Campos urges SF to explore using Richmond's eminent domain plan

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San Francisco eminent domain?
Photo by Joe Fitzgerald Rodriguez
Housing activists and Supervisor David Campos outside of City Hall Monday, September 9, announcing a resolution to explore using eminent domain to save underwater mortgages in SF.

Sup. David Campos is urging the board of supervisors to explore using eminent domain to save San Francisco resident’s underwater mortgages, a plan pioneered by the city of Richmond and its mayor Gayle McLaughlin.

The plan uses the power of eminent domain to seize underwater mortgage loans from banks and investors, saving homeowners from being booted out onto the street when they're behind on their ballooning payments. The plan is controversial and under attack by Wells Fargo and other Wall Street interests, which we explored in last week’s cover story, “Not For Sale." They say that the plan puts money into the pockets of Richmond and Mortgage Resolution Partners, the group that engineered the plan. 

Campos plans to introduce his resolution at tomorrow’s board meeting, but importantly it only asks The City to explore whether or not the plan could work in San Francisco. The resolution would not enact a plan at this point in time.

At a press conference this morning, housing activists and Campos trumpeted the plan as a way to save the homes of San Franciscans. Often those targeted with predatory loans have been people of color, they noted. 

“Our strategies have been, lets be honest, ‘Let’s see what the federal government or the banking industry will do to help these folks,’” Campos said at the steps of City Hall. “We’ve waited long enough.”

Campos rattled off surprising numbers, saying 58 homeowners in his district alone had underwater mortgages at risk of foreclosure, and that 16 percent of homeowners in neighborhoods like Visitacion Valley were underwater. 

Bernal Heights homeowner and activist Ross Rhodes was there supporting the action.

“Dave (Campos) helped me save my home when I was getting nowhere with the banks but frustration,” Rhodes said. 

He was making his payments which were up to $3,500 a month, but while on disability and going through a divorce, it was tough. Campos got Rep. Nancy Pelosi’s office involved, and they talked to the banks on his behalf. In the end, he finally got a principal reduction and what he calls a “real good” modification. “I’m not asking for a handout, I’m asking for help,” he said. 

Now his payments are $1,600 a month. “It just shows the banks can do what they want to do, they control it all, they can work with if you if they want to.”

Campos' resolution also proclaims San Francisco's support for Richmond's eminent domain effort.

The bank asked him why he went to Pelosi and Campos for help, instead of going through them. He was incredulous, as he’d been fighting for a principal reduction on his own for two years. “I’ve been trying to work with you for months,” he told them. “It took that political muscle to get you to move. I went through five different loan agents.” 

The victory made him a convert, going to rallies and speaking to help others suffering with their loans. 

The hounds are coming for Richmond though, and the political muscle needed to enact the controversial plan is at risk. 

Wells Fargo already filed suit against Richmond over its use of eminent domain, saying the plan puts money in the pockets of the city and would put a chill on investments. A Richmond bond with an A- rating was already rejected by Wall Street, finding no financiers, putting Richmond in a possible bind when it comes to public works projects. 

In response, Richmond councilmember Nathaniel Bates has a resolution for tomorrow’s Richmond city council meeting to stall the plan. If it's voted in, Richmond will withdraw all the offers to buy underwater loans and withdraw the plan to use eminent domain to seize them. 

If Bates’ resolution is approved, the whole plan would tank. 

A petition from the Home Defenders League to sand with Richmond’s eminent domain effort has over 7,000 signatures. 

To contact Wells Fargo’s CEO yourself, follow the link here.

The Guardian wrote to the Mayor Ed Lee's office to see if he is in support of Campos’ plan, but didn’t hear back before press time, which was admittedly quick. 

Update 2:20 pm: We asked supervisor Campos' aide Hilary Ronen if San Francisco would be at risk for a lawsuit from Wells Fargo, similar to Richmond, if the city enacted an eminent domain plan. In response, she said "All that we’re doing is asking the city attorney’s office as well as the budget and legislative analyst, 'if we did something similar, what does it look like? What are the financial risks for the city?' This way we can make an educated assessment. After having that information he’ll have to balance what the risks are. We’re not there yet."

Comments

Because when homeowners get a refinanced mortgage that allows them to keep up their payments, they continue to pay both property taxes and other taxes in the community, and contribute to the economy with their purchasing power, thereby generating -more- tax revenue and economic growth.

If the homeowner goes bankrupt and has to leave an abandoned house, that reduces the tax base, and furthermore reduces the property value of the entire neighborhood, gutting the city's property tax base even further.

So Richmond can rightfully establish that it is keeping its homeowners afloat to improve the local economy and tax base.

As Lou Costello proclaimed "Same as you!"

Posted by Eric Brooks on Sep. 11, 2013 @ 11:29 am

for any act that increased tax revenues, even if only marginally. It's fairly clear that the founding fathers did not intend that level of government intervention when they wrote the constitution and the subsequent bill of rights.

And I maybe wouldn't even mind if that city's voters had agreed to pay extra taxes to fund this risk, but Richmond is trying to do it all on the dime of the current loan owners.

No, no, a thousand times no, and the courts will bounce this in a minute. It is nothing like New Haven, which envisaged large-scale redevelopment - which is what EM was designed for. It is a powerful tool and therefore one that should be used only rarely, else we might as well rip up the constitution, which i suspect you would like.

Posted by Guest on Sep. 11, 2013 @ 11:56 am

Exactly as you suggest.

And I will reiterate the tax benefit in Richmond is likely similar to the tax benefit in New Haven.

So you bet. Now that greedy real estate financiers strong-armed that stupid precedent, we will indeed use it to the hilt to nail those same greedy financiers and get back from them what they stole from us.

Read 'em and weep Wall Street...

Posted by Eric Brooks on Sep. 11, 2013 @ 12:12 pm

the City isn't going to these banks making an offer based on what those homes are actually worth. They are taking the actual worth and then cutting it by 20%. That's where this whole thing get eff'd up, especially when a part of that 20% is going to a private company who got this deal with a no-bid contract, something that Campos previously has railed against

Posted by Guest on Sep. 11, 2013 @ 11:41 am

To the banks we say "Tough shit."

You ripped us off, now we are getting our property and our economic base that you stole, back from you. And it is pretty certain that regardless of the many reactionary responses on this thread claiming otherwise, the courts will uphold this perfectly legitimate public taking.

Posted by Eric Brooks on Sep. 11, 2013 @ 12:02 pm

most debtors took out feckless loans and they really should have known better and done better. If a few of them lose their homes, then theyd eserve to and I can live with that.

anything less is a slap in the fact of the hard-working prudent majority who somehow manage to pay their bills every month.

Posted by anon on Sep. 11, 2013 @ 12:20 pm

Richmond is looking to buy these mortgages at 80% of the homes' current values. If these values were inflated and irrational, the loans wouldn't be underwater, would they?

Richmond is lowballing the note holders and threatening ED if they don't get their way. Any court would consider this a taking

Posted by Guest on Sep. 11, 2013 @ 11:38 am

As long as the government pays what the property is worth. This is just the negotiation. If the banks know they can get a better deal up front, they'll take it. If not they'll sue for the chance to get a little more for the mortgages and they may or may not win.

Regardless, eminent domain will happen and save the mortgages.

Posted by Eric Brooks on Sep. 11, 2013 @ 11:55 am

and we're going to knock down hetch hetchy
and SF CleanPower is going to cure global warming
and Shell really isn't that bad and wtf, $19M is chump-change anyway

keep smoking what you're smoking

Posted by Guest on Sep. 11, 2013 @ 12:49 pm

the loans where the borrower is current. But that is still a matter for the creditor not the government.

There are some concerns here that Richmond will "cherry pick" the loans that are potentially the most profitable for them, especially as a private company is behind this scheme.

Posted by anon on Sep. 11, 2013 @ 9:41 am

Why is it a 'matter for the creditor not the government'?

Posted by Eric Brooks on Sep. 11, 2013 @ 10:57 am

But yes, if A owes B a million dollars, then that is a matter between A and B, subject to contract law.

We cannot have the government selectively deciding the result of such conflicts.

Posted by Guest on Sep. 11, 2013 @ 11:12 am

You didn't really answer the question. Why it bad for the government to selectively decide the outcome of debt interactions.

The government clearly -selectively- intervened with hundreds of billions of dollars on the side of large banks to bail them out of -their- debts to other parties. Why is such selective intervention ok in that case, but not in Richmond?

So, it is ok to be selective in favor of banks and not homeowners?

You are not making sense.

Posted by Eric Brooks on Sep. 11, 2013 @ 11:36 am

discriminate between different bank customers - it treated them all the same.

This scheme benefits an artifiically-chosen small set of homeowners at the expense of others.

Moreover, it rewards the borrowers who have been negligent, while punishing those who have been prudent.

Posted by Guest on Sep. 11, 2013 @ 11:59 am

It is clearly in the public interest for the community of Richmond to do this.

And your contention that the bank bailout didn't discriminate for and against particular parties is clearly absurd on its face.

The government bailed out the banks but not the homeowners.

If that was not a scheme which benefits an artifiically-chosen small set of owners at the expense of others, I don't know what is...

Posted by Eric Brooks on Sep. 11, 2013 @ 12:21 pm

decided by a hopelessly biased socialist with a chip on his shoulder, but rather by our courts.

And the courts require a very high burden for government takings, as is right.

Posted by Guest on Sep. 11, 2013 @ 12:39 pm

this is simply a troll barrier

it is a signpost to indicate to the reader that other anonymous posters on this thread are beginning to purposely diminish the conversation into nonsensical, petty, mean spirited, irrelevant bickering

the barrier is put in place to signal that there is probably little point in reading more replies in the thread past this point

proceed at your own risk

Posted by troll barrier on Sep. 11, 2013 @ 1:09 pm

voter what he or she actually wants. They much prefer to lecture voters on what they should want.

And therein lies their fundamental problem.

Posted by anon on Sep. 11, 2013 @ 1:33 pm

So race is a red herring here. But there are three reasons why this won't work in Richmind and four reasons why it won't work in SF:

1) Lawsuits from the banks will be fierce and well-funded because Richmond is setting a precedent there so the stakes are high. The legal arguments do not look good for Richmond and, in any event, it will be very expensive for a poor city like Richmond to defend.

2) Fannie and Freddie have already been instructed by the FHA not to buy in any loans in a jurisdiction that does this. So mortgage rates will be much higher in those areas anyway, and of course also to offset the risk of confiscation.

3) Wall Street firms will refuse to float muni bonds for Richmond, and that is already happening. Richmond's credit rating will fall, making it difficult or expensive to fund their deficit.

4) And at least in SF, home prices are booming and regardless of the reason for that, it means that the default situation has greatly eased. It's the wrong idea but it's also the wrong time.

Posted by anon on Sep. 09, 2013 @ 2:11 pm

Really? You must have a Ph.D in economics at least, I'd imagine.

But yes, people with money want to live here. Good news for everyone including those underwater on their mortgages.

Posted by Guest on Sep. 09, 2013 @ 2:12 pm

People with money who want to flip homes are driving costs up. People who want to buy to live in the homes can't buy homes. Investors, who want to rent out what they are buying and are putting 50% down with the jumbo loans they are taking out from banks (another way for the industry to capitalize on this mess) are pricing people who have the money to put down 20%.

It would be good for everyone, including those underwater borrowers, if a portion of the loans weren't predatory or ARMs (Adjusted Rate Mortgages) and thus, preventing an affordable loan modification based HUD's crappy HAMP program that modifies based on inflated net present value.

San Francisco is doing great when it comes displacing seniors and working class families through Ellis Act evictions and fraudulent foreclosures and bank unwillingness to work with families to address the nature of the loans they provided.

Who needs a Ph.D for that? You just have to decided if you support the working class that has traditionally owned homes and the city or the industry that destroyed the economy. We can only assume which side your on if you're willing to make obtuse statements.

Posted by Guest in response to other guest on Sep. 09, 2013 @ 3:23 pm

my zip code (94117) and the adjoining zip codes, and most properties are being bought by owner-occupiers. Moreover they are investing heavily to create a better home, thereby improving the house, the street and the area.

There are of course a few investors, but even they are improving the properties, as they are usually the rundown properties, and making higher-class homes available either to new owners or renters.

Ultimately property investment can never pay unless the demand is there from genuine residents. There always has to be an end buyer.

As for Ellis, that is only the inevitable reaction to a punitive rent control system. Most rental buildings are not ellis'ed so that is only a marginal factor even if it gets a lot of publicity.

Posted by Guest on Sep. 09, 2013 @ 3:58 pm

It's very easy for an uncompassionate and uninformed mind to find holes in the idea of cities helping their citizens who are in trouble with their home mortgages.

Not every home owner is the victim of unwise financial planning. The number one cause of bankruptcy in this country are medical bills. I have a best friend on disability, which cut his income following an accident while an employee of the city. He also has significant medical bills that his insurance finds convenient not to cover. He's been fighting for two years to try to save his house by refinancing. No banks will work with him. He is the kind of model citizen that the city needs and can't afford to loose.

The city benefits by having citizens in homes. If he and those like him are forced out by a bank foreclosure the only winners are the real estate agents and the banks. And looking at their record profits, they aren't exactly hurting.

Banks would not be taking as big a hit as you think by working with mortgage holders in trouble. If a loan defaults their only true loss is the amount that would remain of the portion of the loan used to purchase the home. The rest are unrealized profits. Money that they hoped to get over the life of the loan. By refinancing a loan they still profit... just not as much.

The financial sector needs to take to heart the old folk proverb: Half a loaf is better than none. Show some compassion and be a good corporate citizen. Greed is not good.

Posted by Croeso on Sep. 09, 2013 @ 2:23 pm

be at the city's expense. In other words, the voters approve a tax increase to fund subsidies so that the homeowner can afford the balance of his mortgage.

Likewise I have no problem if the voters agree to pay more taxes to subsidize rents.

The problem with this plan (and with Rent Control) is that the city is trying to help homeowners but at zero cost to itself. Rather it is trying to effectively tax the lenders indirectly and undemocratically.

And that of course is why it is very probably that the courts will bounce this. It is a snide attempt to sidestep the usual voter approvals for tax subsidies and, effectively, "mug" the lenders by forcing losses onto them.

eminent domain does allow cities to force compulsory purchases BUT they have to be at market values. If the city bought the homes then they'd assume the loans as well, but the loan would be more than the asset is worth. So instead they are trying to pull a fast one by buying the loan instead. This is a stretch of the concept of eminent domain and I cannot see them prevailing in court.

But an initiative on the ballot increasing taxes to raise a billion or so, and then the city can buy these homes, pay off the loans, and re-schedule new loans with the homeowner. That is the correct and fair way to do this.

Posted by Guest on Sep. 09, 2013 @ 2:38 pm

The city didn't cause the housing crisis. The city didn't cause the economic collapse. The banks did that, so they should pay.

Posted by Greg on Sep. 09, 2013 @ 4:34 pm

The homeowners will still be paying the loans back, but on better terms. Whatever minor interest costs the city absorbs will be more than made up for by the stronger economy (and better tax base) that will result from a bunch of homeowners remaining strong consumers instead of going bankrupt.

Richmond isn't just doing this out of the kindness of its heart. It is also a sound economic decision.

Posted by Eric Brooks on Sep. 09, 2013 @ 4:50 pm

The city should buy these homes at whatever they think they are worth, and then re-schedule the mortgages if they want, thereby transferring the debt from the individual to the public sector, if the voters and taxpayers agree.

That way everyone loses something and pays something. Anything else is unfair on the lenders, and mortgages will then become very hard to get.

Posted by anon on Sep. 09, 2013 @ 5:37 pm

(With the exception of a public vote. This is not necessary because it won't be an expensive program long term.)

I think you are assuming things about the program that aren't accurate.

Richmond will bear a little expense on the front end and get the benefits of a better economy and tax base at the other end of the tunnel.

Posted by Eric Brooks on Sep. 09, 2013 @ 8:41 pm

If your car is worth $5,000 and your outstanding car loan is $6,000, then it is OK for the city to make an offer for either the car or the loan. It is OK for the city to use eminent domain to buy your car for $6,000 and assume the loan. It is not OK to buy your loan for $4,000 and tell you that you can keep your car anyway, even though you are not making the repayments.

Posted by Guest on Sep. 10, 2013 @ 6:29 am

And Richmond is now delivering to them what is known as a 'hair cut' by paying a truly sensible, lower market price for their overvalued assets, so that those assets can be productively re-cultivated into the housing market in a way that preserves the crucial buying power of middle and lower class homeowners.

Posted by Eric Brooks on Sep. 10, 2013 @ 7:41 pm

problem as it is doing, thru refinancing, foreclosures and renegotiations.

We do not need municipal bureaucrats with very average IQ's second-guessing people much smarter than them.

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Posted by www.webflips.com on Sep. 23, 2013 @ 10:56 am

these loans anyway. That is why we bailed them out.

You want them to lose even more? Because you want to bail them out even more?

Posted by anon on Sep. 09, 2013 @ 5:35 pm

Who says we need to bail them out. Depositors' money is insured by the federal government.

The banks? Let 'em fail.

Posted by Greg on Sep. 09, 2013 @ 8:07 pm

should have been allowed to fail. In fact, Lehmann was the only bank that was allowed to fail totally, such that even the bondholders and creditors were stiffed.

For that matter, I would have let GM and Chrysler fail as well.

But we cannot allow all banks to fail and we saved many by getting other banks to take them over, such as BofA with Merrill Lynch, Wells Fargo with Wachovia, and JPMorgan with Bear Stearns and Washington Mutual. While the government is now starting to see profits on it's positions in AIG, Fannie/Freddie and Citi.

So in the end, it all worked out.

Posted by Guest on Sep. 10, 2013 @ 6:42 am

It sure worked out for the fat cats; for the middle class... not so much.

I would have just nationalized both the banks and the car companies, like New Zealand did with Air New Zealand, turning a failed privatization model into one of the best airlines in the world.

We do need industries that make stuff and do things other than push paper in this country.

Posted by Greg on Sep. 10, 2013 @ 7:22 am

Both are key industries, although it is much easier to import things than services.

Finnair is another example of a good airline in the west that is government owned. The high-profile middle-east airlines are state-ran but very good as well. Airlines are a terrible business, long-term, as Buffett has noted, and the way almost every major US airline has gone bust at least once is significant.

Things have "worked out2 for anyone who owns property in the SF, and are now sitting on an appreciated asset paid for with record-low interest rates. That's a lot of people.

Posted by Guest on Sep. 10, 2013 @ 7:57 am

Manufacturers produce real goods with real intrinsic value.

Modern banks have become nothing more than money printing machines which create endless new money by creating interest based debt out of nothing; thin air.

Modern banks are now nothing more than massive counterfeiting operations that continuously devalue money by generating endless amounts of it, and (through their requirement of interest repayment for creating the new money) progressively put more and more destructive pressure on natural world resources.

Posted by Eric Brooks on Sep. 10, 2013 @ 7:54 pm

we remain extremely wealthy. It's better to do high-value work here (services, design, consultancy, brokerage) and export the less skilled work to cheaper places.

That trend continues and fighting it just makes you look hopelessly out of touch. Finance is far more important to the US economy than manufacturing - the crisis in the US car industry didn't push us into recession - the financial business did, proving how much more important it is.

We could have closed down GM and it would not have made much difference. In fact, I think we should have done.

Posted by Guest on Sep. 11, 2013 @ 6:52 am

commenter. Sure farm out the "less skilled work" and do the paper pushing here. What's left? Some high paying jobs, mostly low paying jobs, high unemployment and food stamps, low labor participation rates.

Destitution or gated communities with private armies protecting them. The dystopian future now.

This neo-liberal pablum reminds me of the quotation from the likely next Fed chairman, Lawrence Summers, that the developed world should export its waste to Africa because Africa is underpolluted.

Posted by Guest on Sep. 11, 2013 @ 3:42 pm

In fact I'd be willing to bet that you do not make anything, but spend all day pushing a pen yourself.

And there is nothing wrong with that because the brains jobs pay much more than the grunt jobs. We can hire foreigners to do the dirty jobs while we perform the high-value six-figure jobs that everyone wants and millions have.

And for the rest, well, that's what Mexicans are for.

Posted by Guest on Sep. 11, 2013 @ 3:52 pm

with the economic realities I outlined in my comment.

Posted by Guest on Sep. 11, 2013 @ 4:08 pm

Outsourcing isn't racist.

Posted by anon on Sep. 11, 2013 @ 4:12 pm

Richmond being frozen out of the mortgage market is one thing - San Francisco is quite another. The moment expectant home buyers find out banks have stopped issuing mortgages in SF will be the moment pitchfork-wielding mobs storm City Hall looking for David Campos.

Posted by Lucretia Snapples on Sep. 09, 2013 @ 2:38 pm

What is not going to happen is that neither Richmond nor San Francisco will be frozen out of the mortgage market. There is too much money in it, even if the cities force the banks to be a little bit more fair. Saying the banks won't lend is just chicken little-ism.

Posted by Greg on Sep. 09, 2013 @ 4:37 pm

Either way - this plan is DOA in City Hall. SF does not have Richmond's problems - the solutions applied in that city are not applicable outside Richmond. Campos should start focusing on the problems of the middle class and not of the poor - he spends all his time trying to figure out how to give more shit to poor people - it's disgusting.

Posted by Lucretia Snapples on Sep. 09, 2013 @ 5:42 pm

Leaving aside your callous disregard for the least fortunate among us, this is largely a middle class issue that Campos is addressing. If you're a homeowner in San Francisco, you're not exactly "poor." However, you may be driven into bankruptcy, due to various situations mostly caused by people richer and more powerful than middle class homeowners -bad loans (caused by banks), the housing collapse (caused by banks and Wall Street), job losses and downsizing (caused by corporations who put profits over people), medical emergencies (because this country doesn't have a comprehensive health care system... because same rich people don't want it), etc.

The proposal may well be DOA, but not because the solutions aren't applicable across the bridge. It's because we have a mayor who's in the pocket of the corporations and will veto it, unlike Richmond where the mayor actually wants to help people.

Posted by Greg on Sep. 09, 2013 @ 6:12 pm

of some capitalist entity. But if you do achieve success, it's all down to your own individual ability and effort, right?

All you are really advocating is moral hazard - that people should just borrow as much as they can and if they have some bad luck and cannot repay then, no problem, we'll just screw over your creditor and make everything better for you.

Posted by Guest on Sep. 09, 2013 @ 6:26 pm

Make a bunch of risky bets with our money and then demand that we bail them out when they crash and burn?

The choices that these largely middle class homeowners are making are a lot more rational by comparison; and IMHO, ordinary people trying to keep their heads above the water under difficult circumstances are much more deserving of being shielded from risk than some Wall Street speculators trying to make an extra billion or two.

Posted by Greg on Sep. 09, 2013 @ 8:03 pm

1) Floats muni bonds saving cities and counties millions and enabling them to fund their liabilities and make capital investments

2) Manages investments so that little people like you can retire one day

3) Pool and sell mortgages so that banks can make more loans, allowing renters like you an opportunity to buy a home

4) Make the US the global center for finance, adding billions in revenues and tax dollars for the nation.

And yes, among those who work there is the odd bad penny like Madoff who causes some damage.

Posted by Guest on Sep. 10, 2013 @ 8:03 am

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