Bill Brennan spent half of his 42 years as an attorney at Atlanta Legal Aid trying to save the houses of poor homeowners, many of them elderly minority women, threatened with foreclosure.
As director of Legal Aid’s Home Defense Program, Brennan’s expertise on the seamier side of the mortgage industry, often described as “predatory lending,” has resulted over the years in repeated appearances before Congress.
In the years leading up to the financial collapse, Brennan was howling in the wind about how practices in the mortgage industry, from subprime loans to punishing adjustable rates, were going to hurt not only homeowners but also lenders and Wall Street investors.
Now foreclosures on homes are at historic levels, with predictions of a million for this year nationwide. Home foreclosure legal advertisements for the five-county metro Atlanta area are currently running at about 7,000 to 9,000 a month.
Known by his colleagues as the heart of Legal Aid, Brennan, 67, retired this past week because of heart problems. We caught up with him at an Atlanta Starbucks. True to form, he came armed with charts and documents ready to talk about how things in the industry he watchdogged went so terribly wrong.
Q: Was your job one you carried around with you all the time?
A: Ninety percent of what we do in the Home Defense Program is trying to stop foreclosure. If you know you can help someone save his home, you have to do it. It does really affect you.
Q: Years before the housing collapse, you were sounding the alarm about questionable or unconscionable lending practices. What did you know others didn’t?
A: We knew what a lot of lenders were doing, particularly to minority and elderly homeowners, was abusive and evil. We had no idea it would destroy the housing market and seriously weaken the economy of the United States.
Q: You describe the foreclosure crisis as happening in two waves.
A: The first wave was subprime foreclosures. Homeowners were made millions of loans that were unaffordable. The housing market collapsed around the country and in Atlanta because of the flood of foreclosures from those subprime loans.
Q: And the second wave?
A: The first wave caused a near collapse of the U.S. economy. The second wave can be attributed to the increase in unemployment resulting from that. Many cases that come to us today are perfectly good mortgages, but people can’t pay because they don’t have jobs, or now have substantially reduced incomes.
Q: How would you describe the government’s response to the foreclosure crisis?
A: Whereas Congress and the Treasury bailed out the banks — a crisis that evolved directly from the banks making millions of unaffordable mortgage loans — the public policy response for homeowners has been totally inadequate.
Q: How would you describe it?
A: The response has been to let most of these homeowners lose their homes and further weaken the economy.
Q: You are critical of the Obama administration’s loan-modification program. Why?
A: The program has been described as a failure and rightfully so. It is voluntary — the lenders don’t have to do it if they don’t want to. Those lenders that participate often refuse to follow the procedures correctly. They erroneously believe they can make more money foreclosing.
Q: What should have been done differently?
A: The TARP [bank bailout] program could have had a condition that said, “Banks, we will help you, but you have to help these homeowners.”
Q: What needs to be done now?
A: People who can afford to pay something should be allowed to stay in their homes. We need a moratorium on all home foreclosures — a government program to evaluate all of these mortgages to see what is going on. If it is an abusive loan, the homeowner should be compensated in some fashion. Overall, there need to be principal, interest rate and monthly payment reductions.
Q: Why isn’t that happening?
A: The banks oppose this and are very powerful.
Q: What about the states’ inquiry into whether lenders used false documents to justify hundreds of thousands of foreclosures.
A: The shortcuts could expose the banks to millions of foreclosures being set aside. Also, many investors who bought subprime mortgage-backed securities are demanding that lenders buy back the mortgage loans securing them because they did not meet underwriting standards. If that happens, it could lead to another collapse of the banks.
Q: Any idea how this shakes out?
A: If the government and banks fail to address these huge levels of foreclosures, the housing market might stay depressed for a long, long time, which will keep the economic recovery from moving forward.
Q: You fought for reform of the mortgage industry for a long time. How did you do?
A: To be honest, we tried, but did not have a lot of success. In 2002, Georgia passed one of the strongest anti-predatory mortgage lending state laws in the country. Unfortunately, for Georgia homeowners, it was greatly weakened in 2003. However, our highest priority has always been to help our individual clients. Without that, a whole lot more people would be out on the streets.
The Sunday conversation is edited for length and clarity. Writer Ann Hardie can be reached by e-mail at ann.hardie@ymail.com.
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