Foreclosure funk

San Diego CityBeat, 6/24/11 | Read the original article |

More evidence of the need for better local, state and federal oversight

In a piece posted today, ProPublica’s Paul Kiel takes a look at about how, despite saying that they wouldn’t, banks are continuing to pursue foreclosure—sometimes in error—on homeowners who are in the process of seeking a modification on their home loan. From Kiel’s story:

Consider the cases of Laurie Pinkerton and Lisa Peterson. The two women, both Californians and Bank of America customers, had been assured by the bank that they wouldn’t lose their homes before they’d been evaluated for a possible modification. Both had their homes sold last month.

Kiel points to a survey by the California Reinvestment Coalition of 55 foreclosure-avoidance counselors who, combined, assist thousands of borrowers each month:

Almost all of the counselors, 94 percent reported having worked with clients who’d lost their homes while under review for a modification. About half of the counselors reported this happened “often.”

Last month, I wrote about proposed legislation, Senate Bill 729, that would have required banks to hold off on foreclosure proceedings until a homeowner gets a yes or no answer on a loan modification. Sen. Juan Vargas, whose district includes includes Chula Vista, National City, Imperial Beach and the southernmost parts of San Diego, voted against the bill in the Senate Banking and Financial Institutions Committee, which he chairs. The bill failed. (As I reported, Vargas’ has benefited from groups opposed to the bill: the Civil Justice Association of California, which contributed at least $2.5 million to Vargas’ 2010 Senate campaign, and the California Mortgage Association. On June 3, the California Real Estate PAC gave Vargas $19,355.

While Vargas didn’t respond to interview requests for the story, Paul Leonard, with the Center on Responsible Lending—one of the bill’s sponsors—told me that Vargas said in the committee hearing that federal oversight should remedy the problem. As Keil story points out, federal programs to assist homeowners facing foreclosure have been criticized for being overly lax.

Yesterday, the Center on Policy Initiatives, a left-leaning local think tank, released a study (pdf) showing the impacts of foreclosures on the local economy. (I reported on a portion of the study here.) The study looked at foreclosure data from 2008 to the present and, lead researcher Corinne Wilson told me, used conservative estimates to project out to 2012. Some of the findings:

  • Foreclosures over that five-year period mean $117 million in lost property taxes for local governments.
  • The loss in property taxes, combined with the costs to local governments associated with foreclosures (from increased crime tied to vacant buildings to code-compliance issues) means a total hit of between $133 million and $854 million.
  • The zip codes with the most foreclosures are some of the city’s most densely populated—and lower-income—areas: 92101 (Downtown, Little Italy), 92105 (City Heights), 92114 (Southeastern San Diego), 92126 (Mira Mesa) and 92154 (Otay).

Among other things, the study recommends an ordinance that would fine banks that don’t maintain abandoned properties. Councilmember David Alvarez has said he’s interested in sponsoring such an ordinance.