Richmond Moves Forward on Local Principal Reduction Plan Despite Wall Street Opposition

by Melvin Willis, Richmond ACCE on September 12, 2013

Critical vote comes a day after San Francisco Supervisor Campos calls on City of San Francisco to pass resolution in support of Richmond, investigate use of local principal reduction in San Francisco. National fair housing groups file amicus brief in support of city’s motion to dismiss federal lawsuit filed by Wells Fargo and other Wall Street banks

The Richmond City Council has voted 4-3 to take the next step to advance the city’s local principal reduction strategy, “Richmond CARES.” Richmond CARES, the local principal reduction program, is an innovative effort to save hundreds of underwater borrowers by purchasing at fair market value hundreds of mortgages held by Wall Street banks, reducing their principal, and keeping Richmond homeowners in their homes. With nearly half of Richmond homeowners underwater on their homes, Richmond CARES is a critical tool for maintaining city services, helping families stem the tide of foreclosures, and keeping wealth in local communities.

“I’ve seen the housing crisis devastate Richmond’s neighborhoods. I’ve felt the heartache of families who were evicted from their homes. Over half of our homeowners are underwater, and the threat of foreclosure still looms over far too many homeowners. We’re saying enough is enough. We are determined to work to save our communities, and Richmond CARES can begin to fix what Wall Street broke,” said Richmond Mayor Gayle McLaughlin. Richmond is the first city in the country to offer to purchase underwater mortgages from bondholders and consider the use of eminent domain in the event that the bondholders do not agree to sell.

Before the vote, Richmond homeowners and their supporters held a press conference to call on the City Council to move forward with the next step on local principal reduction, the formation of a Joint Powers Authority which will administer the program and provide relief for struggling homeowners. The Council voted to form the Joint Powers Authority late Tuesday night after hearing attended by hundreds of Richmond residents supporting the plan and testimony from 64 speakers most of whom urged the Council to defy Wall Street and move forward with Richmond CARES.

An active grassroots campaign by homeowners and organizations in Richmond, led by the Alliance of Californians for Community Empowerment (ACCE) and the Home Defenders League has mobilized to turn back fear-mongering threats and deception from Wall Street banks and a misleading mail and phone call campaign to residents’ homes by opponents of the local principal reduction plan.

“This is a great victory in the process for my family and the City of Richmond. We can now loon forward to the next step of the process with high expectations for the final result, principal reduction,” said ACCE Home Defenders League member Morris LeGrande, one of the leaders of the community organizing effort and whose own Richmond home loan is deeply underwater. “Being first in anything is a painful experience. Fighting for civil rights was a painful experience, but the end result was equal rights for all American citizens. The same type of sacrifice is being made by taking on Wall Street.”

Tuesday’s vote follows an amicus brief filed Monday by national fair housing groups in support of Richmond CARES, filed in advance of a federal court hearing to dismiss the request for a preliminary injunction filed by Wall Street banks against the City of Richmond. In that brief, housing groups argued that the banks’ threats to provide mortgages to city residents amounted to illegal discrimination against Richmond homeowners, particularly communities of color.

At a Monday press conference, San Francisco Supervisor David Campos announced that he will propose a resolution before the County Board of Supervisors expressing support for Richmond CARES and calling on San Francisco to examine a similar local principal reduction strategy. Support for Richmond CARES continues to grow, with the Service Employees International Union announcing support for the program and other cities exploring the use of local principal reduction for underwater communities.

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