US Insights

Do Americans still worry about keeping their homes?

Geoffrey Pereira

Senior Analyst, CMAG

Economy 05.21.2015 / 10:15

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Increasing anti-bank ads by law firms reflect - or stoke - lingering anxiety about foreclosures

As we have seen at Kantar Media's CMAG with the BP oil spill, the GM auto recall and the immigration debate, law firms often take to the airwaves to capitalize on the confluence of consumer concerns and public policy. Since 2009, a slew of legal advertisers and legal referral hotlines have aired TV advertising enticing consumers to retain their services in order to modify their home loans. Even as foreclosures have declined in recent years, airings of foreclosure-themed TV ads have more than doubled, suggesting ongoing national anxiety over the issue - whether kindled by the law firm advertising or reflected by it.

Eight years ago, the subprime housing market burst, triggering the Great Recession. As foreclosures spiked in the years following the crisis, allegations came from both homeowners and lawmakers of lender and banking malfeasance. Mortgage providers were accused, with varying degrees of accuracy, of tendering predatory loan offers with variable annual percentage rates to subprime borrowers without their informed consent.

Responding to the crisis and the charges that homeowners were duped by lenders into paying them confiscatory sums of money on now-worthless homes, President George W. Bush signed into law the Mortgage Debt Relief Act in December 2007. This act allowed the Federal Housing Administration greater flexibility to refinance loans for struggling homeowners. Additionally, the Troubled Asset Relief Program was signed in October 2008, allowing the Treasury Department to purchase or insure residential or commercial securities in the hopes of promoting market stability.

With all of this as background, sponsors such as American Foreclosure Service, Homeowner Protection Service, Homeowners Relief Line and Main Street Foreclosure Services have spent a combined $10.4 million in foreclosure-related advertising over the past six years on approximately 108,000 ad occurrences. All the messaging from these advertisers alleges predatory lending and fraud as well as saying there are new laws in effect that could save viewers' homes.

What is even more intriguing about this legal ad activity is that there is an inversely proportional relationship between ad occurrences on this topic and the actual number of foreclosures nationwide. As the chart here demonstrates, though foreclosures have declined every year from a high of 3.9 million in 2011 to a mere 1.1 million in 2014, airings of foreclosure-themed ads have more than doubled.

In the years since the Great Recession, the issue has faded from view, both in terms of our national political discourse and in media coverage. There are two possibilities for the increase in legal advertising: Either law firms and their media buyers are whistling past the graveyard and diverting time, money and resources to a dead issue, or there is a well of untapped national anxiety regarding homeowners' ability to stay in their homes with "underwater" mortgages.

Furthermore, there is every indication that for many people, this goes beyond being a private, "pocketbook" issue between them and their creditors. There may be millions of voters wishing for legislation meant to crack down on predatory lenders who used the complexity of the mortgage process against underinformed consumers to trap them in permanent hock.

Countrywide Financial, exhibit A in the court case against subprime lending fraud, is no more. However, they and their problematic mortgages were bought out and absorbed by Bank of America in 2008. In August of last year, BOA announced a $17 billion settlement in order to settle claims from the toxic mortgage securities they acquired. As professional observers of legal ad trends, we can confidently predict that this will not make the issue go away - either in the courts or in Congress - as trial lawyers (a key donor class for the Democrats) smell blood in the water.

Fannie Mae and Freddie Mac, quasi-governmental entities that played a huge role in the expansion of subprime lending, have gone from being public/private partnerships to wholly-owned subsidiaries of Uncle Sam under the conservatorship of the Federal Housing Finance Agency. As we have seen with attempts at redress with private banks, there may be efforts to petition the government in a similar fashion.

As it stands now, the issues in play for the 2016 elections have largely revolved around our budget deficit, the US role in stopping ISIS, same-sex marriage and immigration reform. Wall Street reform and deceptive lending practices have yet to become standard talking points for campaigns and parties.

Paging Senator Warren?

Source: Kantar Media

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