Foreclosures Hurt Communities And Homeowners
Wednesday, August 24, 2011
Aired 8/24/11 on KPBS Midday Edition.
A group of community organizations has tried to calculate the cost of foreclosures to San Diego. They've recently released a report, and they are advocating for a new ordinance to protect property values.
If you live on a block where there are lots of foreclosures, you begin to notice things. Fewer people, overgrown weeds, and unkept sidewalks. If the houses remain unoccupied, they start to deteriorate, insect nests and garbage seem to pile up. Over time, the whole street gets a dilapidated look. And that's only one block. A group of community organizations has tried to calculate the cost of foreclosures to San Diego. They've recently released a report, and they are advocating for a new ordinance to protect property values.
David Lagstein, San Diego Director, Alliance Of Californians For Community Empowerment (ACCE)
Jose Paniagua, member, ACCE
CAVANAUGH: If you live on a block where there are lots of foreclosures, you can begin to notice things. Fewer people, over grown weeds, unkempt sidewalks. If the houses remain unoccupied, they start to deteriorate. You see insect nests and garbage seems to pile up. Over time, the whole street gets a dilapidated look. And that's only one block. A group of community organizations has tried to calculate the cost of foreclosures to San Diego. They've recently released a report, and they are advocating for a new ordinance to protect property values in the City of San Diego. I'd like to welcome Dave Lagstein, he is San Diego director for the alliance of Californians for community empowerment. Welcome to the show.
LAGSTEIN: Thank you very much. We're happy to be here.
CAVANAUGH: Also joining us is Jose Paniagua, he is a member of ACCC. And he's trying to get a modification for his own mortgage. And thanks for being here.
PANIAGUA: Thank you so much for inviting me.
CAVANAUGH: Let me start with you, Dave. Tell us a lot bit about the report on the cost of foreclosures. First of all, which groups did the study, and why did you do it in.
LAGSTEIN: This is a study that was released with ACE and the center on policy initiatives a couple weeks ago. And this is about not just the impact of families when there's a foreclosure, but the impact to the whole community, which is just huge. It looks at the lost in homeowner wealth due to the homeowner values, it looks at the loss in property taxes not collected. Which obviously we have a budget crisis thea the city and the state level, and that contributes to that problem. And it looks at the cost of local government. These are the extra inspection costs, the need for police and fire when there's abandoned houses, removing trash, helping out families that sometimes need support. Even if there's a family that's not in foreclosure, are this affects everyone because it's an economic issue for the city and the region.
CAVANAUGH: Is this sort of the first time a comprehensive cost of foreclosures has been done? Is anybody else keeping track of the various aspects of what this costs a community?
LAGSTEIN: I'm not sure if other studies have been done. But certainly this is something where we wanted to hone in on the impact for San Diego so we could quantify and have an analysis. And part of it is that we want to look at the banks that obviously played a huge role in this crisis, and we want them to play a role in the solution as well.
CAVANAUGH: Break it down a lot bit more for us. I think we know as I said the way we see foreclosed homes, and they look empty, and some of them become dilapidated. What are some of the ways that a foreclosure hurts the rest of the community?
LAGSTEIN: I think that you laid it out. Certainly there is instability in the community. Many people talk about they were neighbors for many years, and some of the same people that they went to soccer games and barbecues with are out of the neighborhood. That's really bad for the neighborhood. When there's abandoned houses on a block, there are documented increases in crime in that neighborhood, there's vandalism, sometimes unofficial there's drug use. So it really has a whole effect. And then on top of that, the cumulative effect does have an effect on property values. I think what we want to talk about, a lot of people, foreclosure is a very personal issue. People say it's my fault, maybe I should have worked a little harder and worked really hard to keep up. But this is a community problem. And we need community solutions.
CAVANAUGH: You know, I want to open this up to our listeners, if I may. And ask listeners to give us a call if they had had some personal experience with the cost of foreclosures to San Diego, either with their own home or with homes in their neighborhood. Our number is 1-888-895-5727. That's 1-888-895-KPBS. Before I bring Jose into our conversation, Dave, I notice in your report you recommend that banks do more loan modification, including principle reductions. Why include that in a report like this?
LAGSTEIN: So what we're -- there's a number of different ways. This is obviously a huge crisis. We have a city recommendation, which we're happy to talk about. But the bigger picture, the only way to really create a solution to this mess of crisis is through principle reduction. And it's actually very interesting. Right now, there's a large settlement negotiation going on with all 50 state attorneys general with the banks around the -- basically the fraud and deception they did to homeowners and investors. And what happened today was Eric Schneiderman who is the lead of the executive community in charge of negotiations was kicked out of the team to negotiate with the banks. And our view is because he was pushing very aggressively to make sure that principle reduction instead of token fines were part of the settlement. Now, the good news is kamala Harris is still part of this, and we're confident that she's going to stand up and make sure that this settlement has a lot of teeth. Unless we have principle reduction to give homeowner ace chance to get out of this so neighborhoods aren't destroyed. It's going to be really hard to get out of this mess.
CAVANAUGH: And Kamala Harris, California's attorney general.
CAVANAUGH: Jose, I understand you're in the process of trying to get a loan modification.
CAVANAUGH: Why do you need one?
PANIAGUA: I would like to -- I'm trying to contact with my lender about my foreclosure now. My home is in foreclosure, and I would like to get a modification from my lender. But last time I showed them more than 10020 page about my situation, my economy, about my income tax, about my checking account, about all my income, they said it's not enough to keep your home. You must do something like short sale. I don't want to be outside from my home. That's why I'm worried about this matter.
CAVANAUGH: So the process, in this process, your bank is telling that you're basically upside down in your property; is that right? You owe more on it than it's now presently worth.
PANIAGUA: Right. And --
CAVANAUGH: I'm just saying that you owe more on the property than it is presently worth.
PANIAGUA: Yes. I owe more -- double than my property value at this time. But for me, it's okay. I want to keep doing my payments because for me, it's more important to deep my home if I owe more than the real value, I don't care. I want to keep doing payments with my bank. And I'm happy to do that, because I'm working, I'm working hard to keep my home.
PANIAGUA: But they said anyway you can't afford this home. And they are trying to sell my home.
CAVANAUGH: In your neighborhood, are there more -- are there lots of foreclosures?
PANIAGUA: Yes. In my neighborhood, across the street, around the block. Yes. There are foreclosures. Of.
CAVANAUGH: And this is what you're talking about, Dave, and the ripple effect of a single situation like Jose's, how it affects an entire community. How does -- give us an idea. How does it expand and affect, let's say, a city like San Diego?
LAGSTEIN: And it's worth mentioning that as Jose has talked about, he's trying to negotiate with the bank. He's trying to push for documentation, and they're just not hearing it. So again, it affects the individual family. And then it affects the whole community. And so what we've proposed for the City of San Diego is the property valley protection ordinance, which does what it talks about. It protects properties. Banks are foreclosing on properties, dealing with all this bureaucracy, and in many cases they're not even taking responsibility to clean up the house after the family has lost their home to foreclosure. So the idea is, if this is passed, there will be a severe fine to the bank fist they don't properly clean up the property. And that will reimburse the property for the cost of cleaning it up, and the things I just mentioned, police, and fire, and trash removal, which makes the neighborhood even worse in addition to the Los of a family to that community.
CAVANAUGH: I want to invite our listeners again to join our conversation at 1-888-895-5727. Dave, I want to challenge you a little bit about this because I know that banks actually pay property management firms to maintain foreclosed properties of the did your report factor in the efforts that the banks are already making?
LAGSTEIN: The -- the efforts are certainly not enough. And what's interesting is this is actually on the books in 75 different cities in California. Just as an example, Chula Vista does have this on the books upon. They have had this since the end of 2007 and they've collected over $2.7 million. So this isn't every property, but in some cases, these are at Deutsche bank is an international bank. They have properties, they're just investors and they don't care about the impacts on communities. And so we want to make sure every single property is properly cleaned up to at least mitigate the impact on a community.
CAVANAUGH: And how does this ordinance actually work in Chula Vista? How is it enforced?
LAGSTEIN: Basically the -- there's a registry where when there's a notice of default there's a list of the foreclosures in the community. And then code enforcement has the ability to review that list, make an assessment if there's a code violation, and then go ahead and correct it. And it has the ability where someone can make a complaint, and if it's a foreclosed property, that's subject to a citation.
CAVANAUGH: And I know that you have had a public hearing, at least a public rally of support to get an ordinance like this passed in the City of San Diego. What kind of support, not only from the public, but from leaders have you already heard about -- they may go for something like this?
LAGSTEIN: The public support has been vast. We have had two city -- not City Council hearings, but town hall meetings, both of them with over 80 people. Councilman David Alvarez has made a commitment to take a leadership role on this. Of the council president, Tony Young, was at the last town hall meeting, and also made may commitment to move the ball forward on this. And we have a date, September 21st, we're anticipating is the first public hearing. As for the community, there's a lot of anger toward the banks and what they've done to communities. People are really fired up about participating in these hearings, contacting City Council, but also understand that this is just the tip of the iceberg. This is going to mitigate the effect on community, but people are also excited to continue to fight for the bigger picture like principle reduction, like mandatory mediation for lenders so people like Jose can actually get an answer if they're trying to get a modification, and to make sure that banks aren't hiding behind tax loopholes and paying their fair share of state taxes. So this is a very critical ordinance for the city, but this is part of a bigger picture as well.
CAVANAUGH: As Jose told us, there are a number of houses in his particular neighborhood that have either been foreclosed upon or going through foreclosure. Do we have a lot of neighborhoods like that? In other words where are foreclosures, a really high number of foreclosures in San Diego?
LAGSTEIN: There -- there really are throughout the city. And if people get the chance to check out the report on our website, which is calorganize.org, they can check it out. But in terms of City Council districts, some of the highest density foreclosures are in council districts 3 and 4 and 6, which is not seen as a place that's necessarily where there's a lot of foreclosures. So it really affects everyone. Communities of color. It affects some of the middle-income neighborhoods, and again, this is an impact on families as well as an impact on communities.
CAVANAUGH: I know as part of your report, you have a projected number of foreclosures for, I believe it's the assistant district attorney of San Diego, through 2012. Are foreclosures -- first of all, give us that number, and tell us, are foreclosures slowing down or what do you foresee with these numbers?
LAGSTEIN: The projection over a five-year head, again, this is just for the City of San Diego, is 56,000 foreclosures, which if you think about it is just astonishing. The rate of foreclosures is slowing down a little bit, but each foreclosure does reverberate in the community, and given the uncertainty around the economic climate, it's not clear if it's going to continue to reduce so there's going to be a change. So we certainly want to be clear that we're not out of the woods in terms of looking at the number of foreclosure, and we're definitely not out of the woods in terms of impact on communities. That's what we want to take this action.
CAVANAUGH: From the number of real estate shows we have done here I do recall that it's not just foreclosed properties, but there are a lot abandoned properties, properties that are almost in limbo. Would your ordinance in any way apply to those properties as well?
LAGSTEIN: The way that the ordinance is written, it's from the point where there's a notice of default, which is the first step in the process. And they would be subject to the same citations and then enforcement from that point. Obviously foreclosures are a very complicated area. There are many cases whether you say it's bureaucracy or incompetence of the banks where they don't even complete the foreclosures that are on track to do so, and these houses are sitting abandoned along the way as well and certainly have the same impact on the community.
CAVANAUGH: Aren't banks actually man dated to pay property taxes if ownership of a property reverts back to them?
LAGSTEIN: They are -- they're man dated to pay this, but there's a lot that gets lost in the shuffle.
CAVANAUGH: I see. That's another thing that your report addresses. I'm wondering, besides -- if you could break down the recommendations of your report, what is it that you actually want this ordinance to contain?
LAGSTEIN: The ordinance is actually very simple. And again, this is not a -- this is not new. We're just watching up with the other 75 cities. It would create a registry of foreclosed properties so that we can actually count the foreclosures and actually do a review. And because of the way this is structured, this is a revenue generator. So there would be some resources for code inspectors and appropriate city personnel to actually look at these properties. And then what there would be -- a letter would get sent out giving the bank 30 days to clean up their act, and if they don't do so, that's when the fine kicks in, which is a thousand dollars a day. If they're being responsible, we understand it's an imperfect world, and there will be foreclosure, but for the purpose of this ordinance, take some responsibility to not make the situation worse.
CAVANAUGH: We have a caller on the line. Benji is on the line from Santee. Hello. Welcome to Midday Edition.
BENJI: Hello. Thank you for having me on. I am a resident of Santee California. And I would like to know a little bit about the foreclosure process before having the homes foreclosed on. We have had an issue where we've been trying to get our home modified through bank of America. And we are having such a hard time. We've been doing that and in the process for nine months. So my question to this gentleman that is speaking today is how do we keep the houses in our area and our neighborhood from foreclosing and trying to help those people that are trying to keep their homes and doing the modifications?
CAVANAUGH: This is the same issue that Jose has. What have you been doing so far to keep the bank at bay?
BENJI: Well, I've written a letter to Diane Feinstein. And I got that back from her with several pages suggesting websites that I could go to for help. And if I couldn't have the modification expedited through bank of America, that her office would help us out, help me and help to expedite that. But I have gone to a help center that was set up through bank of America in mission valley. In addition to that, applying for modification with bank of America just by a human 800 number. Neither entity or neither banking area speaks to one another. Nobody has any idea of what the other person's doing. And the result has taken nine months. And we're still being reviewed for modification on our loan.
CAVANAUGH: Benji, thank you very much for the call. Let me get a reaction now. Dave, you wanted to get in here.
LAGSTEIN: Yeah, first I just wanted to say that I'm so sorry that you're dealing with this issue. And unfortunately you are far from the only one. There is really a huge issue where there's a lot of people that have a reasonable case as the caller did, and as Jose does, that with a reasonable modification, they can pay their bills, but the bank is just not specify. They're repeating asking for ridiculous amounts of paperwork, you talk to a different person every time. So number one, our advice is continue to fight. Call, fax, do everything you can. Number two, talk to a had you had certified loan counseling agency because they have expertise in negotiating with the basics. And number three, part of the work that we do, our organization ACE is sometimes you have to raise a lot bit of a noise. Upon so sometimes what we've done and we've talked about this in Jose's case, sometimes you do a picket at the bank, do a call in to the appropriate loan officer or the CEO, and raise attention to unfair foreclosures, and sometimes you can get their attention. And we've helped many people that were previously being ignored. But again, we want to make sure that you can push on an individual case, and we've been helpful in many of those cases. But at the same time, we need to keep an eye on the bigger picture and push for principle reduction which can be done by the national attorneys general as well as their state legislation that can be protecting homeowners, helping with modifications and reducing their principles as well. So this is a big issue, and we need to organize and advocate for our rights.
CAVANAUGH: Gentlemen I'm afraid we're out of time. But I want to thank you so much, Dave Lagstein with the alliance of Californians for community empowerment, ACE. And also Jose Paniagua, thank you for going in and sharing your story. The best of luck to you.
LAGSTEIN: Thank you very much for having us.
PANIAGUA: Thank you very much.