Members of Congress, and to act swiftly to give judges the authority they need to write down mortgages.  The banks must take responsibility for their own bad judgment; taxpayers shouldn’t be expected to pick up the tab.

These same people killed efforts in 2007 to allow bankruptcy judges to write down mortgages at that time, which could have helped us from ever getting to this place.  It’s time they stop pretending that they care about their constituents when they’re only being tools of the banking lobby.

I think it’s more about telling Pelosi we’ll have her back if she stands up to these cretins.  You know what to do.

Chris Bowers advises that the House will be going ahead with housing legislation tomorrow that would allow bankruptcy judges to modify the terms of mortgages to reflect current home values and allow homeowners to avoid foreclosure (commonly known as “cram-down”.  As I discussed with Rep. John Conyers, the author of this bill, this would not encourage bankruptcy but help people avoid it, giving them a level playing field to get banks to follow through with loan modifications.  While practically every other property someone owns can have the terms rewritten by a bankruptcy judge, primary residences are excluded.  That is arbitrary and wrong, and changing it would reduce foreclosures and homelessness and bring some stability to the housing market.  This legislation is supported by the President and included in his housing plan, but a change in the law like this should be passed by the Congress to make it a federal statute.

Bowers writes:

Tomorrow, the House will vote on Representative Conyer’s bankruptcy cram down. The whip count is unclear right now, but some Blue Dogs and New Democrats, including Melissa Bean (D-IL), Dennis Moore (D-KS), and New Democratic chair Ellen Tauscher (D-CA), are working on behalf of the financial services industry to water down the legislation. Tauscher in particular is problematic, both because of her leadership role in one of the ideological caucuses, and also because rumors are that she has organized up to two dozen members thus far. It is about time that Tauscher, and the Representatives she is organizing, stop listening to industry lobbyists who do not have the public interest in mind.

So, let’s make Representative Tauscher listen to someone else right now. Contact Ellen Tauscher, and urge her to stop organizing other Democrats to water down HR 200. She needs to listen to honewoners, not to the financial industry that got us into this economic disaster.

Here is the contact information:

Email form (California residents only)

D.C. office: 202.225.1880

Ellen Tauscher’s New Democrat ways haven’t surfaced much since the threatened primary challenge in 2007, but torpedoing this bill would bring that back all over again.  She needs to know that people are watching her and want to be sure that she is protecting homeowners and not the big banks and lenders.

Please contact her now or in the morning.