This past Monday, a new California law went into effect imposing a 90-day moratorium on housing foreclosures.
A potential silver-lining in this new law might be its positive effect on county revenues.
California Assemblymen Ted Lieu, author of the bill, advocated that it would assist county governments.
“I see this bill as an important part of the state’s overall economic recovery package, and that includes California counties,” stated Lieu.
California has seen record foreclosures with more than 365,000 foreclosures since early 2007, with many more already scheduled.
Counties receive much of their revenue from property taxes, and this 90-day foreclosure moratorium might help stimulate more economic growth for counties throughout the state.
California homeowners now have 90 days before they are forced to foreclose if their bank fails to help renegotiate their delinquent loans.
Put another way, the intent of the new law stands to make lenders try harder to keep borrowers from foreclosing.
“In California, a foreclosure occurs once every 30 seconds, and if we don’t eliminate that, our economic recovery will be hampered,” Assemblymen Lieu avowed.
“Foreclosure’s are a lose-lose situation for everyone and we want to eliminate that,” Lieu said. “They (foreclosures) create a negative trickle-down effect throughout all of California.”
Lieu further stated the negative overall effect foreclosure’s can have on counties.
“With foreclosures localities are forced to spend public safety funds to ensure that vacated homes don’t turn into bad places that fall apart, become homes for gangs, etc.,” stated Lieu. “That’s just not a cost a city or county needs to bear.”
Lieu emphasized that this bill is really about the people.
“The goal is not the 90-day moratorium but rather to force banks and lenders to help keep families in their homes for the long term,” Lieu stated.
When asked if this bill will help California Counties in their revenue growth, Lieu’s response was simple and to the point: “It’s absolutely accurate to say that this bill will help counties,” Lieu affirmed.
However, not everyone believes it will have a great impact on California counties.
The bill faced stiff opposition in the state Assembly, and Assemblyman Lieu said it was strongly opposed by Wall Street and received a mainly party-line vote in the Assembly.
Current President of the California Association of Counties, Gary Wyatt, stated the impact may fall more on the community than on county revenues.
“Well, the impact of the law on counties is more personal in the fact that our concerns are for how foreclosures will impact families and the local community,” stated Wyatt.
While unsure of the actual affects the new law may have, Wyatt still stated he wanted to see it succeed and help further the growth of California counties.
“I’m not sure if many counties will actually gain from this law, but there might be a few who have significant impacts,” Wyatt concluded.
Richard Gordon, immediate past President of CSAC, echoed Wyatt’s sentiments.
“What’s more important to us at the local level is the community impact not the revenue impact,” Gordon stated.
“In a foreclosure, if the property is taken back or foreclosed on, it doesn’t affect the county as much because whoever owned the home is still responsible for the property tax no matter what,” said Gordon.
Gordon stressed that the community is who he thought bore the brunt of foreclosures.
“It is the community with the loss of families and vacant homes that gets impacted the most,” Gordon concluded. “Not in my county, but in others you’ll see four to five empty homes on a new subdivision block, and that’s not good for the community.”
Many efforts will need to occur to see the state’s economy fully rebound; some believe this new law 90-day moratorium law will strengthen county budgets and be part of the overall solution.
Andrew Carico can be reached at acarico@publicceo.com