NSLDN and HERA Statement on Automatic Closed School Discharge Announcement

FOR IMMEDIATE RELEASE:

December 14, 2018

MEDIA CONTACT:

press@nsldn.org | 202-734-7495

NSLDN & HERA Statement on Automatic Closed School Discharge Announcement

Washington, D.C. – The National Student Legal Defense Network (NSLDN) issued a statement responding to the Department of Education’s announcement that it would begin discharging the loans of students who attended schools that closed. NSLDN filed a lawsuit in November, on behalf of Housing and Economic Rights Advocates (HERA), demanding that the Department of Education immediately fulfill its legal obligations and discharge the loans of tens of thousands of students whose schools or campuses have closed.

“This appears to be a positive development, but we will continue pressing the Department to ensure that every single eligible borrower receives the full and complete relief they deserve,” said NSLDN President Aaron Ament. “This automatic discharge rule was put into place because the impact of a school closure is so devastating on students’ plans and careers, and because many borrowers were not aware of the right to request a discharge. If it weren’t for Secretary DeVos’s unlawful delay of the rule in the first place, students would have gotten this relief in 2017 and public interest organizations like HERA would not have had to divert their limited resources to solve problems caused by this Department.”

“While it is heartening to hear that the Department is planning to do its job by stopping collections against students whose schools clearly failed them, it is important to note that the Department has already proposed rules that would severely limit this same relief in the future,” said HERA Managing Attorney Noah Zinner. “We urge the Department to reconsider these new restrictions on student debt relief.”

The Department of Education’s Borrower Defense Rule, a regulation finalized in 2016, instituted a provision known as Automatic Closed School Discharge – in short, the provision requires the Department to automatically discharge the loans of all eligible borrowers harmed by the abrupt closure of their school. The automatic aspect of the relief is especially important because students are often unaware of their rights – fewer than half of eligible borrowers affirmatively apply for relief.

Under Secretary DeVos, the Department delayed the July 1, 2017 implementation of the Borrower Defense Rule three times, and in September 2018, a federal judge held that the delays were unlawful, arbitrary, and capricious. After the judge’s order, the rule went into effect as if the Department’s illegal delays had never happened. However, until this announcement the Department and its servicers have continued to collect on loans that it is required by law to discharge.

Since November 2013 nearly 3,600 schools have either closed a campus or stopped operations entirely. Borrowers eligible for closed school loan discharge should receive the following benefits:

• Complete loan discharge: Borrowers who get a closed school discharge are no longer obligated to repay any outstanding loan principal, accrued interest, or collection costs.
• Refund of payments already made: Borrowers should be reimbursed for any and all payments made to date on the loan, including through wage garnishment or tax refund offsets
• Federal aid eligibility: Borrowers should be made eligible for new loans and grants, including Pell grants.
• Clear credit history: Any adverse credit history due to the loans should be deleted by the credit reporting agencies.

Housing and Economic Rights Advocates is a California statewide, not-for-profit legal service and advocacy organization dedicated to helping Californians — particularly those most vulnerable — build a safe, sound financial future, free of discrimination and economic abuses, in all aspects of household financial concerns. HERA provides free legal services, consumer workshops, training for professionals and community organizing support, creates innovative solutions and engages in policy work locally, statewide and nationally. Learn more at www.heraca.org

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The National Student Legal Defense Network (NSLDN) is a non-partisan, non-profit 501(c)(3) organization that works, through litigation and advocacy, to advance students’ rights to educational opportunity and to ensure that higher education provides a launching point for economic mobility.

HERA and LEGAL SERVICES CENTER OF HARVARD LAW SCHOOL FILE CLASS ACTION COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

December 20, 2017, Oakland, California:

This morning, borrowers represented by HERA and the Project on Predatory Student Lending at the Legal Services Center of Harvard Law School filed a nation-wide class action against the Department of Education for illegally and unfairly denying relief to tens of thousands of former Corinthian students who the Department already decided are entitled to have their loans discharged and their payments refunded.  Not only were they lied to by Corinthian, they have now been lied to by the federal government.

The case was brought by three named plaintiffs:

• Martin Calvillo Manriquez was talked into WyoTech’s automotive technology program over community college. He didn’t really have an opportunity to even touch cars or car parts while he was enrolled. The school didn’t have tools or certified instructors. While he was in school, he worked at an oil change shop earning $8 an hour. He kept seeing classmates who had graduated from his program applying for the same low-paying, non-technical job he already had. Most of them didn’t even get jobs changing oil. Martin has never had a job related to auto repair. Even though the Department determined that Martin was misled and cheated, and even though he applied to have his loans discharged, the Department has taken two years of tax refunds and garnished his wages to pay back his loans.
• Rthwan Dobashi owes more than $20,000 for the same program. He has also never worked in the field.  He is married, has two kids, and is expecting a third. In early 2016, he found out from the attorney general that he was eligible to have his debts from WyoTech cancelled, and he applied. He also told one of his friends from school, and his friend applied, too. His friend’s loans were discharged almost a year ago, while Rick still hasn’t heard anything from the Department.
• Jamal Cornelius’s attended the Information Technology-Emphasis in Network Security program at Heald College, and borrowed more than $25,000. His debt from Corinthian is the only line on his credit report. He has been waiting more than fourteen months for any response to his application for relief.

All three borrowers, and all class members, are entitled to relief pursuant to the Department’s Corinthian Job Placement Rate Rule, which it has established through countless public statements, previous discharges, and direct notice to tens of thousands of covered individuals. The Department may not now change this rule and apply changes retroactively. In other words, it is unlawful for the Department to go back on its word.

See the full complaint here.

Please contact us at inquiries@heraca.org or (510) 271-8443 ext. 300.

(HERA in the News) KBLX Cares Interview with Sterling James: Housing and Economic Rights Advocacy

Find out what we’re all about as Sterling James from 102.9 KBLX talks to our executive director Maeve Elise Brown, listen here.

See more here: www.heraca.org & www.money-happy.org

Over 130 Organizations Call on FHFA to Review Policies that Fuel Displacement

FHFA NEEDS TO “REFOCUS” ITS STRATEGIC PLAN

San Francisco, CA—Nov.15, 2017— Earlier today, 136 organizations sent a letter to Mel Watt, the director of the Federal Housing Finance Agency (FHFA), urging him to review and possibly end policies that are enabling the widespread displacement of low income people and people of color. FHFA is currently revising its strategic plan and had asked for input, which is why advocates are weighing in with the agency. The letter is signed by nonprofit organizations serving communities in more than 20 states.

“It’s no secret that working families throughout the country are facing high housing costs,” explains Kevin Stein, deputy director of the California Reinvestment Coalition. “What we’re calling attention to with this letter is that FHFA policies are exacerbating this problem. As FHFA updates its strategic plan, it has a key opportunity to change policies and to mitigate this problem of working families and households of color being displaced from their homes and their communities.”

“We know that some of the investments by the GSEs are actually increasing housing costs and the displacement of low income people and people of color.  In light of this, FHFA should re-focus its strategic plan to better support homeowners and communities, not Wall Street executives that are buying up our neighborhoods,” adds Maeve Elise Brown, executive director of Housing and Economic Rights Advocates.

“The REO to Rental phenomenon has been a clear disaster for working families,” adds Merika

Regan, a community leader with ACCE in East Oakland. “Renters are experiencing slum-lord conditions, unaffordable rent increases, and are being displaced as a result. There is no compelling reason for Fannie or Freddie to provide financing to companies who are exacerbating the housing crisis in communities across the country.”

In their letter, advocates are outlining how the FHFA, in its role overseeing Fannie Mae, Freddie Mac (the GSEs), and the Federal Home Loan Bank System, is failing low and moderate income households and people of color in 3 important ways:

1) GSEs are Financing Displacement via Investments in REO to Rental  REO to Rental, a business model created by some of the same Wall Street actors who caused the housing meltdown, has wreaked havoc on local communities. Potential first time homeowners can’t compete against all-cash investors, meanwhile, long-term tenants are experiencing slum-lord conditions and rapidly rising rents, and/or being displaced. Yet, Fannie Mae recently invested in this harmful practice by guaranteeing a $1 billion loan by Wells Fargo Bank to Blackstone/Invitation Homes. Beyond the harm caused to consumers, the California Reinvestment Coalition also highlighted in a 2014 report how the financing structure for most REO to Rental deals is eerily similar to the financing mechanism that ultimately led to the housing meltdown.

2) Federal Home Loan Bank Funds Used for Questionable Mortgage Purchases: FHLB members are supposed to use their access to FHLB credit in order to finance affordable housing and community development. But, according to media reports, Starwood Property Trust, a Real Estate Investment Trust (REIT), is using relatively cheap funding from the Chicago Federal Home Loan Bank in order to buy non-Qualified Mortgage (QM) loans. These loans do not meet federal ability to repay standards and are therefore riskier for the borrower and the lender. Beyond safety and soundness concerns, advocates are deeply concerned Starwood and similar companies may have a perverse incentive to engage in poor mortgage servicing of these loans in order to foreclose and add more homes to its REO to Rental empire.

3) GSE Affordable Housing Goals Should Consider Gentrification Pressures: FHFA sets important annual affordable housing goals for both Fannie and Freddie that dictate the percentages of loans the GSEs should buy that are made either to low-income consumers or made in low or middle income areas. The Affordable Housing goals are hugely important to efforts to create homeownership for all Americans. But, as gentrification pressures increase, advocates are concerned about the GSEs buying mortgages that were originated to higher-income homeowners in lower income areas or in high-minority census tracts, which could be contributing to gentrification. This is a problem that even FHFA acknowledged, stating that the GSE’s share of loans to wealthier borrowers in low-income census tracts and high-minority census tracts has been increasing.  Advocates suggest FHFA consider lowering the “cap” of loans to higher-income people that count for the GSEs (currently at 14%) in order to meet their affordable housing goals. In this way, FHFA would signal to the mortgage and banking industry the need to increase their efforts to serve low-income homebuyers, not just homebuyers who are purchasing in low-income communities.

Recommendations to FHFA

Advocates are urging Director Watt to review all GSE and FHLB policies with an anti-displacement lens to mitigate the displacement currently happening in low-income communities and communities of color in California and across the US.

Specifically, FHFA should:

1) Prohibit Fannie and Freddie from financing REO to Rental transactions. If FHFA will not do so, it must at the least implement significant protections. If the GSEs intend to continue with these investments, they must include safeguards against first time homebuyers being elbowed out as well as protections for tenants against shoddy maintenance, unnecessary evictions, and unaffordable rent increases.

2) Immediately prohibit REITs from using Federal Home Loan Bank advances for purchasing non-QM loans, distressed loans, or for any investments in REO to Rental that have the effect of destabilizing low and moderate income and of color households and communities.

3) Minimize incentives for lenders to extend mortgages to wealthier homebuyers in low income zip codes.  Currently, the GSEs are allowed to “count” as part of its affordable housing goals up to 14% of their mortgage purchases that are to wealthier homebuyers in lower income or high minority census tracts, and FHFA is proposing to increase this to 15%.  However, advocates suggest that if FHFA were to lower this “cap,” it would incentivize the GSEs, and the lenders they buy mortgages from, to refocus their efforts on serving low and middle income homebuyers. GSE affordable housing goals are critical and must be strengthened and refocused on low and moderate income and of color borrowers to ensure that all Americans are able to achieve the dream of homeownership and wealth accumulation, especially in communities vulnerable to gentrification pressures.

4) Increase oversight and transparency in regards to GSE foreclosures and note sales to guard against unnecessary foreclosures, especially as it relates to Wall Street and private equity companies buying and servicing mortgages as a result of financing from the GSEs.

Additional Context:

In a 2014 report, the California Reinvestment Coalition detailed how REO to Rental companies are depleting affordable housing stock, elbowing out potential first-time homebuyers, and displacing long-term tenants. 

See the original press release on CRC’s website here.

Advanced Policy Analysis-Medical Debt & Hospital Charity Care Policies: A Case Study

Advanced Policy Analysis

Medical Debt & Hospital Charity Care Policies: A Case Study

by Nisha Kurani  as part of the program of professional education at the Goldman School of Public Policy, University of California at Berkeley.

Project Overview

Medical bills and medical debt have a lasting impact on the financial stability for families, particularly vulnerable populations. The uninsured and lower income groups are more likely to experience problems paying medical bills, although people of all socio- economic groups report experiencing problems with medical costs. The Affordable Care Act (ACA) aimed to increase protections for consumers by increasing access to private and public insurance coverage, as wel

l as mandating charity care for low-income, uninsured or underinsured patients in nonprofit hospitals. While uninsured individuals do not have any insurance to help cover costs in the case of medical necessity, underinsured refers to a person who has health insurance but faces high medical costs. This is especially relevant today: recent surveys show that 35% Americans still experience issues with medical costs, and 47% of that group reported that they were unaware of charity care after receiving health care services. While health insurance mitigates the impact of medical bills by providing some protection, medical bills nonetheless remain a problem for millions of insured and uninsured individuals.

This is particularly relevant for the client, Housing and Economic Rights Advocates (HERA), a legal advocacy clinic based in Oakland, California. HERA provides legal services and information to Californians, particularly those most vulnerable, to promote financial security free of economic abuses. They also advocate for stronger consumer protections from debt at the state level. While HERA’s focus in the past has centered around homeownership and protections from mortgage debt, over the past 6 years, HERA has opened its doors to address the vast array of debt and credit concerns experienced by tenants and homeowners alike that are unrelated to housing, while continuing to address housing related concerns for renters and homeowners.

The goal of this report is two-fold. The first is to analyze the current landscape of medical costs, bills, and debt for low-income individuals, with a case study on HERA  clients, to understand why medical bills may persist among insurance coverage expansions and charity care policies in California. The second part of this paper examines charity care policies for hospitals in Alameda and Contra Costa counties in the Bay Area, California. California in particular has policy protections in place for low-income uninsured and certain insured individuals, yet data suggests that those policies are underutilized by eligible populations. The paper will conclude with policy recommendations on how to improve charity care and consumer protections in the U.S.

See the full paper here.

New HERA Brochure

Proud to share our new HERA brochure, find out Who We Are.

 

Thank you to our wonderful friends at PSPrint for their kind donation to HERA. We are delighted with the results! For high quality online printing you must check out www.psprint.com. Thanks again!

Please contact inquiries@heraca.org to request brochures. You can access a PDF version of our brochure by following this link: HERA Brochure 2017.06.20

(HERA in the News) From Foreclosure to Eviction: One Family’s Struggle to Recover [KQED May 30th, 2017]

When Vanessa and Richard Bulnes got an eviction notice, it felt sadly ironic. The Bulneses were unable to pay the rent because their corporate landlord took three years to remediate high levels of lead in the backyard soil, which caused Vanessa to lose her business — a family home child care that she had run for more than 20 years.

It was the latest in a string of injustices that happened to the Bulnes family: first, loan modification fraud, then foreclosure, now the threat of eviction. Their story is emblematic of a bigger problem: the disproportionate loss of African-American and Latino wealth during the foreclosure crisis and the obstacles to build up that wealth again. Between 2007 and 2013, so many African-American and Latino homeowners in Oakland were wiped out by foreclosure that entire neighborhoods were transformed. Many of the homes that were lost ended up in the hands of corporate investors, who then rented them out, sometimes to the same families who had lost their own homes. And that put those families, like the Bulneses, at risk of much more loss.

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Losing a home often begins this way: A family hits a hard spot, a health crisis or a loss of income. At the time of the stroke, Richard was working at Meals on Wheels. The family lost about $2,000 a month in income, about the same amount as their mortgage payment at the time, which had ballooned after they refinanced. They still had Vanessa’s income from her child care business, but they decided their best option was to try to modify their loan.

The Bulneses, though, were caught up in a bigger web. Oakland and other cities across the country are now suing big banks for targeting African-American and Latino homeowners with loans that had abusive rates. At the same time, many banks weren’t playing fair to help homeowners modify their loans.

“It seemed like at every point, when we got to where we thought we were going to get a modification, they needed another piece of paperwork, they needed another bank statement,” said Vanessa, who is 58. “There was always something else they needed, and when we gave them that, ‘Oh we lost that, could you send something else?’ ”

What Vanessa describes sounds really familiar to Maeve Elise Brown, director of the statewide organization Housing and Economic Rights Advocates. In 2009, President Barack Obama had introduced the Home Affordable Modification Program to help struggling homeowners modify their loans, but homeowner advocates, researchers and news organizations like ProPublica found that banks often broke the rules.

“Mortgage servicers were telling people to turn in paperwork over and over and over again. They weren’t looking at it, they would shred it. They would deny people instantly,” Brown said. “Not everyone qualified, but a whole bunch of people could, but were prevented from accessing that relief by the mortgage servicing companies.”

Latino and African-American neighborhoods, like the Bulneses, were hit the hardest by the foreclosure crisis. These are the same neighborhoods that were redlined decades ago, with residents denied mortgages simply because of where they lived. Across the country, African-American and Latino neighborhoods lost three to four times more homes than white neighborhoods during the recent mortgage crisis, according to Cornell University research. On the Bulnes’ six-block street alone, at least 35 properties were foreclosed between January 2006 and December 2012, according to the website PropertyRadar, which tracks foreclosures.

Read the full article here.

 

HERA Settles Class Action Against Chase for Violating Fair Debt Collection Laws in Collecting Purchase Money Home Loans

Oakland, California, May 26, 2017-   Judge Winifred Smith of the Alameda County Superior Court approved the settlement of Housing and Economic Rights Advocates’ (HERA) longstanding class action lawsuit against Chase Bank for deceptive practices in collecting purchase money mortgage loans.

HERA filed Banks v. JPMorgan Chase Bank (Case No. RG12614875) in January 2012 under California’s purchase money anti-deficiency law, challenging Chase’s attempts to collect mortgages used to purchase family homes. After four years of hotly contested litigation, including HERA’s amicus curiae participation in four related appellate cases, a settlement was reached.  HERA’s Banks case was designated the lead case that consolidated four related anti-deficiency class actions for joint settlement.

Judge Smith granted final settlement approval and entered final judgment on December 9, 2016. The settlement awards $500,000 in statutory damages to Chase borrowers from whom Chase attempted to collect loan balances on purchase money loans; a payment of $364 to each class member regardless of whether they made payments in response to Chase’s collection attempts. The settlement provides additional compensation to class members who made payments, prevents Chase from engaging in further collection efforts, and requires Chase to provide corrective credit reports to the major credit reporting bureaus stating that the borrowers do not owe anything on the loans.

HERA litigation attorneys Arthur Levy, Elizabeth Letcher, and Noah Zinner led the litigation effort, with co-counsel Kemnitzer, Barron & Krieg.

For more information please contact, Maeve Elise Brown Executive Director, Housing and Economic Rights Advocates, at melisebrown@heraca.org or (510) 271-8443.

Predatory Lending Class Action Against CashCall Opens New Chapter as Federal Courts Turn to California Supreme Court for Guidance

Oakland, California, May 26, 2017- The nine-year marathon class action litigation attacking CashCall’s exorbitantly high interest loans entered a new phase last month when the federal Ninth Circuit Court of Appeals took the unusual step of requesting guidance from the California Supreme Court on relevant state law.

CashCall pioneered the high-interest $2,600 personal loan in 2005.  California’s usury law does not place fixed interest rate limits on personal loans in excess of $2,500. CashCall took advantage of this loophole to make $2,600 loans in California at interest rates as high as 135%. Other lenders followed suit, charging rates as high as 200% to Californians seeking short-term loans.

These loans are “subprime,” and typically offered to borrowers with low credit scores, uneven credit histories, and who are in financial distress. CashCall uses saturation TV advertising urging viewers to just get up and “make the cash call.” CashCall’s website says you can “APPLY IN MINUTES & GET CASH TODAY!” with an easy online application.

The class action, filed in June 2008, challenges CashCall’s loans under California’s “unconscionability” law.  This law empowers courts to strike down loans that are unreasonably one-sided or unfair. The case ended up in the federal Court of Appeals after a San Francisco federal judge ruled the courts do not have the authority to invalidate consumer loans or to provide relief to borrowers.

In April 2017, the Ninth Circuit Court of Appeals issued a decision invoking the unusual procedure of certifying a question of state law to the California Supreme Court. The federal appeals court asked the California Supreme Court whether loans over the dollar amount of the usury limit ($2,500) can be invalidated under California’s unconscionability doctrine.

Plaintiffs in the case are hopeful that the California Supreme Court will take advantage of this opportunity to issue a ruling protecting California borrowers against predatory loans and validating court power to curb unconscionable lending in California.

HERA’s Director of Litigation, Arthur Levy, is co-lead counsel in the CashCall case with four other law firms.

For more information please contact, Maeve Elise Brown Executive Director, Housing and Economic Rights Advocates, at melisebrown@heraca.org or (510) 271-8443.