Let’s be clear. The papers talk of a “recovery”, but we haven’t seen it in Richmond. Some 900 families lost their homes to foreclosure last year alone. Nearly half of Richmond homeowners are still “underwater”, meaning that they owe more than their properties are worth. Many more homes will be lost to foreclosure in the coming year if we fail to take action that can prevent this.
Patricia and Robert Castillo have lived with their son and daughter in the North and East neighborhood of Richmond for 8 years. They bought their home for $420,000 and it’s now worth $200,000. To make matters worse, they were peddled a high-cost interest-only loan, so their payments are increasing annually. Robert is a mechanic for the Berkeley school district. So far they have never missed a payment, but they are hanging on by a thread.
Thousands of Richmond resident are in the same boat, and struggling mightily to stay afloat. Based on Fannie Mae estimates, far more than half of underwater homeowners whose loans are owned on the private secondary market will go into default! Our entire city is harmed by this crisis as neighborhoods are destabilized, property values and property tax revenue is reduced, and our city faces the added costs to deal with the rise in vacant properties.
Despite massive government bail-outs and subsidies for Wall Street, banks have offered little relief for struggling homeowners and hard-hit communities. Many big banks are making record profits, but they are leaving ordinary people behind.
The Richmond government, in partnership with residents and community groups like ACCE and CCSICO, is working on an innovative program to throw a life-preserver to as many underwater homeowners as we can, rebooting our local economy in the process.
The City plans to offer to buy certain underwater loans that we believe can be modified with reduced principal. If the loan servicers are unwilling to sell them, and the City Council makes the appropriate findings, we hope to use eminent domain to acquire them, paying fair market value as required by law. Homeowners can then refinance into an affordable loan in line with the current values of the homes and current market interest rates.
We will work with investors who have the capital to acquire the loans and are willing to cover all program costs. The City will be in charge, making all programmatic decisions. Homeowners will be able to choose whether or not to participate, and the program will have no cost to homeowners or taxpayers. In fact, by keeping properties on the tax rolls and preventing further decline in property values, it will help the city economically, allowing us to restore vital public services.
Across the country, a next wave of Wall Street vultures are swooping in to buy up foreclosed properties, further benefiting from the misfortune of hard-working families. We have a different vision and are working with investors in order to do just the opposite – keep people in their homes and help keep communities intact. Other cities are considering similar strategies. We believe that Richmond is on the cutting edge of a national movement.
Wall Street banks and their lobbyists are lining up to oppose this project and pressure local communities to back off. The same Wall Street banks that targeted our communities with predatory loans are now trying to scare and bully us. But we are not backing down. We have a local solution to the crisis Wall Street created. So we are moving forward to do what’s best for Richmond, not Wall Street.
- Mayor Gayle McLaughlin, City of Richmond
- Reverend Marvin Webb, Associate Pastor, Bethlehem Missionary Baptist Church, Richmond, California