At today's LPSF meeting those present voted to oppose Supervisor John Avalos proposal to develop a Joint Powers Authority with the City of Richmond for the purpose of seizing underwater mortgages using eminent domain ostensibly in order save borrowers from foreclosure. LPSF friend Trish Cypher (one of the panelists at our Prop 13 Symposium) suggested that LPSF pose a list of very specific questions directly referring to the points on Avalos proposal; LPSF voted to take Trish suggestion, which I volunteered to carry out.
1. Therefore, I am posting the following: Attached is Avalos Resolution which I saved from the BOS website Pasted below is the missive to the BOS, which consists of two sections: one with "Concerns" and one with "Questions." (The format may be a little messy because of the cutting and pasting)
Below the questions is my exchange of emails with Trish. Her suggestions are pretty good, and can be useful for future communications. 2. To reiterate: The LPSF approved the opposition to Avalos' proposal, and the method of questions. 3. My comments: The idea of this effort is not a wide intellectual discussion neither here nor with the Supervisors. The idea is to encourage the Supervisors to be clear and truthful with the public, especially those desperately seeking relief from a threat of foreclosure. Once the public becomes aware of the risks and limitations of the proposal, they will not be as excited about it as they are now. As always, I encourage you all to look over the material and let us know if you find a factual error, grammatical error, or misspelling. I do not suggest endless rewriting, since there is so much LPSF could be doing instead. I suggest we send this letter to each of the Supervisors by Tuesday, July 15.
Dear San Francisco Supervisors:
At the Board of Supervisors meeting of July 8, 2014,
Supervisor John Avalos indicated that he intends to develop a City Ordinance –
not a Resolution as that presented to the Board on July 8 – for the purpose of
establishing a Joint Powers Authority with the City of Richmond to act as the government
agent in the implementation of Local Principal Reduction programs.
We at the Libertarian Party of San Francisco expect the
Board of Supervisors to base the proposed Ordinance to which Supervisor Avalos
referred at the meeting of July 8 on the same reasons as those posed on the
Resolution. We find such reasons vague
and insufficient to support the serious expansion of the use of eminent
domain. Therefore, we ask that you
kindly address our concerns and our specific questions listed below.
Our concerns regarding
the plan alluded on Supervisor Avalos’ Resolution presented on July 8 are as
Applies only to homeowners who are still making payments on
their mortgages. It does not apply to borrowers
who are no longer able to pay, and are truly facing foreclosure.
Applies only to securitized mortgages. Traditional mortgages still being held by original
lenders are not included, no matter how underwater they are.
Applies to a relatively small percentage of borrowers, but
will have a negative effect on all borrowers as well as on some investors. Lenders will have to increase the price of
all mortgages in order to offset government seizure of some of their loans. Savings plans, such as 401K’s and annuities,
invested in mortgage backed securities
will suffer losses to the same extent as the “predatory lenders” whose
investments are seized.
The likelihood that investors will sue under attempts to
seize their investments by force is high.
This proposal seeks to form a Joint Powers Authority in hopes the
Authority will shield the member cities from liability. However the ultimate victim, regardless of
what entity is determined liable, is the taxpayer.
The language of this proposal includes several references to
“predatory lending” perpetrated by big banks.
It makes no reference to Mortgage Resolution Partners LLC, who designed
this eminent domain plan, and who will be handsomely paid for their role in
funding the plan. Funds used, will most
likely come from “Wall Street.” This
situation coming full circle seems evident to us.
We encourage you to
communicate the points above very clearly to your constituents.
As we indicate above,
we find the reasons for Supervisor Avalos proposal vague, and would like to
hear your response to the following questions,
Whereas No. 1: Are
you asserting that four million foreclosures in 2007 were the sole reason for
“state and local governments facing crippling budget crises”?
Whereas No. 2: How
exactly would the government seizure of private mortgages have helped the
2005-2009 “decrease in household net worth” which you indicate.
Whereas No. 3: Does
your mention of a “dual mortgage market” suggest that families whose income
could not qualify them for traditional mortgages should have been given such
Whereas No. 4: Where
are these “numerous studies” that document minority borrowers of income equal
to that of white borrowers “were sold” sub-prime loans?
Whereas No. 5: Can
you provide more information on your assertion that “Racial inequality in
lending actually increased with borrower income levels..?”
Whereas No. 6: This
“Whereas” is actually true. Securitized
loans (loans sold by lenders to investors who pool them into bundles which
become securities purchased by individuals, organizations, retirement funds,
and other investors) are a nightmare for both borrower and lender to
trace. Therefore, our question is, from
whom is the Joint Powers Authority planning to seize such loans?
Whereas No. 7: Are you
suggesting that adjustable rate, “balloon,” interest-only, and negative
amortization mortgages – all of which have been around for decades, and often
are the only means for lower-income borrowers to buy a home – are now
“predatory” and should no longer be made?
Whereas Nos. 8 and 9:
Same as “Whereas No 6.” How is
the Joint Powers Authority planning to sort out whom to take “collective
Whereas Nos. 10 and 11:
Why do you emphasize in almost all your “Whereas” that non-white
borrowers account for a large percent of underwater borrowers? Is your proposal not designed to “help” all
underwater borrowers regardless of race?
Whereas No. 12: What
is your basis for hope that your proposal will succeed, even though, as you
indicate previous efforts to “help” homeowners with securitized underwater
loans have failed?
Whereas No. 13: We
agree with this “Whereas” that the City has an interest in preserving the
property tax base. Our question is, by
whatever means necessary?
Whereas No. 14: Same question
as in “Whereas Nos. 10 and 11” apply here.
Why the statistics on non-white borrowers?
Whereas No. 15:
“Cities and towns elsewhere in the country have considered implementing
local programs (‘Local Principal Reduction’) to reset underwater mortgages by
acquiring certain underwater mortgages for fair market value for the purpose of
restructuring and modifying those loans by reducing the loan principal.” Have any cities or towns actually
successfully implemented such programs?
Whereas No. 16: Can you
assert that “Cities implementing a Local Principal Reduction program may
utilize their power of eminent domain to acquire, restructure, and/or modify
the PLS loans…” Can you cite any clause
in the California Constitution or any court decision to support your assertion? Are you certain that the Federal Hosing
Financing Agency (FHFA) will remain active in San Francisco should your
proposal be adopted?
Whereas No. 17: Can
you support your assertion that “Such Local Principal Reduction programs may
help prevent foreclosures?” How can such
programs help individuals who can no longer make payments on their mortgages,
and are truly facing foreclosure, when these programs only apply to “performing
Whereas No. 18: “The
City of Richmond, California, is seeking other California cities to join it in
the formation of a Joint Powers Authority…”
How many other cities have rejected Richmond’s invitation to form a
Joint Powers Authority? Will a Joint
Powers Authority really protect its member cities from liability? Can you cite a bona fide legal opinion that
Our aim is to ensure that the people of San Francisco,
especially borrowers facing foreclosure and hoping for any help available,
clearly understand the risks and limitations of Local Principal Reduction
programs. We are especially committed to
making clear to voters that expansion of eminent domain into yet another field dangerously
erodes Constitutional protection of private property.