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Fair housing groups ask courts to squelch investor lawsuit against Richmond

For Immediate Release                                                                                             Contact: See Below      

Monday, Sept 9, 2013                                                                                             

 

Fair Housing Groups Ask Court to Deny Banks’ Effort to

Stop Richmond’s Mortgage Rescue Plan

Industry threats constitute illegal, discriminatory lending practice, and would lead to redlining in Richmond

 

A coalition of fair housing and civil right groups filed an amicus brief in federal court today, supporting the City of Richmond’s opposition to a motion for preliminary injunction filed by trustees Wells Fargo Bank and Deutsche Bank. The trustees (Wells and Deutsche Bank) seek to block the City’s plan to help homeowners by restructuring underwater mortgages.

 

The brief, filed by the law firm Relman, Dane, & Colfax PLLC, on behalf of the National Housing Law Project, Housing and Economic Rights Advocates, Bay Area Legal Aid, the Law Foundation of Silicon Valley, and the California Reinvestment Coalition, argues that the actions the securitization industry has threatened to take to block the program, known as Richmond CARES, would amount to illegal redlining and would violate federal and state fair housing and fair lending laws, including the federal Fair Housing Act.

 

Richmond is 40% Hispanic and 25% African-American, and the fair housing and civil rights groups argue that the Securities Industries and Financial Markets Association’s (SIFMA) plan would therefore have a disparate impact on minority borrowers.

 

Kevin Stein, Associate Director at the California Reinvestment Coalition, explained: “Banks continue to fail at keeping Richmond families in their homes, without any real consequences from their regulators.  Instead of fighting the city and threatening to redline Richmond, the banks should refocus their efforts on helping homeowners, especially since more than half (51%) of them are underwater in Richmond.” 

 

Last summer, the Securities Industries and Financial Markets Association (SIFMA) announced that in response to Richmond’s plan to help homeowners, SIFMA would block any future mortgages made in Richmond from being accepted in the most desirable part of the secondary market for mortgage-backed securities (MBS).  By restricting access, the cost of credit would likely rise dramatically for Richmond borrowers.

 

Marcia Rosen, Executive Director of the National Housing Law Project, explained: “The Banks’ attempt to prevent Richmond from responding to its foreclosure crisis is especially egregious given their role in the predatory lending underlying the crisis.   And the assertion that the injunction is necessary to protect the public interest from their own threatened redlining of the city must be seen for what it is — discrimination in violation of the Fair Housing Act that would further harm this beleaguered city and its residents.”

 

“What the securitization industry says it will do to the people of Richmond if it loses in the city council and the federal courthouse is racially discriminatory redlining, and it is illegal under federal and state law.  We fully expect that if the industry ever tries to go forward with its redlining plan, a court will step in and stop it,” said Glenn Schlactus of Relman, Dane & Colfax, a civil rights law firm based in Washington, D.C.

 

Maeve Elise Brown, Executive Director at Housing and Economic Rights Advocates, explained, “The mortgage servicing industry has lost money for investors for years by failing to work with homeowners on foreclosure avoidance options, particularly principal reduction.  The industry knows that principal reduction is the wise financial choice for investors and homeowners alike.  But now, disingenuously, the industry claims that a plan with principal reduction will hurt investors.  The fact is, the eminent domain proposal is likely to save investors money over the years to come, as well as maintaining communities and saving the city from tremendous losses.”

 

Hearing: A hearing on the trustees’ motion for a preliminary injunction and the City of Richmond’s motion to dismiss the case will be held on September 12, 2013, at 10:00 a.m. at the U.S. District Court for the Northern District of California, the Honorable Charles R. Breyer, presiding.

 

San Francisco Resolution supporting Richmond introduced: A resolution supporting the City of Richmond’s program was introduced today by San Francisco County Supervisor David Campos, recognizing the damage done to local communities by the foreclosure crisis, and supporting Richmond’s efforts to confront the problem head on.

 

Additional background:

The City of Richmond’s local principal reduction program Richmond CARES, launched with a vote by City Council in April, will acquire certain underwater mortgages, through regular purchase or eminent domain if necessary, in order to restructure the troubled mortgages and help the homeowners modify or refinance, getting them mortgages with reduced principal in-line with current home values.  Community, labor and faith groupssupporting the program say it will allow the City to preserve wealth in local hands, especially in communities of color and low-income communities that have been decimated by the foreclosure crisis and see no end in sight. In Richmond, 51% of all residential mortgage holders are still underwater.

 

In August, more than 50 fair housing, labor and community groups sent a letter to Congress, declaring that federal agencies should respect the right of cities like to pursue local principal reduction programs without facing redlining or illegal discrimination by the big banks or federal agencies.     

 

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Richmond councilman denounces eminent domain plan, urges special meeting

From Councilman Nat Bates in an email sent to supporters:

April 2, 2013 City Council minutes of action taken.

The matter to approve an Advisory Services Agreement with Mortgage Resolution Partners, LLC to assist the City of Richmond in reducing the impact of the mortgage crisis, by advising on the acquisition of mortgage loans through the use of eminent domain, in order to restructure or refinance the loans and thereby preserving home ownership, restoring homeowner equity and stabilizing the communities’ housing market and economy by allowing many homeowners to remain in their homes was presented by City Manager Bill Lindsay. (At 11:00 p.m. on motion of Councilmember Myrick, seconded by Mayor McLaughlin extended the meeting to finish the current item with Councilmember Butt voting Noe). Councilmember Butt left the meeting at ll:15 p.m. Leland Chan and Melvin Willis gave comments.

A motion was made by Councilmember Beckles, seconded by Councilmember Myrick to approve an Advisory Services Agreement with Mortgage Resolution Partners, LLC. Councilmember Myrick requested a report back from staff regarding loan criteria and specifics. A substitute motion was made by Vice Mayor Booze, seconded by Councilmember Bates to hold the item over for 30 days to gather more information. Following discussion, Councilmember Bates withdrew his second. The original motion to approve an Advisory Services Agreement with Mortgage Resolution Partners, LLC passed by the following vote: Ayes: Councilmembers Bates, Beckles, Myrick, Rogers, Vice Mayor Booze, and Mayor McLaughlin. Noes: None. Abstentions: None. Absent: Councilmember Butt.

 

As noted above, this action was to approve an Advisory Service Agreement with a follow-up of the criteria and specifics. How the mayor interpreted this as a mandate to go after the lending institutions is beyond me. The mayor has been misrepresenting the city council action by parading around  San Francisco and threatening Wells Fargo without the city council approval. In addition, this council has no idea the capacity of Mortgage Resolutions Partners LLC financial ability to pay damages should the court order such against the city. Also, there has not been any staff report regarding loan criteria and specifics as directed in the motion of April 2, 2013,some 4 months ago which suggest not one councilmember including the mayor understand the criteria and specifics.

 

In addition, this action has caused serious financial risk to the city, and each and every homeowner or potential home owners who wish to refinance, purchase or sell a home in this city. My recent communication with the Finance Director, Mr. Jim Goins indicate the city was circulating some 30 millions of dollars in revenue bonds. Although the city has a strong A bond rating, not one financial institution was willing to come forward to purchase these bonds because of the Eminent Domain issue and Wall Street’s reaction to the City of Richmond. Kindly take a look at the reactions from several news articles, etc listed below.

 

While most of us are sympathetic to the many citizen who are undergoing financial risk of losing their homes through the mortgage crisis and etc, as responsible elected officials, we must not comprise the integrity and financial ability of this city to operate efficiently.

 

It is important this council take leadership and do our job in representing our citizenry. Therefore, I am requesting my council members join me in calling for a special city council meeting within the next seven days to clarify and make the necessary corrections to offset this potential financial liability and embarrassment to this city. Should my fellow colleagues concur, kindly email your support to the city clerk as soon as possible.

 

Respectfully,

 

Councilmember Nat Bates