MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT
In a move that is hard to fathom considering how many banks too big to fail are being fined for subprime mortgage fraud, the nation's top house financing regulator, the Federal Housing Finance Agency, is threatening that if the City of Richmond, California, uses eminent domain to save homes for families, mortgages will be cut off for the city.
According to the Los Angeles Times:
The salvo from the Federal Housing Finance Agency came Thursday, on the heels of a lawsuit directed by major Wall Street firms and U.S.-sponsored mortgage giants Fannie Mae and Freddie Mac against the Bay Area city of Richmond.
Richmond is the first to push forward with the plan, also being debated in cities across the state and nation. Richmond wants to require lenders and investors to sell underwater mortgages at a deep discount. The city would then refinance borrowers into more-affordable mortgages.
The federal housing agency, which regulates Fannie and Freddie, on Thursday made clear it doesn't intend to let this happen. The agency said it would instruct Fannie and Freddie to "limit, restrict or cease business activities" in any jurisdiction using eminent domain to seize mortgages.
BuzzFlash at Truthout wrote a three-part series on the grassroots and innovative efforts of Richmond, an econonmically-challenged city in the Bay Area, to maintain a strong community amidst predatory lending and environmental assaults (by Chevron). One of their strategies is to seize foreclosed (or near foreclosed) homes -- meeting certain criteria -- through the use of eminent domain. As BuzzFlash at Truthout reported, Richmond would then resell them to the residents at current market value through a third party lender.
But yet again the Obama administration is siding with the big bank and secondary lenders -- the very ones that they are fining (while avoiding criminal cases against them) for everything from nationwide deceptive mortgage practices (in poorer communities), robo-signed foreclosures that are often in error, cash bonuses from banks for deceptive practices, and on and on. It's a thieves den list of mortgage abuse, particularly targeting communities of color.
Yet, the power of eminent domain and taxpayer subsidies that is used commonly to build sports stadiums and even expensive housing developments for multi-millionaires (and billionaires) -- as Dave Zirin recently recounted in Truthout -- is the focus of ire and legal threats by the Obama administration when it comes to saving homes for people who want to live in them and build their communities.
But Richmond is not backing down, says the LA Times:
Even with prices rebounding in Richmond, many residents still struggle with outsized mortgage payments, said Richmond Mayor Gayle McLoughlin.
"The fact these threats are being put out there are very, very disturbing — but we are not afraid to go to court," McLoughlin said. "We are looking forward to it, because we think fully that our legal reasoning will win."
Cornell Law professor Robert C. Hockett, who advised Mortgage Resolution Partners on the proposal, said that the federal housing finance agency was acting outside of its authority by issuing its threats.
"How many times must it be repeated that principal write-downs on deeply underwater mortgage loans increase the value of the loans — even while keeping homeowners in their homes and communities intact?" Hockett said. "This is not only illegal, it is disgusting."
The history of using eminent domain to build sports stadiums (and other structures that benefit the private sector, not to mention the increased value of the land) goes back a long way. In the '50s, Pittsburgh displaced some 8000 residents to construct the original Civic Arena, now replaced by the Consol Energy Center.
In fact, the Consol Energy Center, new home of the Pittsburgh Penguins, brings up another point. These stadiums (and again eminent domain is used to acquire private property from the poor and middle class for other purposes that benefit the private market) become branded entities with names not of teams or municipalities or people who have contributed to the common good. The sporting venue goes from neighborhood to stadium to commercially-branded product, and often with large taxpayer support (as in Detroit) for private gain, with little proof that they help in revitalizing a city in almost anyway.
Perhaps -- sarcastically -- the suggestion for Richmond is to have foreclosed homeowners, many of them victims of predatory lending, sell the naming rights to their houses to the banks too big to fail. Maybe the Federal Housing Finance Agency would agree to a community of homes named Bank of America or Fannie Mae or JP Morgan Chase.
Who needs the names of families who are enriched by their homes when you can brand a house with a corporation's name, particularly the one that defrauded the homeowners in the first place? That's justice in the Obama administration when it comes to minorities and home ownership; that's the free market of unjust and illegal practices at work.
Minorities used to be redlined out of mortgage access; now the Federal Housing Finance Agency is threatening, in essence, to revive the practice in Richmond.
Or as Pat Garofalo of US News and World Report wrote about the governor of Michigan's "emergency manager" declaring Detroit bankrupt, while Governor Snyder was giving a few hundred million in taxpayer subsidies to build a new Detroit Red Wings stadium, "Let them eat pucks."