Mayor Gayle McLaughlin shows her support of the CARES, (Community Action to Restore Equity and Stability) program during a public meeting in Richmond, Calif. on Saturday June 15, 2013, at the Nevin Community Center. A radical new program is being proposed as a way to help struggling homeowners that could lead the city to use eminent domain to seize underwater mortgages and restructure them to keep families in their homes. Photo: Michael Macor, The Chronicle
"Richmond rhymes with enrichment," Mayor Gayle McLaughlin boasts on her city website. Actually, Richmond does not rhyme with enrichment. The slogan, however, is apt for the first American city poised to seize mortgages by eminent domain. City pols claim the scheme is legal because the city would pay "fair market value" for private property in the furtherance of public good. Call the scheme Richmond Hood, in honor of Robin of Sherwood Forest.
It turns out Richmond does spell enrichment - for Mortgage Resolution Partners, a San Francisco startup in which Chronicle columnist Willie Brown was an initial investor.
The plan originally was billed as a means to help Richmond by "preserving home ownership, restoring homeowner equity and stabilizing the communities' housing market and economy by allowing many homeowners to remain in their homes." Folks figured that meant fixing up homes and eliminating blight in depressed neighborhoods, Councilman Nat Bates recalled. "Lo and behold," he added, "we find out that we have folks with million-dollar homes" that can be helped.
As The Chronicle's Carolyn Said reported, with MRP's help, Richmond threatened the seizure of 624 underwater mortgages. The vast majority of the loans, 444, are current on their payments; 180 are delinquent. The three most expensive mortgages are for $1.22 million, $962,307 and $888,000 for homes in Richmond's priciest hood, Point Richmond on the waterfront.
The city offered $679,834, $543,608 and $510,727 to purchase those three mortgages. For a $4,500 fee, MRP helps homeowners get lower loans, and the city pockets profits in the process. (MRP would not talk to me on the record.)
So far, no surprise, no bank has taken up Richmond on its "fair market value" proffers. Still, the purveyors of Richmond Hood contend that the deal benefits the public.
Enter the cold embrace of reality. In August, Richmond tried to refinance $34 million in A-minus-rated bonds. No one bought them.
Richmond homeowners who have kept up their mortgages should be asking themselves: If I want to sell my house in three years, will potential buyers be able to secure a mortgage in a town known for robbing banks by fiat?
"It sounds good, the eminent domain, and I'm not in love with the lending institutions, because I do feel they've taken advantage of a huge number of our citizens," said Councilman Bates, who plans to introduce a motion on Tuesday to withdraw the city's purchase-or-go-to-court offers. "They're a hard-nosed group of people. But at the same time, I can't in good conscience go out and take these people on when they do have certain rights."
Also it would be a financial disaster to get in a fighting match with Wall Street and financial institutions, as City Hall is about to sell tax-revenue anticipation bonds needed to keep the city running.
McLaughlin tells me that she's not worried about finding buyers for Richmond bonds. "We think that it's a lot of blustering, and they're acting out of emotion," quoth the mayor.
And if banks won't lend to would-be Richmond home buyers?
"We believe that's totally against the law," she answered. Surely there are many civil rights lawyers who would be happy to "right any wrongs brought against the city of Richmond."
The next slogan: Richmond rhymes with legal pitchman.
She's not asking: Who wants to buy a home in a city where officials believe they have a right to seize property from one taxpayer - not for the public good of a school or a road but to feed a money-making enterprise run by political cronies? No one is safe in such a city. There is no alarm system powerful enough to protect a humble homeowner from the giant maw of such a revenue-raking machine.
"Suppose a homeowner owes $300,000 on a home now worth $200,000. The city seizes the loan (by eminent domain) and pays the current mortgage holders $170,000. This price assumes a large number of severely underwater homeowners will ultimately default.
"The city, which now owns the loan, writes down the balance to $190,000. Now instead of being underwater, the borrower has $10,000 in equity. He gets a new loan for $190,000, which pays off the $170,000, with $20,000 left over for the city to share with its investors and pay expenses."
It turns out Richmond does spell enrichment - for Mortgage Resolution Partners, a San Francisco startup in which Chronicle columnist Willie Brown was an initial investor.
The plan originally was billed as a means to help Richmond by "preserving home ownership, restoring homeowner equity and stabilizing the communities' housing market and economy by allowing many homeowners to remain in their homes." Folks figured that meant fixing up homes and eliminating blight in depressed neighborhoods, Councilman Nat Bates recalled. "Lo and behold," he added, "we find out that we have folks with million-dollar homes" that can be helped.
As The Chronicle's Carolyn Said reported, with MRP's help, Richmond threatened the seizure of 624 underwater mortgages. The vast majority of the loans, 444, are current on their payments; 180 are delinquent. The three most expensive mortgages are for $1.22 million, $962,307 and $888,000 for homes in Richmond's priciest hood, Point Richmond on the waterfront.
The city offered $679,834, $543,608 and $510,727 to purchase those three mortgages. For a $4,500 fee, MRP helps homeowners get lower loans, and the city pockets profits in the process. (MRP would not talk to me on the record.)
So far, no surprise, no bank has taken up Richmond on its "fair market value" proffers. Still, the purveyors of Richmond Hood contend that the deal benefits the public.
Enter the cold embrace of reality. In August, Richmond tried to refinance $34 million in A-minus-rated bonds. No one bought them.
Richmond homeowners who have kept up their mortgages should be asking themselves: If I want to sell my house in three years, will potential buyers be able to secure a mortgage in a town known for robbing banks by fiat?
"It sounds good, the eminent domain, and I'm not in love with the lending institutions, because I do feel they've taken advantage of a huge number of our citizens," said Councilman Bates, who plans to introduce a motion on Tuesday to withdraw the city's purchase-or-go-to-court offers. "They're a hard-nosed group of people. But at the same time, I can't in good conscience go out and take these people on when they do have certain rights."
Also it would be a financial disaster to get in a fighting match with Wall Street and financial institutions, as City Hall is about to sell tax-revenue anticipation bonds needed to keep the city running.
McLaughlin tells me that she's not worried about finding buyers for Richmond bonds. "We think that it's a lot of blustering, and they're acting out of emotion," quoth the mayor.
And if banks won't lend to would-be Richmond home buyers?
"We believe that's totally against the law," she answered. Surely there are many civil rights lawyers who would be happy to "right any wrongs brought against the city of Richmond."
The next slogan: Richmond rhymes with legal pitchman.
She's not asking: Who wants to buy a home in a city where officials believe they have a right to seize property from one taxpayer - not for the public good of a school or a road but to feed a money-making enterprise run by political cronies? No one is safe in such a city. There is no alarm system powerful enough to protect a humble homeowner from the giant maw of such a revenue-raking machine.
Eminent domain and mortgages
The Chronicle's Kathleen Pender wrote this description of the Mortgage Resolution Partners model in her Net Worth column:"Suppose a homeowner owes $300,000 on a home now worth $200,000. The city seizes the loan (by eminent domain) and pays the current mortgage holders $170,000. This price assumes a large number of severely underwater homeowners will ultimately default.
"The city, which now owns the loan, writes down the balance to $190,000. Now instead of being underwater, the borrower has $10,000 in equity. He gets a new loan for $190,000, which pays off the $170,000, with $20,000 left over for the city to share with its investors and pay expenses."
Debra J. Saunders is a San Francisco Chronicle columnist. E-mail: dsaunders@sfchronicle.com Twitter: @DebraJSaunders
"Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it." - Mark Twain
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