When the 2013 legislative session began, Minnesota anti-foreclosure groups and progressive lawmakers hoped to draft a powerful law that would hold banks and lenders accountable and enable homeowners to sue financial institutions if they misstepped. What they got was a watered-down bill that the banks approved after being deeply involved in the negotiating process.
To some observers, the process proved, once again, the power that money holds at the State Capitol.
Nevertheless, homeowner advocacy groups walked away declaring victory. They got a ban on “dual tracking” and a private right of action for homeowners. A third objective, mandatory mediation between banks and homeowners in danger of losing their homes, was a casualty of the banks’ involvement in drafting the legislation. Mediation, however, could re-emerge as an issue in next year’s legislative session.
Compromise or no compromise, Golden Valley homeowner Rose McGee celebrated her birthday on May 28 with a soulful breakfast of grits and biscuits together with a handful of friends and fellow activists who, over the past year, helped her take on CitiBank — and Minnesota lawmakers — to keep her home.
McGee’s struggle, chronicled along the way by The UpTake, played out in neighborhoods, synagogues, churches, banks and, ultimately, at the State Capitol before she reached a deal in May with CitiMortgage and Fannie Mae. In so doing, she has become a hero of the anti-foreclosure movement. Many other distressed homeowners may benefit because of her fight.
Last year, CitiBank foreclosed on her suburban home after telling McGee for months that they were working on a plan to save it. That unfair and unpopular process, known as “dual tracking,” was one reason that CitiBank and other lenders were forced to pay billions in a national settlement.
In Minnesota, McGee’s case inspired several activist groups to lobby the Legislature for a “Homeowner Bill of Rights” that, among other protections, sought to outlaw dual tracking. The bill passed the State Senate, 61-1, and the House, 123-0, as the clock wound down on the 2013 legislative session.
Gov. Dayton signed it into law last Friday.
In the end, the bill attracted nearly unanimous support, but its path to becoming law was marked by wrong turns, roadblocks and, ultimately, a difficult effort to force powerful banking interests to come to the negotiating table with housing activists.
The bill, sponsored by State Sen. Patricia Torres Ray — a DFLer who represents South Minneapolis and Richfield — and Rep. Melissa Hortman, DFL-Brooklyn Park, followed an earlier, more ambitious effort by Rep. Mike Freiberg, who represents Rose McGee’s district. But Freiberg’s bill didn’t receive the support of the banks and died in committee, frustrating many activists who wondered openly at the heavy lobbying influence of the banking industry.
Worried that banking interests had killed the effort, activist groups including ISAIAH, Jewish Community Action, Minnesotans for a Fair Economy, Neighborhoods Organizing for Change, and Occupy Homes staged protests in communities and at the Capitol, including a rally in the Rotunda on May 15. “Hear this bill,” they demanded of lawmakers.
“Banks shouldn’t be able to take your house if you can save it,” Rep. Hortman told the crowd.
Meanwhile, in homes, places of worship, banks and halls of local government, everyone from Occupy Homes activists to U.S. Rep. Keith Ellison showed up to support Rose McGee and speak out in favor of a homeowner bill of rights.
“I’m on the side of Rose McGee, and not the side of Fannie Mae, Freddie Mac, or CitiBank,” Ellison said during a recent rally in support of McGee. “The banks represent their shareholders. The politicians represent the people who they represent. If you’re in Congress or the state Legislature, your first consideration for what’s good should not be how a privately-held corporation feels about it. It should be what’s in the best interests of the people.”
The interfaith group ISAIAH held more than a dozen Townhall-style gatherings in which it encouraged people to call their lawmakers and push for homeowner rights legislation. ISAIAH activists also held a vigil outside the office of Sen. James Metzen, a Democrat with ties to the banking industry who blocked Freiberg’s initial legislation and refused to allow it out of committee.
Meanwhile, Torres Ray and Hortman refused to let the initiative die. They sought the help of Legal Aid and lobbyist Ron Elwood, who quietly worked behind the scenes with banks and their attorneys. Elwood, a native of Queens, N.Y., who moved to Minnesota 17 years ago, is a passionate advocate for consumer and homeowner rights, though his work rarely attracts the spotlight. He said that parts of Freiberg’s initial legislation were incompatible with federal anti-foreclosure policy coming down the pipe in 2014. Freiberg’s bill, House File 83, was among the first introduced in the 2013 legislative session but quickly ran up against tough resistance from financial institutions and title companies, and stalled before the committee deadline in mid-session.
Nevertheless, said Elwood, bank lobbyists recognized there was a need for legislation to stop dual tracking and curb foreclosures. He and Legal Aid got banking representatives to agree to Rep. Hortman’s scaled-back bill, House File 1377 (paired with Sen. Torres Ray’s companion bill, 1276), that would include a ban on dual tracking, and give homeowners the opportunity to legally call a timeout. “We wanted to create an important tool for homeowners to create loan modifications for which they’re eligible,” said Elwood.
“That wouldn’t have happened without the support of bank lawyers who helped craft the language to work in concert with other legislation already out there. Ultimately, it was the effort of advocates and industry working together that got the bill done.”
All parties eventually agreed on a bill that would ban dual tracking and include a private right of action for homeowners. But banks would not agree to the third component of Freiberg’s original Housing Bill of Rights — mandatory mediation. The push for mandatory mediation could re-emerge next legislative session.
“Everyone understands there’s still an issue we need to deal with regarding foreclosures,” said House Speaker Paul Thissen. “But (we need to) understand what’s happened so far and how that’s been effective, what’s happened at the federal level and how that interacts with what we need to do at the state.”
“The process to move the Homeowner Bill of Rights forward (was) not a simple process,” conceded Sen. Torres Ray, who took the bill to the Senate floor on May 16. “Almost 170,000 people have lost their homes in Minnesota,” she told fellow lawmakers. “These individuals only have us to represent them here.” The Senate passed the bill 61-1. Three days later the House approved it, 123-0.
“It’s a compromise between the bankers and consumer advocates to give our consumers a little bit more protection in a foreclosure situation,” conceded Rep. Hortman.
Gov. Dayton signed the Homeowner Bill of Rights into law on May 24.
Housing justice advocates declared a resounding victory, and on Aug. 1, Minnesota will join California as the second state in the country with a Homeowner Bill of Rights. The dual-tracking prohibition takes effect on Oct. 31 — in advance of federal Consumer Financial Protection Bureau regulations that kick in next January. Housing activists say that California’s bill of rights has cut foreclosures by over 60 percent — however the recovering economy and housing market is responsible for some of that improvement.
“For us it’s an unbelievable show of bipartisan support for this issue,” said Anthony Newby, an organizer with Neighborhoods Organizing for Change (NOC). “There were multiple days during this legislative session when this bill was dead in the water. Senators had threatened to not hear the bill. On the House side it felt like there was not enough confidence to keep it moving. It’s pretty clear to me that the on-the-ground pressure has been the difference-maker.”
What remains to be seen is how the homeowner rights legislation will impact communities of color, which were hit hardest by the economic recession and foreclosure crisis.
The day after the bill passed the Senate, NOC released a report called “Wasted Wealth”, which details how communities of color have been hit harder than white communities during the financial crisis and housing market collapse. Read the report here.Wasted.Wealth_MINNEAPOLIS.STPAUL
“It’s something we knew,” said Newby. “We now have a report that gives the facts and figures. There were hundreds of millions of dollars that have been stripped from communities of color (in Minnesota), and we need comprehensive legislation that will address that issue.
“It’s great that this bill passes, but if it doesn’t affect our members and the people in North Minneapolis, East Saint Paul and the Frogtown and Phillips neighborhoods, then it hasn’t had the effect that it needs to, and we’ve got more to do.”
Sen. Torres Ray was motivated to carry the homeowner bill through the Senate by the homelessness she’s seen arise in her district, particularly among working-class Latino and African-American families.
“When I started door-knocking seven years ago, I almost never saw an empty house in District 63,” she said. “During the last three years I have seen so many empty homes. Individuals who work, individuals with young families, who have lost their homes and right now are homeless. A significant number of Latinos and African Americans who invested in their homes, who bought a home for the first time, and who lost all of their savings, and now they are homeless.”
Depending on how the housing market recovers, the state legislature may have to revisit homeowner rights again in 2014.
But for now, Rose McGee is celebrating her twin victories: Keeping her home and her important role in the housing victory at the Capitol.