A Novel Richmond, California Plan to Avert Foreclosures Gaining National Traction

Posted on December 6, 2013. Filed under: Uncategorized |

By Turner GPA Staff

Just a few short months ago Richmond, California seemingly stood alone in its fight to stem the tide of home foreclosures hollowing out that working-class city. Championing a novel plan to bailout underwater homeowners, which includes the option of using eminent domain, city leaders there have thus far withstood a storm of threats and litigation from big banks and Wall Street investment firms.  The tenaciousness of Richmond officials and that of their ally, Mortgage Resolution Partners (MRP), which is working with the city in its anti-foreclosure fight, is finally garnering the attention of other beleaguered cities.

Richmond’s growing profile is thanks in large measure to the zealous efforts of MRP Chairman Steven Gluckstern who has crisscrossed the country over the past year talking about what is playing out in this East Bay city of 100,000 people.  One evening in late October, Gluckstern, squired by Caren Turner, president of Turner Government and Public Affairs, was in Washington, D.C. working a room at a gathering of high-powered progressive politicos and their supporters having spent the first part of day doing several media interviews. According to Gluckstern, winning this fight pitting Main Street against Wall Street is about getting the word out and building a grassroots movement.

A key point that Gluckstern presses home is that the “plan” isn’t first and foremost about cities using the power of eminent domain to seize mortgages with negative equity. Instead, he says the goal is to get banks and other institutional mortgage holders to sell underwater mortgages—those most likely to go into foreclosure—to cities at fair-market value. The cities would in turn reduce the debt on those mortgages, which means families will be able to stay in their homes, neighborhoods can avert the blight of vacant houses, and property values will remain stable.

Apparently Gluckstern’s nonstop evangelism is gaining converts. Last month the mayor of Irvington, New Jersey announced he is considering a plan similar to Richmond’s as a way to save “anywhere from 500 to 1000 homes,” from foreclosure. According to the Associated Press, Newark, New Jersey, Brockton, Massachusetts, Chicago, and Yonkers, New York are also looking to bailout struggling underwater homeowners facing foreclosure. Other cities, including Baltimore and Pomona and Oakland in California are considering Gluckstern’s plan as well.

For its part Wall Street, the big banks, institutional investors, and the Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, are pushing back. In September, a California District Court judge dismissed a lawsuit brought by bondholders challenging Richmond’s plan. However, that has not stopped banks and other lenders from threatening legal action and other punitive measure, including restricting credit. The FHFA too has promised legal action against any city seeking to use eminent domain to seize underwater properties. And a two Republican Congressmen have proposed legislation that would block access to federally-back mortgages in places that use eminent domain to seize mortgages.  Likewise, four Senators have proposed a similar plan.   But lest you believe this is a David and Goliath situation… it is not.  The Mayor of Richmond has formally requested the Department of Justice to conduct a formal investigation of threats waged against the community and the ACLU stepped in, as of yesterday.  They sued FHFA to comply with freedom on information (FOIA) requests.

Neither the City of Richmond nor MRP is backing down. According to Gluckstern his firm is finalizing terms of a Joint Powers Authority with at least five other California jurisdictions that will allow the governments to act as one.  As Gluckstern said in a January 2013 interview with Mother Jones: “…I believe this is the right thing for people and we will fight to the finish…”

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One Response to “A Novel Richmond, California Plan to Avert Foreclosures Gaining National Traction”

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This is another dumb idea to get the government involved in the housing market. Hasn’t the government done enough damage? I live a few miles outside of Irvington, NJ. Do you think it has the money to buy out bad loans? Do you think it has the ability to manage more houses? The town already owns a ton of housing, which is rotting away.
The private sector needs to handle this problem, not more government bureaucrats.


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