San Franciscans brace for another round of home foreclosures as the banking lobby kills mortgage reform proposals
Weber said the legislation is a response to problems with the industry's Mortgage Electronic Registration System (MERS), which was introduced 15 years ago. "The mortgage industry wanted to expedite the transfer of mortgages between entities so that they could be sold and resold on Wall Street," Weber said, noting that the system also allowed the industry to avoid paying recording fees to counties.
MERS records an average of 6,700 deeds of trust annually in San Francisco, and MERS deeds of trust are usually transferred two to four times, Weber observed. "So MERS members avoided — conservatively — $134,000 per year in fees."
Grace Martinez of Alliance of Californians for Community Empowerment noted that the banking lobby already killed AB935 by Assemblymember Bob Blumenfield (D-Northridge), which sought to charge a $20,000 fee to compensate for the estimated cost of a foreclosure to local government. "That money would have gone back to the city," she said.
In an April 14 letter, the banking lobby claimed Blumenfield's bill was a tax that increases the costs of homeownership for new borrowers. "It also serves to discourage the importation of capital into California at a time when the federal government is winding down their involvement in mortgage finance and protracts and complicates California's economic recovery," stated the letter, which the California Bankers Association, the California Chamber of Commerce, and other business groups signed.
But Dan Byrd, research director at Berkeley's Greenlining Institute, reminded the mostly black and brown crowd at SFHDC's foreclosure seminar that declining property values due to foreclosures have drained $193 billion from African American and $180 billion from Latino communities nationwide. "Folks from these communities who had credit good enough to qualify for a prime loan were given subprime loans with adjustable mortgage rates," he said
Byrd stressed that homeowners facing foreclosures need to be more financially literate. "A lot of loan documents are written in language that people can't understand, and they don't have the money to hire a lawyer," Byrd said, as he urged politicians to fund organizations that provide financial counseling and education. "Our elected federal officials just cut the budget that supports SFHDC and similar groups."
SFHDC housing counselor Ed Donaldson said appraisal values make it hard to sell the below-market-rate units that are coming online. "So if we don't do something about the foreclosure problem, the housing market will continue to unwind," he said, urging people to protests banks and show up at City Hall and in Sacramento to support reform.
The Rev. Arnold Townsend, vice president of the local branch of the National Association for the Advancement of Colored People, said San Francisco likes to pretend that the foreclosure crisis didn't really affect the city. "But it did," he said. "It badly hit people of color that the city, by its policies, doesn't seem to care if they leave."
Attorney Henri Norris noted that bankruptcy can be an alternative to foreclosure. "A bankruptcy can stop a foreclosure, at least temporarily," Norris said. He recommends that people make their loans current and try to get a loan modification approved. "But it's going to take running a marathon."
Avalos, who is running for mayor, noted that the city does not fund enough affordable housing and he proposed an affordable housing bond that would include assistance for mortgage assistance, ownership downpayment, seismic retrofitting, and energy efficiency. "I understand that voters see no personal benefit, but it would raise wealth in property values," he said.