Fixing the Foreclosure Problem

One of the sad legacies of the housing and mortgage securitization bubble and the subsequent collapse of the economy over the past two years is the virtual devastation of working-class neighborhoods throughout the United States.  Thousands of homes sit vacant and deteriorating after foreclosure or are listed for sale at a price half or less than their value just 18 months ago.

Foreclosures aren’t hitting just the working class, but The New York Times reports that workers in the manufacturing and distribution sectors were keeping up mortgage payments until they found themselves unemployed and unable to pay for their homes, complicating efforts to stem foreclosures.

Even as the Treasury Department appears poised today to announce efforts to force more banks to modify loans, increasing evidence suggests that the federal government’s efforts are floundering.

Rather than focusing their efforts on the complicated Homeowner Affordable Modification Program (HAMP), or on bailing out banks in the hope that they will loan more money to homeowners and small businesses, federal policymakers can accomplish more  for those facing foreclosure, not to mention their neighbors and American taxpayers, by making relatively modest changes to the business practices of the Federal Housing Administration and HUD.

The story of an Ohio worker and homeowner illustrates how the federal government is missing easy opportunities to play a meaningful role in reducing the impact of the foreclosure crisis and the recession on real people.

In 2007, Bob was employed by DHL as a driver earning over $20 per hour. He bought a modest house in a middle-class suburb of Cleveland for a fair market price of $90,000 to live in with his son.  When DHL shut down its U.S. operations in 2008, Bob, along with thousands of others nationally, was laid off.

Meanwhile, back on Bob’s street, for sale signs proliferated and one of six homes in his community is in foreclosure.  As a result, the market value of Bob’s home has dropped to less than half of what he paid for it.

Bob and his son were able to survive on his unemployment benefits but couldn’t pay the monthly mortgage.  Bob recently took a job with FedEx paying less than half of what he earned at DHL and less than his unemployment benefits, because he simply couldn’t stand “not working any more.”

His mortgage, which was insured by the FHA, is being foreclosed. With the costs of foreclosure and 18 months of late fees included, the lender claims to be owed $120,000 on a house optimistically worth $50,000.

Bob requested that his foreclosure case be sent to mediation, and he provided the lender with extensive documentation of his income and expenses and the current value of his home during the course of those negotiations. The loan servicer has refused to agree to a modification of the terms that makes any sense to Bob. They are completely unwilling to consider any modification that reduces the principal balance at all, let alone bring the figure anywhere close to the current value of the home.

Bob does not qualify for the H.A.M.P program, the centerpiece of the Obama Administration’s effort to assist homeowners in default and foreclosure, because his loan (like the loans of most people in foreclosure) is more than one year behind. That program actually pays cash to lenders and mortgage services who agree to modify loans.

During the course of the negotiations it became increasingly clear that the lender or loan servicers have no incentive to enter into any kind of meaningful modification.


Because after foreclosure, FHA stands ready to pay the lender 100 percent of its loss on the loan, including the cost of foreclosure. If the lender were to agree to modify the loan, it would be paid far less.

Here is the outrage. If the lender proceeds to foreclosure, Bob and his son will be thrown out of their home and the lender will be made whole at the cost to FHA — and ultimately the taxpayers — of $80,000 or more.

This scenario is repeating itself in mortgage foreclosure cases throughout the country, putting the solvency of the FHA at risk while throwing thousands of working people out of their homes. The New York Times recently reported that FHA itself might be in need of an infusion of cash.

If FHA were included in the negotiation and would agree to pay lenders some amount –say half of what they are likely to lose, $40,000 — to allow the principal to be reduced, Bob could refinance at competitive interest rates and stay in his home, the federal Ggvernment and ultimately the taxpayers would save $40,000, and the lender would have an interest-paying borrower (who can afford the lower payment) and earn profits from the interest.

Everybody wins under this scenario.

Another problem that could be fixed by a more realistic approach by HUD and the FHA was detailed in a recent Cleveland Plain Dealer Story about problems created by HUD’s failure to demolish or fix homes they own (mostly as a result of FHA insured foreclosures) in greater Cleveland.  Dilapidated houses drive down housing values for entire neighborhoods.  Making it tougher for guys like Bob to sell or refinance their homes and making community problems worse. Local communities are struggling to maintain housing stock in aging neighborhoods, and HUD’s failure as a homeowner has devastating effects on entire communities.

The Federal Government has a chance to raise the bar for responsible homeownership, yet instead they appear to be lowering it. HUD should be a model community citizen, collaborating with local housing officials on neighborhood wide efforts to improve home values.  The agency should hire local consultants or even contract with local governments and empower them to make quick and honest assessments of the likelihood of selling any particular piece of real estate with an eye toward the best community use for the property.  For houses that will not realistically sell in a reasonable timeframe, HUD should require that the houses be demolished within 30 days.

Increasing evidence suggests that the new programs being created by Congress and the Obama administration are not having a significant impact on the foreclosure problem. Only 1711 homeowners nationally had completed a modification by September 1, 2009 under the HAMP Program.

Bob’s story suggests that a better approach may be to find ways to make the existing machinery of the federal government’s mortgage programs work in the interests of homeowners and taxpayers.

Marc Dann

Marc Dann is a Cleveland lawyer who represents homeowners in foreclosure.

What Working-Class Universities Should Do

Sherry Linkon’s two recent blogs react to a new study that found working-class students (defined by parents’ income and education) are less likely to graduate from a “working-class college or university” than from elite, more selective schools (defined by selectivity).  As someone who took seven years at four different universities to get a bachelor’s degree and who subsequently spent three decades teaching undergraduate working adults at a “working-class university,” this probably doesn’t concern me as much as it should.  The causal weight Sherry gives to what she fears is our “low expectations” of working-class students and a “dumbing down” of the curriculum concerns me more.

Both the study and Sherry have good reasons for this concern, but my fear is that it plays into a larger dialogue that I’m convinced is mostly negative for both students and faculty at colleges and universities with large numbers of students from working-class families.

“Dumbing down” is an ugly phrase, but I’m pretty sure I do it if you compare my teaching to what goes on at elite universities.  For example, many of my students are poor (and slow) readers, so I assign shorter readings and spend more time than I should in breaking readings down into their parts for discussion and, indeed, in requiring students to pay a lot of attention to how the organization of a piece of writing affects its meaning.  This means I do not cover content they should be learning.  Likewise, far too many students can’t work percentages or do other arithmetic that are about equally important to dealing with academic facts and figures as they are in daily life. Teaching arithmetic is not something our (or, so I’m told, any university) math department is willing to do.  So in many of my classes, I take time away from other things to drill students on working percentages.

Likewise, I’m not as interested in “challenging” my students with “more demanding” material as I am in trying to engage and sustain their interest in whatever we’re studying and their commitment to improving their reading, writing, thinking, and communicating skills.  This is based on a pedagogy of taking students where they are and doing what I can to help them improve.  This – merely sustained interest and improvement — is surely a low expectation, but I’m convinced it serves most of my students well.

Sherry’s notion that creating “a stronger atmosphere of achievement” might better serve working-class students could work for the higher-achievers who may find our curriculum not challenging enough to keep them intellectually engaged.  But it could also turn away the vast majority of middling students who already often feel disrespected as well as disabled in college classrooms, while actively pushing out the most poorly prepared who are also the most difficult to teach.

Like most teachers, I suspect, I have always aimed at teaching the middle because it’s the largest group of students, while paying more individual attention to the most poorly prepared.  Though I’ve had unusual circumstances (teaching general education seminars to adults), I have never felt guilty about cheating the high-achievers in my classes.  For one thing, they’re more capable of learning on their own.  For another, they often take a leadership role in class, others look to them for help, and they generally elevate the level of discussion (and learning) regardless of what I do.  As a rule, I need them more than they need me.

For the great middle group, however, I think it is important to clearly understand that our task is different from that of the elite schools.  I reject the notion that “workforce preparation” is not “true education.”  The overwhelming majority of students in my classes are there because they want higher-paying, more secure, less dangerous and/or demeaning jobs.  To get and keep those they’re going to need to greatly improve a whole set of reading, writing, thinking and communicating skills that are characteristically “middle class” in our society, but which are of some universal value as well – even if often overestimated by us highly educated folks.

Raising expectations may be a good idea in many instances, but to foster a “stronger atmosphere of achievement” would be to heighten the already heavily middle-class cultural atmosphere of higher education as a whole.  Because of tenure and other protections for academic freedom (now eroding), university faculty and our middle-class professionalism have an unusual degree of autonomy from ruling-class and managerial oversight.  All universities, partly as a result, tend to be hyper-middle class in our ethos and culture – a culture that, as Sherry says, “emphasizes individual success and competition,” a more meritocratic place than most, and one that values individual achievement above all else.  Indeed, for a working-class student a university is where one is socialized into the values, the ways of thinking and behaving of “the educated middle class.”

Barbara Jensen, Annette Lareau, and others have argued that there is a distinctly different working-class culture, one that is much less achievement-oriented, more bonded to people and places, and one that often sees middle-class ways as lacking in “personal integrity and sincerity and [having] poor interpersonal relations,” as Michele Lamont has found.  If this is true, and I believe it is, then the college experience for working-class students is inevitably a clash of cultures in a way it can never be for middle-class students.  Heightening that clash could be good for some of our students, but it would be bad for more.  What’s more, it would be bad for most faculty, I think, because it would make it harder for us to value and learn from the good things in working-class culture.  It would make our classrooms more adversarial than they are now, and over time it would likely lead to the kind of middle-class self-righteousness I associate with wannabe second-tier universities.

For me, being a “working-class university” is an aspiration.  You shouldn’t get that designation simply by having a large proportion of first-generation college students or by having more faculty and administrators from working-class backgrounds, or even by providing a supportive environment for working-class students.  These are necessary but not sufficient conditions.  To earn that title, a working-class university must be a place where working-class and middle-class cultures meet to feed and water each other, a place where certain middle-class skills are effectively taught along with some manners and mores, but where students are not required to abandon the entirety of their culture (often including their existing network of family and friends) in order to get a better job.  A working-class university should also be one that, both in its classrooms and in its relation with the larger community, should be actively engaged in building solidarity with the two-thirds of American workers who do not now and never will have a bachelor’s degree.  Once that part of the working class has steadily improving standards of living, more secure jobs and incomes, there may be less need for workforce preparation and more room for “true education.”  Until that time, Youngstown State seems to many of us one the few places that is consciously living that aspiration.  My hunch is that creating “a stronger atmosphere of achievement” would undermine that.

Jack Metzgar

Education, Business, and Perpetuating the Class Hierarchy

In our last blog, we noted the increasing absence of working-class writers from the Journalism profession, due in part to the proliferation of the unpaid internship as the requisite for a career in the field. While the financial consequences of this requirement are obvious, the less visible and more complex results of this practice may be far more wide reaching. For example, Anya Kamenetz notes that the wholesale acceptance of the unpaid internship leads to “over-identification” with employers: “I make sacrifices, to work free, therefore I must love my work.” She cites a University of Washington study of a coping strategy of interns in communications industries that study authors Gina Neff and Giovanni Arata label “performative passion.” They suggest that this “becomes a justification for the lack of pay and need for sacrifice.”  As these findings show, journalists who literally buy into this system will be less likely to question the assumptions and structures that always privilege business and the employer over individual and social needs.

But this isn’t just an issue for Journalism.  The over-identification with the employer, or employers in general, has become a guiding principle for higher education, particularly at working-class institutions, and this contributes to the institutional missions and student attitudes that Sherry Linkon outlined in her last two blogs. At universities across the nation, internships are just one peg of a larger strategy to match college education to the needs of specific employment sectors. A brief look at Ohio’s Strategic Plan for Higher Education provides a clear example of the transformation of higher education into vocational training. In a section titled “Relationship With Business Community,” the document recommends measuring the success of higher education across the state by surveying business leaders to find out “whether business is satisfied with the product of higher education.” Such a survey, the report claims, “will be a powerful tool in helping institutions and the Board of Regents exercise this public trust.”

Aside from the alarming rhetoric of product and consumer, the plan is generally organized around a claim that has become a siren call to educators and politicians across the country—that colleges and universities are not graduating enough students in STEM fields to compete in the “21st century” economy. In Ohio, the remedy for this deficit and the key to economic regeneration is, predictably, to emphasize and fund STEM programs and develop more internships in STEM fields, often at the expense of other fields—especially the liberal arts. Elsewhere, the Ohio plan calls for targeting resources toward programs that directly foster economic development (read STEM and business) and rewarding universities that align curriculum with the needs of employers.

And yet, it turns out that the long accepted truism that the US suffers from a shortage of graduates in science engineering and technology might not be so true. A recent study by Rutgers University finds that there are plenty of graduates in STEM fields, confirming an earlier study done by RAND in 2005 that found the shortage was more the product of “special interests” seeking a labor surplus than statistical reality. As Joe Smydo reports in the Pittsburgh Post Gazette, the Sloan Foundation, which focuses on STEM and economic issues, noted two years ago that the shortage cry was sounded by “’interest groups and their lobbyists,’ including employers who want to increase the labor pools and keep labor costs down; universities seeking an influx of grant money and graduate students; and others who see STEM advocacy as a way to attract funding.”

Most engaged in the debate agree the alarm over the lack of STEM talent seems to be cyclical, sparked decades ago by Sputnik, and more recently by the rise of India and China. Such events spur the fear that the US will be left behind in the tech race, and politicians are quick to throw money and resources at the educational “problem” in an effort to produce more and more tech workers.

Rather than improving conditions and fostering growth in the workplace, this approach increases the number of available applicants. Indeed, Harold Salzman and B. Lindsey Howell, the authors of the Rutgers study, suggest that the glut in STEM graduates has resulted in stagnant wages in science and technology fields.  Because of this, newly credentialed grads are taking their skills elsewhere—specifically to more lucrative careers in finance, management, and consulting.

The problem is not specific to STEM disciplines; rather the example shows the dangers of university missions that focus too narrowly on the vocational mission and creating job specific educational “products.”  Of course, this is exactly what’s happening in Journalism.  When colleges and universities are too willing to tailor curriculum to the market, or even the technology, we risk setting in place long-term educational policy based on transient factors.

At our university, and others like it, we proudly roll out degree problems as quickly as possible based on predictions of shortages, too often without carefully examining the validity of these claims or, worse, the broader implications for degree seeking students.

For while higher education is a means to a better job, we should be careful not to make our emphasis on degrees too narrowly focused.  Trends and technologies change, and a meaningful education should equip students to understand the bigger picture and adapt to new situations and knowledge.

An overly vocational focus also perhaps inadvertently reinforces the class and status divides within higher education. For while students at the most prestigious schools are learning broad concepts and acquiring intellectual and ethical frameworks for processing complex, multiple, and shifting realities, too often students at lower “tier” institutions are being trained to perform tasks, with one career or vocation the sole goal of their education.

One group will likely become the innovators and the entrepreneurs, the other the workers.

Tim Francisco and Alyssa Lenhoff

Politics is Personal: How Our Taxes Subsidize Walmart and Hurt Local Workers

We talk a lot about workers in this space— at the Center for Working-Class Studies and in our  Working-Class Perspectives blog—but for the most part we do it on the macro level: massive job losses precipitated by NAFTA and other foreign trade agreements; the collapse of domestic manufacturing; the Walmartization of  America; a stimulus package that pours too much money into the financial institutions that caused the economic meltdown and far too little into job producing infrastructure projects; weak unions; falling wages; vanishing pensions; disappearing health care; fading opportunity.

Sometimes, we’re too focused on the big picture to see how these macro issues affect people in our community.  We have a sense that government’s coddling of business is problematic, but do we really understand why?  We feel in our gut that a neutered union movement leaves working families vulnerable, but can we truly identify with the moms and dads who lie awake at 3:00 A.M. worried that their jobs may evaporate in a week, a month, a year?

Probably not, and that’s too bad, because if we can personalize the devastation caused when the economy stops working for the working class we may actually be able to solve some of the problems that are steadily eroding the American Dream.

For example, I firmly believe that health care reform would have been easier to achieve if, instead of talking about the 47 million people who don’t have health insurance, we gave the problem a face by talking about the 60 year-old woman living down the street who nearly died of colon cancer because she had no health insurance and could not afford to get the follow-up colonoscopies she needed after her first bout with the disease.

That woman, by the way, is my now 75 year-old mother.  She’s a walking, talking advertisement for reform: she had insurance when she first contracted cancer, had it cancelled shortly thereafter, was repeatedly denied coverage because of her pre-existing condition, could not afford the $3,000 per month premium for the only policy she could get, and finally made it to age 65—the point at which she qualified for the government-run health care system that has saved her life repeatedly: Medicare.

If we put my mother and the millions like her who live in every community in the nation out front in the health care debate, would Rush Limbaugh or Glenn Beck really be able to call reform advocates commies?  Would the health insurance industry have any credibility at all after callously attempting to kill my mother and thousands like her every year?  The answer to both questions is no.

It’s also way past time to personalize the discussion about the many ways in which working-class taxpayers are subsidizing gargantuan multi-national corporations like Walmart. We’re all familiar with the storyline: state and local governments roll out tax abatements and other incentives to attract the chain.  The Bentonville, Arkansas behemoth comes to town and builds a store that devastates the competition.  Shortly thereafter the store owners and employees who paid the taxes that funded the abatements are out on the street.  Meanwhile, many of the giant retailer’s employees are eligible for food stamps and qualify for Medicaid.  Walmart may save us money at the check-out, but we pay for it in taxes and lost jobs. Even though we all know the story, it is for some inexplicable reason, repeated year after year in community after community.  Why?  Perhaps because the government officials who work so hard to entice Walmart and the residents who breathlessly anticipate its arrival don’t know or have any connection to the people whose lives will be changed forever once the store opens its doors.

So let’s personalize the situation and talk about the new Walmart in Liberty Township, one small business owner who operates in its shadow, and the response of the union that represents his workers.

I’ve known Sandy Zander for a long time. He was my boss when I worked for the grocery chain he helped run. He was a fair-minded and able negotiator when we sat on opposite sides of the table during contract talks, and he’s been a successful small businessman since 1988 when he bought a few stores from the company that employed us until it went of business in the wake of a strike neither of us wanted but couldn’t avoid.  He’s genuinely a good guy.

Today, he and his family own two stores: a Giant Eagle in an upscale township east of Youngstown and Union Square Sparkle, one of the few full-service markets still operating in the distressed city.  Sandy’s stores are unionized, so his workers earn a decent wage and have health care and pension benefits.  For two decades he’s managed to survive despite the fact that he’s competing with non-union operators whose wage cost is much lower than his.

In Poland his main competitor is Henry Nemenz.  Henry’s been in the grocery business a long time.  He’s always been a non-union, low-wage, no benefits operator who profits by exploiting his employees.  His owns only a handful of stores, and the Zanders clean his clock every week.  When you drive by the two markets, which are located across the street from each other, you notice two things.  First, there are ten times more cars in the Giant Eagle lot and, second, the UFCW is conducting informational picketing at Nemenz.  The union is spending a lot of money to let people know that Henry’s non-union.  Good for them.

In Youngstown, Sandy’s main competitor is the new Walmart that Liberty Township officials begged for on bended knee.  When you drive by the two stores, which are located less than a half mile apart, you’ll notice two things: first, there are a lot of cars at Walmart and far fewer at Sandy’s than there used to be and, second, there is no UFCW picket line even though Walmart is every bit as bad an employer as Nemenz.

Picket line or no picket line, Sandy will continue to dominate the market in Poland.  But in Youngstown the prospects are not quite as bright.  If people continue to flock to Walmart, Sandy, his store, his workers, and the neighborhood he’s served for two decades could be in trouble.  His employees will lose their good jobs, their health care benefits, and their pensions.  Youngstown will lose the income taxes they pay, and 30 or 40 more city residents will be added to the unemployment rolls.  All because Liberty Township went out and bought themselves a Walmart.

Maybe, just maybe, if the UFCW decided to stand in front of the new store and make sure that people knew that every dollar they spent was putting a neighbor or friend in jeopardy they’d think twice about going in.  Maybe, just maybe, if the union decided to air some ads that highlighted the importance of good-paying retail jobs to the community customers would make different decisions about where they shop.

Maybe, just maybe, it’s time to start fighting back — one township and one worker at a time.

Leo Jennings