Tucson Progressive

Pamela Powers Hannley, a progressive voice for Arizona

Richmond, Calif to Try Eminent Domain to Reduce Foreclosures

welcome-sm72The banksters are pissed. How dare the City of Richmond, California try to use its power of eminent domain to stop housing foreclosures in its city?

Generally, governmental bodies use eminent domain to force people to sell their land and/or homes to make way for projects (like freeways) which are for the common good. Long ago, the Occupy Wall Street movement suggested that cities could use eminent domain to buy up mortgages and reduce homeowner debt– before the homeowners are forced out of their underwater mortgages by the banksters.

Remember the old Occupy chant? “Banks got bailed out. We got sold out.” The US government bailed out the Wall Street gamblers who crashed the worldwide economy, created and burst the housing bubble, caused businesses to close and lay off workers, and plunged millions of Americans into homelessness or rental units when they lost their homes. The federal government has done almost nothing to help the millions of beleaguered homowners who have lost their homes or are on the verge of it.

From the New York Times

Scarcely touched by the nation’s housing recovery and tired of waiting for federal help, Richmond is about to become the first city in the nation to try eminent domain as a way to stop foreclosures.

The results will be closely watched by both Wall Street banks, which have vigorously opposed the use of eminent domain to buy mortgages and reduce homeowner debt, and a host of cities across the country that are considering emulating Richmond.

The banks have warned that such a move will bring down a hail of lawsuits and all but halt mortgage lending in any city with the temerity to try it.

But local officials, frustrated at the lack of large-scale relief from the Obama administration, relatively free of the influence that Wall Street wields in Washington, and faced with fraying neighborhoods and a depleted middle class, are beginning to shrug off those threats.

“We’re not willing to back down on this,” said Gayle McLaughlin, the former schoolteacher who is serving her second term as Richmond’s mayor. “They can put forward as much pressure as they would like but I’m very committed to this program and I’m very committed to the well-being of our neighborhoods.”

Despite rising home prices in many parts of the country, including California, roughly half of all homeowners with mortgages in Richmond are underwater, meaning they owe more — in some cases three or four times as much more — than their home is currently worth. On Monday, the city sent a round of letters to the owners and servicers of the loans, offering to buy 626 underwater loans. In some cases, the homeowner is already behind on the payments. Others are considered to be at high risk of default, mainly because home values have fallen so much that the homeowner has little incentive to keep paying.

Many cities, particularly those where minority residents were steered into predatory loans, face a situation similar to that in Richmond, which is largely black and Hispanic. About two dozen other local and state governments, including Newark, Seattle and a handful of cities in California, are looking at the eminent domain strategy, according to a count by Robert Hockett, a Cornell University law professor and one of the plan’s chief proponents. Irvington, N.J., passed a resolution supporting its use in July. North Las Vegas will consider an eminent domain proposal in August, and El Monte, Calif., is poised to act after hearing out the opposition this week.

But the cities face an uphill battle. Some have already backed off, and those who proceed will be challenged in court. After San Bernardino County dropped the idea earlier this year, a network of housing groups and unions began working to win community support and develop nonprofit alternatives to Mortgage Resolution Partners, the firm that is managing the Richmond program.

“Our local electeds can’t do this alone, they need the backup support from their constituents,” said Amy Schur, a campaign director for the national Home Defenders League. “That’s what’s been the game changer in this effort.”…

The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.

Then, the city would write down the debt to $190,000 and allow the homeowner to refinance at the new amount, probably through a government program. The $30,000 difference goes to the city, the investors who put up the money to buy the loan, closing costs and M.R.P. The homeowner would go from owing twice what the home is worth to having $10,000 in equity. [Read the rest of the story here.]

Strike Debt, Occupiers, and public banking proponents all have talked about buying debt– student loans, credit cards, or mortgages– and excusing the debt altogether (as Strike Debt did recently with student loans) or reducing the debt to a reasonable amount (which is what Richmond wants to do). I hope they succeed. I’m tired of watching people’s lives be destroyed by debt.

Related Articles:

Eminent domain may find new use to salvage urban homes

Las Vegas Suburb Accused of Plotting to Seize 5,000 Homes with Eminent Domain to Flip Them for a Profit [Las Vegas is being sued by “George Smith,” whoever that is, because it wants to help underwater homeowners.]

Eminent Domain Plan Decried by DoubleLine Sees New Life

4 comments on “Richmond, Calif to Try Eminent Domain to Reduce Foreclosures

  1. Pingback: In Light of Local Poverty, Tucson Needs Creative Direction & Progressive Economic Ideas | Tucson Progressive

  2. dachsielady
    August 10, 2013

    I think you are leaving out some extremely important facts related to this story.
    First of all, a good portion of the loans that would be declared eligible for this “program” are mortgages that are good, that is they payments have been made regularly and completely on time throughout the mortgage’s term. A mortgage is a CONTRACT and this violation or breaking of the contract is unconstitutional and extremely challengeable in court.

    Secondly, these people are supposedly going to be able to get a new loan on the property and continue living in it, but most lenders are going to consider this a VERY RISKY LOAN and are going to calculate those risk in to any new mortage, if a new mortage at all is obtainable. If one is not obtainable, will the “homeowner” still be able to live in their “reclaimed” property and who would they make payments to under a mortgage with what entity.

    Lastly, this article presents this as though the City of Richmond CARES about the people and the community and the neigborhoods and wants to keep everybody in their homes, but in reality the City of Richmond is itself about to go belly up and is engaging in risky deals with real estate investors aka banksters, many of whom have a rotten reputation themselves and may also go belly up.

    P.S. I thought only counties and states could do eminent domain takings, but you do not mention a county’s name in this article.

    Read very recent coverage of the reality of this chicanery at MaxKeiser.com and Teri Buehl and others as guests.

    • p2hannley
      August 10, 2013

      Let me guess… You work for a bankster like Bank of America or a PR firm retained by the banksters.

  3. Pingback: New World Next Week: Episode162 – Terrorganda, DEA Data, Eminent Domain | Media Monarchy

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About

The Tucson Progressive: Pamela Powers Hannley

I stand on the side of Love. I believe in kindness to all creatures on Earth and the inherent self-worth of all individuals--not just people who agree with me or look like me.

Widespread economic and social injustice prompted me to become a candidate for the Arizona House, representing Legislative District 9 in the 2016 election. My platform focuses on economic reforms to grow Arizona's economy, establish a state-based public bank, fix our infrastructure, fully fund public education, growlocal small businesses and community banks, and put people back to work at good-paying jobs. I also stand for equal rights, choice, and paycheck fairness for women. I am running as a progressive and running clean.

My day job is managing editor for the American Journal of Medicine, an academic medicine journal with a worldwide circulation. In addition, my husband and I co-direct Arizonans for a New Economy, Arizona's public banking initiative. I am a member of the national board of the Public Banking Institute, and I am co-chair of the Arizona Democratic Progressive Caucus, the largest caucus of the Arizona Democratic Party.

I am a published author, photographer, videographer, clay artist, mother, nana, and wife. I have a bachelor's degree in journalism from Ohio State University and a masters in public health from the University of Arizona. I grew up in Amherst, Ohio, but I have lived in Tucson, Arizona since 1981. I am a proud member of the Unitarian Universalist Church of Tucson and the Public Relations Society of America.

My Tucson Progressive blog and Facebook page feature large doses of liberal ideas, local, state, and national politics, and random bits of humor. I also blog at Blog for Arizona and the Huffington Post.

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