A town in California is making headlines on how it is tackling its foreclosure crisis. In Richmond, almost half of the city’s residential mortgage holders are underwater. In a major development last week, Richmond became the first city in the country to offer to purchase mortgages of distressed homeowners from Wall Street banks and other lenders. Under a plan approved by the city council in April, the city can also use its eminent domain authority to purchase loans in order modify them and allow families to avoid foreclosure and stay in their homes. "The banks sold our community predatory loans, and now they have no solution they’re presenting for this crisis," says Richmond Mayor Gayle McLaughlin. "We are stepping in by taking these troubled loans off the hands of the banks, and we’re paying them fair market value for these loans. And then we’re working with the homeowners to refinance and modify loans in line with current home values. We call on the banks to voluntarily sell us these loans, and if they don’t cooperate, we will be considering eminent domain."
Transcript
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AMY GOODMAN: As President Obama heads to Phoenix today to talk about housing, I want to turn now to how Richmond, California, is tackling its foreclosure crisis. Almost half the city’s residential mortgage holders are underwater. In a major development last week, Richmond became the first city in the country to offer to purchase mortgages of distressed homeowners from Wall Street banks and other lenders. Under a plan approved by the Richmond City Council in April, Richmond can also use its eminent domain authority to purchase loans in order to modify them and allow families to avoid foreclosure and stay in their homes. Other cities are advancing similar bills, like Newark, New Jersey, and here in New York City.
Well, Richmond Mayor Gayle McLaughlin, who’s a member of the Green Party, remains with us now from Berkeley, California, to discuss this new way of addressing the foreclosure crisis. Lay it out for us, Mayor McLaughlin.
MAYOR GAYLE McLAUGHLIN: Yes, of course. First of all, the housing crisis in Richmond is not over, far so from being over. We had 900 foreclosures last year and just as many in the pipeline this year. So, this situation is something that we feel in the city of Richmond we have to address. It’s destabilizing our families. It’s destabilized neighborhoods. And it’s caused a huge impact to the city as a whole.
So, the city is stepping in to fix the situation. The banks sold our community predatory loans, and now they have no solution that they’re presenting for this crisis. So we are stepping in to fix the situation. We’re stepping in by taking these troubled loans off the hands of the banks. And we’re paying them fair market value for these loans, and then we’re working with the homeowners to refinance and modify loans in line with current—current home values. So we call on the banks to voluntarily sell us these loans. And if they don’t cooperate, we will be considering eminent domain—again, paying them fair market value for these mortgages. So—
AMY GOODMAN: Republican Congressmember John Campbell of California has introduced a bill that would block your efforts to use eminent domain to purchase home mortgages. In a press statement, Campbell said, quote, "Using eminent domain to seize mortgages is not only legally questionable, it represents a complete abrogation of private property rights. The federal government and the American taxpayer would be forced to bear all the risk in the event of a failure. Further, these schemes pose a critical threat to recovery of the housing sector as lenders and investors that a sustainable housing finance system rely on would not have any faith in the durability of contracts. Moreover, the savers and retirees who own these mortgages, many of them through their pension funds and 401(k) accounts, would be exposed to serious losses," unquote. Mayor McLaughlin, your response?
MAYOR GAYLE McLAUGHLIN: Well, first of all, that argument does not hold water at all. This is a fair and simple transaction. They’re getting fair market value for mortgages. The city has every legal right to do this. The city has researched this, you know, vastly and from many legal sources. We’re utilizing eminent domain, if necessary, to help a situation. The market will not recover without this recovery for cities like Richmond that are struggling still with a spiraling-down housing crisis. So, we don’t think that bill in Congress will pass. We don’t think it holds water. We think that we have every right to do so, and that is—to move forward, as we are, and an obligation to do so. So, we think these kind of actions are totally, totally outside the realm of the law.
AMY GOODMAN: Well, Mayor McLaughlin, I want to thank you—
MAYOR GAYLE McLAUGHLIN: And many—go ahead.
AMY GOODMAN: I want to thank you very much for being with us.
