Supervisors have acknowledged that San Francisco homeowners at risk of losing their homes to banks deserve help, but an agreement on how best to assist them has been put on hold.
San Francisco was poised to become the first city to partner with nearby Richmond to launch a program that would use eminent domain to seize underwater mortgages — which have a higher balance than the value of the home — from financial institutions.
Richmond was one of the hardest-hit Bay Area cities by the foreclosure crisis. Its plan is championed by termed-out Green Party Mayor Gayle McLaughlin, who has asked other cities to join in the effort, drawing the ire of some financial institutions.
Supervisor John Avalos had asked the Board of Supervisors to authorize negotiations to form a joint powers agreement with Richmond. But without the necessary votes to take that step, Avalos scaled back his proposal to instead require that the City Controller's Office provide further analysis of partnering with Richmond and other options to address underwater mortgages within 75 days. That means the debate is likely to return to the board in three months.
“There is a real blind spot when it comes to providing support for households that are struggling with their mortgages,” Avalos said.
Critics of the plan said the program is financially risky for The City and not worth the risk when it would only benefit a small number of homeowners. The breadth of whom the program could assist remains a debated point. Mayor's Office of Housing Director Olson Lee has warned it could jeopardize The City's favorable financing relationship with banks for ongoing below-market-rate housing efforts.
Avalos, however, said the approval this week of his modified legislation still “helps move The City forward on an issue that's affecting a lot of middle-class, working class households that are struggling with their mortgages, even in our economic boom.”
The Mayor's Office of Housing is required under the legislation to contact those with troubled loans and gauge their interest in such a program.
The Richmond program is limited to bundled mortgage-backed securities, known as private-label securitization trusts. In San Francisco, there are about 8,000 of these types of mortgages, of which 300 are underwater and 400 are delinquent, according to data provided by Alliance of Californians for Community Empowerment, a nonprofit which works with homeowners facing foreclosures. Also, 5,000 are subject to interest rate increases in the next 18 months.
Homeowners, Avalos said, are up against “resistance from the banks” to refinance their mortgages. “We need some tools to have leverage over the banks to actually negotiate with a stronger presence so we can get better results,” he said.