(NEW YORK) MintPress – John Hankins and his young family are caught between a rock and a hard place. They are paying a mortgage on one home and rent on another.
Hankins, his wife and 2-year-old son, Ezra, moved into their new home in Klamath Falls, Ore. in June, but after a couple of weeks there, they all started to get sick.
“It was hard to eat and swallow. You could feel something was drying out all of your mucus membranes,” he said in a recent television interview.
So Hankins decided to get the house tested. What the family learned was shocking. “The results showed 38 micrograms of methamphetamine. Oregon law considers a house contaminated if they detect .5 or above,” he revealed.
“The house that was meant to protect us and put a roof over our head was the very thing that was intoxicating our bodies.”
Hankins said the broker at Fisher Nicholson Realtors didn’t tell them about the home’s history before he signed the $37,000 deal. They bought the foreclosed home “as is,” meaning they were responsible for any repairs or needs.
Oregon law mandates that a realtor fully disclose any criminal activity that occurred inside the home, including drug related incidents, but officials with the company said they had no idea that meth had been manufactured inside the house and would not have sold it to Hankins if they had.
Hankins and his family have been forced to abandon their home because the cost of cleaning up the meth residue would exceed its value.
At this point, Hankins says there is nothing he can do. Home inspectors don’t normally check for meth, and there is no law requiring them to do so.
Financial quagmire
Hankins acquired his mortgage from Freddie Mac, officially the Federal Home Loan Mortgage Corporation (FHLMC), a public government-sponsored enterprise (GSE) created in 1970 to expand the secondary market for mortgages in the U.S.
It advertises, “Our qualifying homes come with a reviewed title, and a repaired living space making them easier to sell and improving home values in your territory. We sell our homes responsibly. Freddie Mac is committed to having the best property maintenance and sales standards in the country.”
But Freddie Mac won’t take any responsibility for the Hankins home.
So Hankins has started a petition drive on Change.org demanding that Freddie Mac cover the cost of decontaminating his family’s home, in addition to covering their current housing costs and the cost of replacing furniture and other household items.
Most important, he wants Freddie Mac to start regularly testing the homes it sells for meth contamination, just as it would for lead paint and asbestos.
The online petition is addressed to CEO Donald H. Layton, who spent almost 30 years at JPMorgan Chase and its predecessor firms before taking the helm at Freddie Mac earlier this year. It reads, “I’m writing to demand that your company right the wrongs done to Jonathan Hankins and his family, and to make sure this never happens again.”
Checkered history
This is hardly the first time Freddie Mac has been embroiled in controversy. In 2003, it revealed that it had understated earnings by almost $5 billion, one of the largest corporate restatements in U.S. history. It was fined $125 million, an amount that Forbes called “peanuts.”
Then, in April 2006, the company was fined $3.8 million, the largest amount ever assessed by the Federal Election Commission, as a result of illegal campaign contributions.
Freddie Mac was accused of illegally using corporate resources between 2000 and 2003 for 85 fundraisers that collected about $1.7 million for federal candidates. Much of the illegal fundraising benefited members of the House Financial Services Committee, a panel whose decisions can affect Freddie Mac.
In 2008, the company was the subject of a multi-billion dollar federal rescue effort. At the time, Freddie Mac and its sister organization, Fannie Mae, owned or guaranteed about half of the country’s $12 trillion mortgage market.
This made both corporations highly susceptible to that year’s subprime mortgage crisis, and the government took action to prevent their collapse, extending credit limits and granting access to Federal Reserve low-interest loans (at similar rates as commercial banks).
The move also renewed calls for stronger regulation of GSEs by the government, and on Sept. 6, 2008, the director of the Federal Housing Finance Agency (FHFA), James B. Lockhart III, announced that he was placing Freddie and Fannie into conservatorship run by the FHFA, which involves a more temporary control than does nationalization.
In June 2010, it was announced that both corporations would have their shares delisted from the New York Stock Exchange.
Future regulation
In her new book, “Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself”, published on Sept. 25, Sheila Bair, former chairperson Federal Deposit Insurance Corporation (FDIC), calls for abolishing both Freddie Mac and Fannie Mae.
“The hybrid nature of Fannie and Freddie led to disastrous consequences,” she writes. “Ultimately, both institutions need to be liquidated.” But because of the huge role they play in the housing market, that is easier said than done. “There’s no agreement on what to do with the GSEs,” Bair says. She recommends getting rid of them gradually.
Bair argues that there was a “symbiotic relationship between Wall Street and the GSEs,” which were big buyers of the banks’ mortgage-backed securities.
That is one reason, she maintains, that Fannie and Freddie were not forced into liquidation in 2008: Because Wall Street firms hold a great deal of the corporations’ debt, they had a vested interest in keeping them intact.
As for Jonathan Hankins, his petition is also directed toward Oregon Gov. John Kitzhaber along with the federal government and financial firms asking that banks and other such institutions be forbidden by law from selling meth-contaminated homes.
As of Friday, it had more than 175,000 signatures.