A new California coalition launched a legislative campaign March 16 that would blunt the foreclosure epidemic and raise revenues for local governments facing increased layoffs and program cuts.
One in five foreclosures in the nation originate in California, making it the hardest hit state with 1.2 million foreclosures since 2008, a number projected to climb to 2 million through 2012.
If the state’s foreclosure rate continues unchecked, the combined costs to homeowners, the property tax base, and local governments will amount to a staggering $650 billion – and possibly as high as $1 trillion – from 2008 through 2012, the labor-community coalition revealed in a report publicly released the same day.
The coalition includes Alliance of Californians for Community Empowerment, People Improving Communities through Organizing, California Reinvestment Coalition and several Service Employees International Union locals.
Nearly a third of California homeowners owe more on their mortgages than their homes are worth, compared to 23 percent nationally, according to the report, titled “Home Wreckers – How Wall Street Foreclosures are Devastating Communities.”
“Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties,” said Mark Fleming, chief economist at CoreLogic.
Monetary losses to homeowners due to a decline in home values between 2008-2012 would amount to an astronomical $207 billion in the case of foreclosed homes and $424 billion to neighboring homes.
“Families in my community,” said Peggy Mears, a Fontana homeowner, “have lost either their homes or their life savings that were invested in their homes.”
The labor-community coalition is backing three bills in the California legislature that would subject banks to a foreclosure fee and greater regulation, which is expected to reduce the number of foreclosures and increase homeowners’ rights.
Assembly Bill 935 would impose a fee of $20,000 on banks for each foreclosure, which would lessen the economic impact on local governments and the state.
A single bank foreclosure can cost local government anywhere between $20,000 and $34,000 in the form of inspections, unpaid water and sewage charges, trash removal, maintenance of blighted properties and transitional assistance to displaced families, among other things.
In addition, foreclosures and neighborhood home devaluation undermine the property tax base that goes to fund vital local services, exacerbating the local government revenue crunch.
Senate Bill 729 would mandate that mortgage servicers first complete negotiations with homeowners on their loan modification application before starting the foreclosure process, and gives borrowers legal recourse when serious violations occur.
To ensure that the bank actually has the legal right to foreclose, AB 1321 would require the recording of all mortgage deeds/trusts and assignments, payment of the requisite fees and filing of the mortgage prior to issuing a Notice of Default.
These bills are expected to help slow down the rate at which banks are foreclosing while increasing the rights of homeowners and revenues to support public education and other government services.
“Everyone is sacrificing. Everyone except the Wall Street Banks and CEOs like Wells Fargo’s John Stumpf,” Mears, who is also an ACCE leader, declared in an email inviting supporters to sign onto a signature-gathering internet campaign.
While no monetary value can be placed on human suffering, ACCE notes that Stumph received $21 million in salary and compensation in 2009 while the federal government was bailing out Wells Fargo to the tune of $25 billion in TARP funds.
Meanwhile last year, Wells Fargo quietly emerged from the financial crisis as one of the nation’s strongest banks, reporting net income of $12.36 billion.