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

I suspect that this will be nipped in the bud as it will discourage any kind of lending in cities that have a reputation for not respecting contracts.

Posted by Guest on Sep. 10, 2013 @ 6:31 am

I surmise that Wall Street and Wells Fargo have determined that the potential liquid to be derived from these illiquid assets due to, to be determined defaults, are of more value than the equity currently accrued?

Posted by Awayneramsey on Sep. 10, 2013 @ 2:39 pm
Posted by Guest on Sep. 10, 2013 @ 3:34 pm

"Potential liquid" ??

This is not chemistry.

These loans that are underwater have not retained any "liquid". (I assume you mean equity here). The value of the loans (in SF, this means 2 or more loans because the house has been used as an ATM machine) are higher than the value of the house.

Ramsey needs a grammar lesson. And a lesson in economics.

Posted by Guest Lecturer on Sep. 11, 2013 @ 6:19 am

@Guest Lecturer and Guest: That is, assume mortgage payments are current on these illiquid assets. At a “to be determined” time, these mortgage payments may cease due to hardships of the debtors. Also assume that Wall Street and financial institutions are now careful to bundle these high-risk financial instruments for trades on the open market considering near-past disclosures of financial crisis and therefore, choose not to bundle and trade, eliminating this option “higher risk” option. This said, the creditor may choose to sell the illiquid asset at estate auction for “potential liquid.”

I am not trying to win a grammar contest, neither am I an apologist, but I will posit my opinion as best I can.

Posted by Awayneramsey on Sep. 11, 2013 @ 8:52 am

rationalization I heard debtor speak of was the idea that their situation was all the fault of the creditor. Of course, in practice, that is rarely true, but it is comfort blanket for those in debt.

The fact is that most people do not want to be in debt - if they had intended it from the outset, that is criminal fraud. But once they get in debt they look for an excuse to not pay and pain the creditor as the bad guy. This often starts when the creditor steps up their collection method (foreclosures, evictions, court actions etc.) At that point the debtor decides that it is all the fault of the creditor, and that the debtor is just an innocent victim.

Sadly that is what this idea is predicated upon.

Posted by Guest on Sep. 11, 2013 @ 8:42 am

the legal consequences of being sued in court, losing, and having to pay out millions.

But will anyone sell them such insurance?

http://blog.sfgate.com/ontheblock/2013/09/10/richmond-council-residents-...

Posted by Guest on Sep. 11, 2013 @ 9:06 am

a State-wide thing with other cities involved. I'm guessing that the city isn't wealthy enough to risk losing lawsuits over this. That could lead to a city bankruptcy as one of the council said last night.

This seems like a lot of risk to take for a relatively small reward that only benefits a few lucky borrowers. Which tells me this is more grandstanding than a serious policy initiative.

The mayor would be better off trying to stimulate economic activity and improve public safety, than this kind of ideological gamble.

Posted by anon on Sep. 11, 2013 @ 10:06 am

Did Campos miss the article about the bonds from Richmond getting no buyers? Does he want that to happen in SF?

If you eliminate all the people who did a cashout refi how many foreclosures are left in SF?

Posted by Guest on Sep. 11, 2013 @ 10:44 am

1) Courts may issue an injunction against cities doing this, citing it as a taking

2) If (1) doesn't happen, the courts could still award the disadvantaged lenders damages and that could bankrupt a city like Richmond, and severely damage a place like SF.

3) Fannie/Freddie may redline cities that do this, driving up loan rates therevy reducing home values. A vicious cycle.

4) Wall St. may refuse to underwrite muni bonds, as you note, drivng down the city's credit rating and driving up borrowing costs.

But people like Campos never think.

Posted by Guest on Sep. 11, 2013 @ 10:59 am

Recall this idiot! Does he not know anything? Not know that a Contract is a contract. Did he not go to college -- learn about Economics?
Sadly -- he is pandering to people who do not know Compost only cares about himself and making sure he stays a politician (buying votes with tax payers money).

SAD and WRONG -- and know I know who to picket and protest - Compost Go Home.

Posted by Guest on Sep. 11, 2013 @ 8:27 pm

I'd back the more moderate and consensual Chui to beat the polarizing and partisan ideolog Campos.

Posted by Guest on Sep. 12, 2013 @ 2:55 pm

Beware what you wish for. Campos is a Harvard Law grad, so he presumably knows that this use of eminent domain in this fashion is a constitutional Trojan horse. Imagine the irony if a Progressive measure turns out to arm the Tea Party with exactly the reasoning that's needed to assert a Takings claim against any tax measure whatsoever.

Posted by Guest on Sep. 11, 2013 @ 9:47 pm

this update is fascinating ... isn't Campose a Harvard law grad? why would he need a legislative aide to ask the city attorney for an opinion on something that any 1L could guarantee is surely going to bring a lawsuit against the city, at taxpayers' expense? if the goal is to use public money to bail out struggling homeowners, do it with legislation, not with the constitution. i'm in favor of helping people in need, but this just doesn't make sense.

__________

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."

Posted by ObamaFan on Sep. 11, 2013 @ 10:05 pm

Buy em up and convert them to family styled flats or demo them and rebuild with multi-unit redevelopment.

If you get to bulldoze parkmerced, why not other areas of the city where high-end real-estate eliminates essential housing development.

Posted by goodmaab50 on Sep. 13, 2013 @ 9:45 am

better homes (it's Richmond, so the term is relative) because they are a better risk. The last thing the city wants to do is be stuck with a bunch of deadbeats while the good borrowers stay with the banks.

Hardly what was intended though, so the city is open to the charge of hypocrisy.

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Posted by MALTIDA on Sep. 15, 2013 @ 8:34 am

If Richmond want's to put their money with the mouth is, they should buy the mortgages out in full, then reduce the principal to whatever they think is fair and then refinance the loan back to the banks at the new level.

It is not charity to spend other people's money...

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