In 2010, Joann Rodriguez suffered a health crisis precipitated by her multiple sclerosis. She could no longer keep her job with the AARP, but it took her two years before she received any disability benefits. After draining all of her retirement savings, she finally fell behind on her mortgage.
Three weeks ago, Joann came home to find a note taped to her front door. It said that she has until March 28th to vacate her home. Joann has tried to negotiate a modification that would allow her to pay off her mortgage and stay in her house, but instead, her house is being foreclosed on by a Wall Street vulture capital fund called Oaktree Capital Management. Instead of negotiating, Oaktree has asked the sheriff to evict Joann from her home.
Paula Smith, a mother of three who works for Baltimore City Public Schools, and her family were scheduled for eviction Monday. In 2009, the bank that owned Paula's mortgage went bankrupt at the height of the financial crisis. She spent months trying to send her payments to the new owner of her loan, Bank of America, but says they refused to accept payment. When Bank of America finally did acknowledge that they owned her mortgage, they notified her that she was in default because the loan was more than 90 days overdue. After Oaktree became the owner of Paula's loan they informed her that they were no longer interested in negotiating a modification and were moving to foreclose.
Joann's and Paula's stories speak for hundreds of other Baltimore families whose lives have been upended by Oaktree's actions. When we first learned of Paula's and Joann's circumstances, our offices sent Oaktree letters requesting they keep these families in their homes, to come back to the negotiating table, to stay their evictions. Oaktree never responded to our requests.
How did we get here?
In 2014, Oaktree purchased 612 distressed home mortgages in Baltimore City and Baltimore County through the federal government's Neighborhood Stabilization Program. Oaktree paid only 48 cents for each dollar of unpaid principal balance owed by homeowners.
The program that gave Oaktree access to Joann's and Paula's loans was created to "encourage investment in communities hit hardest by the foreclosure crisis to stabilize neighborhoods," according to the Department of Housing and Urban Development. It was intended to help homeowners like Paula and Joann. But instead of a giving Baltimore homeowners a second chance, Oaktree has foreclosed on 40 percent of the loans it purchased. (Editor's note: Until recently, Oaktree owned a large stake in The Baltimore Sun's parent company.)
When activists from UNITE HERE and the Baltimore Housing Roundtable visited the houses whose mortgages Oaktree purchased, 42 percent of them appeared to be vacant. Baltimore already has serious problems stemming from vacant houses. They are dangerous, they encourage crime, and they lower neighborhood property values. By foreclosing on Baltimore homeowners, Oaktree harms not only the homeowner but their neighborhood. This is the opposite of "neighborhood stabilization."
We ran for City Council to fight economic inequality and take on the affordable housing crisis in Baltimore. Oaktree's actions in our community not only undermine that mission, they contribute directly to the problems that our city faces. Home ownership is a vital component of stable and safe communities, so we are particularly disturbed to see that Oaktree's actions have affected families in predominantly poor African American neighborhoods. Home equity is one of the few forms of wealth that can give people a path into the middle class, and we are appalled to see this opportunity being stripped from families across our city.
Joann and Paula are the kind of homeowners that Baltimore needs. They have fought through illness, economic hardship and the bureaucratic incompetence of their lenders to stay and contribute to a better Baltimore. They have also spoken out about Oaktree's abusive and predatory practices.
Baltimore should not allow such homeowners to be displaced so that an out-of-state vulture fund can make a bigger profit. We call on Oaktree to put an end to these unconscionable practices and stop preying on Baltimore homeowners.
The Baltimore City Housing and Urban Affairs Committee will hold a hearing to investigate the impact of this program on Baltimore Communities on Thursday inside of Baltimore City Hall at 2pm.
John Bullock (John.Bullock@baltimorecity.gov) and Kristerfer Burnett (email@example.com), both Democrats, are members of the Baltimore City Council.