Kaptur visits UT to discuss housing crisis

Twenty-seven years of representing the 9th Congressional District of Ohio — an area that stretches across parts of Lucas, Ottawa, Erie and Lorain counties — has taught Democratic Congresswoman Marcy Kaptur a great deal about the inner-workings of American politics — something she calls “peeling the onion.”

One thing she has learned is that, when lawmakers and big money interests meet, the public interest doesn’t always find its way into the legislation.

Speaking on the American housing crisis, Kaptur asked a group of over 70 students gathered at the University of Toledo’s College of Law Auditorium, “Where’s Congress?”

Her response: “They’re off the reservation, in my opinion.”

On Monday, Kaptur visited UT’s law school, where she delivered a half-hour speech in which she discussed the “imprudent” lending schemes practiced by the nation’s largest home lenders, the lack of oversight and action by Congress and the executive branch and the role the judicial branch and legal system can play in advocating on the behalf of troubled homeowners. Kaptur believes the banks’ behavior and governmental complacency are what led up to the mortgage foreclosure crisis. However, she feels the solution to the crisis will come through the nation’s lawyers and judges.

In her speech, Kaptur was critical of the legislative branch and the overall productivity of her colleagues.

“I’ve seen Congress and its inability to produce anything that works … The bills that Congress is passing [to solve the housing crisis and make homes affordable], I call ‘hollow bills,’” Kaptur said.

According to Kaptur, the housing bills being passed in Congress “have a nice name and they have some great goals, but there are no teeth because they’re not holding these firms [mortgage lenders] accountable.”

She believes the largest banks, such as JP Morgan Chase, Wachovia, Wells Fargo and Citigroup, were bailed out by the U.S. government but the American people were left behind. She asked the audience, “Why didn’t JP Morgan go bankrupt? Why did they say it’s the homeowner who forever will have on their record and credit report that they went bankrupt? Where’s the justice on the other end?”

In an interview after her speech, Kaptur said, “I’m heartbroken, but I keep trying to say, ‘You’ve done the wrong thing. You’ve rewarded the very people who did this to us. You need to reward those who were prudent, not those who were imprudent.”

Kaptur believes there is “too much” of a private sector influence on Congress for any progress to be made in fixing the housing crisis. “The very powerful interests can afford representation. You would think that with the level of crisis that we have, that key committees of Congress would have the victims [of foreclosures] up there … They haven’t done it; they haven’t met their responsibility, in my opinion. They have the bankers up there, but where are the people?”

Kaptur devoted a large portion of her speech to discussing how the change from the American “banking system” to a “financial services system,” in the late 1980s and early 1990s, was the origin of the American housing crisis.

In Kaptur’s opinion, one dangerous result of the systematic change is that it has led to fewer locally-owned banking institutions.

“With the changes in the financial system today, where the mortgage was turned into a bond and then the bond securitized, the mortgage market became heavily weighted toward Wall Street. And local loans that were originated in places like Toledo were sold up the chain, and locals didn’t really have responsibility for servicing,” Kaptur said.

Securitization is a banking process in which the bank that originates the loan sells the loan to another bank rather than hold on to the debt until it is fully paid off. The practice allows the originating bank to restore their deposit funds in order to issue out more loans and earn profit off the interest accrued. The loans are often sold together in “bundles,” which is a financial instrument that reduces investment risk by combining high risk and low risk loans into one purchasable unit.

Kaptur noted that oftentimes the securitization process is so complex that the original mortgage note can be lost and that the firm who holds the note at the time of the foreclosure usually has trouble producing the note to show that they own the debt. That is why Kaptur has introduced a bill she calls “Produce the Note.”

According to Kaptur, her bill will “make it more difficult for the financial institutions of our country to foreclose because it would require that they actually produce the deed — the note.”

“So often, when the firms or banking companies foreclose, the homeowner is not asking at the legal proceeding that proceeds [the foreclosure] for the company to actually produce the paper trail — the financial trail — of that mortgage transaction, right up to the note itself,” she said.

On its Web site, the Consumer Warning Network states, “There is only one original note for your mortgage that has your signature on it. This is the document that proves you owe the debt.”

“During the lending boom, most mortgages were flipped and sold to another lender or servicer or sliced up and sold to investors as securitized packages on Wall Street. In the rush to turn these over as fast as possible to make the most money, many of the new lenders did not get the proper paperwork to show they own the note and mortgage, “according to CWN.

While Kaptur expressed her disappointment in Congress, she also asserted that she is hopeful that the judicial branch and legal system will be able to find a solution to what she considers the “unjust” treatment of homeowners and encouraged the law students in attendance to be a part of the solution.