Yale Team Presents Recommendations to Stem the Foreclosure CrisisUpdated on: April 14, 2011
This story was originally posted on December 17, 2010. On April 14, 2011, video was added to the story.
On November 30, a group led by several Yale SOM faculty members presented a white paper on Capitol Hill aimed at addressing the ongoing foreclosure crisis and the resulting economic distress in minority communities.
The event, attended by members of Congress, Obama administration officials, federal regulators, and business and nonprofit leaders, marked the culmination of work begun when Sharon Pratt, former Washington, D.C., mayor and president of the Opportunity Funding Corporation, contacted Constance E. Bagley, professor in the practice of law and management at Yale SOM, about pulling together a group to study the issue. Over six months, Bagley teamed with faculty and students from SOM and Yale Law School to study the causes and effects of the crisis within African-American and Hispanic communities and search for strategies to deal with it. "This was a very ambitious project with not a lot of time," said Bagley, who recruited fellow SOM faculty Heather Tookes, associate professor of finance, and Stephen Hudspeth, a lecturer in law at Yale SOM and Yale Law School, to work with her. "What strikes me about this is the incredibly wide and diverse group of thought leaders with whom we collaborated. This is a very important problem. The economic well-being of the American middle class depends on how it’s addressed."
The white paper begins with a troubling statistic: A majority of Americans now fear not being able to pay their mortgage or rent. The foreclosure crisis that contributed to the 2008 financial meltdown continues to hit communities of color particularly hard. Hudspeth, who led the working group responsible for proposing a revamped homeownership strategy, enlisted the aid of the Law School’s Ludwig Community and Economic Development Clinic, led by Robin Golden. He noted how in many minority communities, wealth was based almost entirely on housing. As foreclosures mounted, wealth generated over several generations was wiped out. "This affects every aspect of life," he said. "The loss of wealth—estimated to be more than $375 billion in communities of color alone—means the loss of future educational opportunities, the loss of the opportunity to start a business. Foreclosures destroy families and neighborhoods but can be readily addressed if there is the political will. We did it in the Great Depression and after World War II, and we can do it again."
The point of the white paper, which was written largely by John Rooney, a 2010 graduate of Yale SOM, is to spur action by the federal government to alleviate the crisis and start rebuilding the wealth of these communities. Bagley said that the reaction, especially from members of Congress, was positive and encouraging. "Congressman Elijah Cummings said this is the best white paper he has ever read," she said. "We’re all optimistic that the momentum created by the white paper and presentations on Capitol Hill will advance thinking and mobilize multiple constituencies to solve this crucial issue."
In all, about 70 people were involved in the project, with particular support from leaders at the Center for Responsible Lending, Aspen Institute, Urban Institute, National Community Reinvestment Coalition, and Joint Center for Political and Economic Studies.
The paper makes 10 key recommendations for dealing with the foreclosure crisis: