Every week, Praxia Partners shares important community-building news. This week, we have a special edition of the weekly news round-up that focuses on the mortgage crisis and the state of homeownership in the wake of the foreclosure crisis.
- Months ago, we told you about Richmond, California’s plan to use eminent domain to address its mortgage foreclosure crisis. This week, UC Berkeley’s high-profile Haas Institute for a Fair and Inclusive Society backed Richmond’s plan and released a report on the current face of the mortgage crisis. Recommendations include (their words, my emphasis):
1. Loan holders—banks, government sponsored enterprises (i.e., Fannie Mae and Freddie Mac, which are regulated by the Federal Housing Finance Agency, FHFA), and investors—should reduce the principal on underwater mortgages to current market values.
2. If loan holders are unwilling or unable to reduce the principal on underwater mortgages to current market values, they should allow these loans to be purchased by publicly-owned or nonprofit entities that are willing to restructure them with fair and affordable terms.
3. Local municipalities should use all options at their disposal to facilitate the goal of resetting mortgages to current market values, including the use of “reverse eminent domain” (the program proposed in Richmond, California and elsewhere) to acquire mortgages in order to restructure them with fair and affordable terms.
4. Banks, government sponsored enterprises like Fannie Mae and Freddie Mac, and investors that own vacant homes that have already been foreclosed upon should sell them to publicly- owned or nonprofit entities that can convert them to affordable housing units for residents of the community instead of selling them to speculators.
5. Local municipalities should use all options at their disposal to facilitate the goal of turning vacant, foreclosed homes into affordable housing. This includes the use of “reverse eminent domain” to acquire properties in order to convert them to affordable housing units for residents of the community and to prevent them from being purchased by speculators.
- Peter Dreier’s op-ed in the New York Times suggests that the housing crisis is far from over. One-fifth of homes with mortgages– 9.8 million households– are underwater, meaning they owe more than their homes are valued at. He notes, “The banks’ risky loans eventually came crashing down, devastating communities and causing financial havoc. The federal government rescued the banks, but nobody came to the rescue of the communities the banks left behind.” However, he says that cities may be able to address their crisis. “Dealing with this problem on a city-by-city basis may not be the most efficient way to confront a national crisis, but in the face of Wall Street intransigence and federal indifference, cities have had to find their own way to restore the lost wealth of their constituents.”
- Haas also produced individual reports on some of the cities suffering the most from the mortgage crisis. Las Vegas, Atlanta, Jacksonville, Orlando and Chicago have been particularly hard hit.
- Senator Elizabeth Warren recently wrote about how easily many people found it to blame the families losing their homes during the foreclosure and mortgage crisis. She shares some of her memories, including her frustration at the government’s inadequate response to the struggles of homeowners. (Boston Globe)
- CNBC provides yet another example of banks failing families: a Florida bank is under-compensating homeowners affected by the housing crisis and overcompensating those who weren’t harmed.
- The financial crisis is hitting older Americans hard, and more seniors are burdened by mortgages they simply can’t afford. (Time)
- Meanwhile, the government’s efforts to secure deals with banks that sold mortgage securities and spurred the financial crisis remain uncertain. (New York Times)
- Watch local coverage of Richmond’s plan from KPIX.
- Learn more about the Haas Institute.
What do you think was the most important community development story this week? Share your insights and thoughts below or by email.
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