The City must be made into ‘No-Foreclosure Zone’
By: Phil Ting
Special to The Examiner
February 26, 2009
SAN FRANCISCO — The epidemic of home foreclosures is doing more than financially devastating Bay Area families. It is tearing apart local neighborhoods and leaving a gaping hole in our city and county budgets.
On the national level, President Barack Obama has addressed the problem head-on with an aggressive housing-rescue package. However, according to loan data from the real estate service Zillow, more than 90 percent of Bay Area homeowners may not qualify for the low-cost refinances included in the plan. If we want to solve the housing crisis in the Bay Area, it’s becoming increasingly clear that we will have to also address it with locally driven solutions.
Recent studies show that the municipal costs alone of a home foreclosure range from $6,937 to $30,000. These are costs we pay, either in higher taxes or in reduced city services. That’s why it is time to take a close look at a local “foreclosure fee” to be paid by banks and lending institutions to help us recoup the costs being transferred to taxpayers as a result of predatory lending, outright fraud and years of financial negligence on the part of lending institutions.
When a house is foreclosed and abandoned, it sets off a spiral of negative consequences. Families often lose their life savings, but the cost goes beyond personal. Neighbors see home values decline. Tax revenues fall along with home values. Vandalism and other crimes go up in the most affected neighborhoods. And in the end, we all pay for foreclosures.
It’s important to remember the catalyst for today’s foreclosures: the implosion of an overextended, overfinanced housing market. In the years leading up to 2007, certain mortgage lenders participated in a virtual orgy of exploitative lending, taking advantage of many of our most vulnerable citizens by packaging unsustainable loans for the profit of banking institutions. It was a formula founded on excess that could have been anticipated as financially unsound.
The real and emotional costs to foreclosed homeowners are often immeasurable. But the financial impact is something we can, and should, determine. By understanding the cost on our communities we can institute preventative measures based on the value lost that will create a strong deterrent to a repeat of today’s crisis in the long term and a much needed recovery of lost revenue in the short term.
There have been a handful of attempts to evaluate the financial impact of foreclosures, most notably by Temple University, and in the city of Chicago, which is in the second year of a major campaign to prevent and reduce home foreclosures.
The Temple University report notes, “The nationwide municipal cost of foreclosures could easily top the $1 billion mark — money that is annually being diverted from meeting other pressing urban needs.”
Costs associated with foreclosures are widespread: loss of tax revenues and decreased property values; increased crime and vandalism; increased policing; accelerated rates of unemployment and homelessness; increased demand for social services; and myriad costs associated with managing the process itself.
Though not as severe as the rest of the country, San Francisco has not escaped the foreclosure epidemic, and has not avoided the costs and impacts associated with it. But we must learn from this loss and move forward with greater policy and stronger protections.
This is why I am proposing a “nexus” study to determine the exact cost of home foreclosures to our community — and with those results, to levy a fee on predatory banks and lenders for each foreclosure.
This “foreclosure fee” would be based on a study (required for municipal fee increases) to determine the cost to San Francisco taxpayers for the foreclosure process. It would help recoup the financial impact of foreclosures, encourage the refinancing of loans and create a disincentive for banks and lenders to issue predatory loans in the future. It would determine the financial impact of foreclosures and transfer their costs away from our communities and onto the banks and lenders. It would discourage banks from issuing bad loans and levy a cost for evicting people from their homes.
Out of great crisis comes great opportunity. Today, we must be willing to be bold and think big — something San Francisco has never been afraid to do. Creating a “foreclosure fee” would be the first step toward transforming our city into a “No-Foreclosure Zone”; keeping San Franciscans in their homes; protecting the quality of our neighborhoods; saving money in difficult economic times; and deterring the practice of predatory lending in our great city.
Phil Ting is the assessor-recorder for the city and county of San Francisco.
