Banks bill the city for $115 million to foreclose on its residents
EDITORIAL Here's a great issue for the San Francisco mayor's race: The big banks that the city uses to hold nearly half a billion in cash deposits are part of a group of financial institutions that are costing the taxpayers $115 million.
That's the amount the city will wind up paying to cover the lost property taxes and other costs associated with home foreclosures, according to a new report. And the authors of the report, the Community Reinvestment Coalition and the Alliance of Californians for Community Empowerment, estimate that San Francisco homeowners are going to lose a total of $6.9 billion in value because of the foreclosure crisis.
Most of the discussion around foreclosures has focused on the national picture — but there's plenty the city can do.
The numbers are alarming: 16,355 San Francisco homeowners are underwater on their mortgages, meaning they owe more than the house is currently worth. By 2012, the report estimates, 12,410 local homes will be in foreclosure.
That means 12,400 families facing displacement — which adds to the homeless crisis, puts more pressure on the rental housing market and most likely will force many people who work in the city to find housing a long commute away.
Foreclosures also drive down the value of neighboring property — which means the city collects less property tax. The cost of sending deputy sheriffs out to evict families, of patrolling and monitoring vacant houses, dealing with increased crime in the area — all of that adds up. According to the report, every foreclosure costs the city $19,229. Add up the loss of property taxes and the direct costs to taxpayers and the bill exceeds $115 million.
Two of the top four banks involved in foreclosures in California are Wells Fargo and Bank of America. Those just happen to be two of the three banks that have to contract to handle the city's cash accounts — which contain $406 million, according to an Aug. 16, 2011 report by Budget Analyst Harvey Rose. So the city is giving its money to banks that are costing the city money.
The banks aren't paupers, either — and have accepted huge amounts of federal tax money. B of A and Wells together received $270 billion in bailout money — and both are now making nice profits (enough that the CEO of Wells, John Stumpf, earned $17 million last year). They can afford to write down the underwater mortgages and arrange for foreclosure relief for people behind on the bills.
The report suggests that the banks be charged a fee — between $10,000 and $20,000 — for each foreclosure. That would offset the costs and provide a disincentive for throwing families out on the street. The candidates for mayor ought to be pushing that — but the city can do more.
The supervisors ought to call a hearing on the crisis and demand that the B of A and Wells executives come down and explain why they're moving so slowly on write-downs and relief. And they should be told, in very clear terms, that the city will no longer put a penny of its money in banks that are damaging, instead of investing in, San Francisco.
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