- This Week
Richmond to seize hundreds of mortgage loans from banks to revive its communities
09.03.13 - 3:26 pm | Joe Fitzgerald Rodriguez |
Guardian photo by Brittany M. Powell
"I would wake up at night and be 'no that's not happening,' but it was happening," he said.
Above is a 20 minute audio interview with Sandoval, which you can download or stream.
Things got better four years ago when his daughter, Celeste, was born.
"She came during a very bad time for us. I think she came for a reason, she held the family together," he said. "We were having so many problems."
He pays $1,500 a month toward his mortgage now, but that will soon balloon to $3,000.
After his work injuries as a subcontractor, "money was not coming in," he said. The cost of his surgeries made it hard to make his mortgage payments, and so he asked for help. "I requested help from my bank, Central Mortgage this year." But by a stroke of luck, "they lost the paperwork."
After months of haranguing, the bank offered him a short sale.
But this is a home he wanted to keep for his family to live in, he said. As he looked over at a small pile of his daughter's toys, a pink stuffed rabbit and a toy car, he contemplated his family's future.
"It was too late for me, when I found out and figured out I made a mistake. The mistake I made was to trust the realtor with my family," he said. But now, he thinks his family may have a chance to stay. "If they do that program I will keep my house, my payment will be less, I will have the money to do all the repairs I need."
THE BIGGER PICTURE
It's not just about helping out the 624 homeowners Richmond seeks to assist with their underwater mortgages, Vlahoplus said.
"The critical thing is this is not just about the borrower," he explained. "Did someone do something morally correct and get (tricked) by some scummy mortgage broker? Or did someone sign something illegally? This is irrelevant."
Instead, it's really about the surrounding homes, the neighbors and the local economy, he said. And there is data to back this up.
A study by researchers from Princeton University and the University of Chicago's Booth School of Business, titled Household Balance Sheets, Consumption, and the Economic Slump, identified a direct tie between lower property values and shrinking credit rates. The study showed that those with lower property value spend less on automobiles, which economists recognize as a significant part of the nation's economic contraction.
Homeowners in cities with fewer than 15 percent of mortgages underwater cut back a bit, the study found, but in zip codes where more than 50 percent of homeowners were underwater, consumers cut back their spending by five times as much.
Meanwhile, Richmond is slowly becoming immersed in underwater mortgages and foreclosures. In Sandoval's neighborhood, seven other houses within view of his doorstep had been foreclosed in the past year alone.
One homeowner we spoke with, Morris LeGrand, 56, thinks it's unfair that his underwater mortgage is dragging down the values of his neighbor's homes, and that's why he supports the eminent domain plan.
"All along when you talk to everyone on the street, everyone is struggling. Who wouldn't want to see an improvement in their neighborhood?" he said.
And with modern mortgage structures, which have investors in small slices from all over the country, it can be complex to negotiate for the loans without the eminent domain puzzle piece. Many of the loans are part of private label securities, sold by bond trustees like Wells Fargo to private investors.