New Report Shows Wall Street Costing California Homeowners, Taxpayers $650 Billion


Posted on 18 March 2011

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A new report shows the extent of Wall Street foreclosure costs to Californians, and state legislator and community groups announce new legislation to require Wall Street to pay for damages. The report can be found by clicking here.

On Wednesday, homeowners and their supporters held events throughout the state to announce the RE-Fund California campaign organizing to push legislation that will reduce foreclosures and raise roughly $8 billion in revenue annually over the next few years. The group called on the banking industry to stop costing California communities and to support the solutions to the crisis the helped create.

The report, Home Wreckers: How Wall Street Is Devastating Communities, brings to light the full impact of the foreclosure costs statewide and for each county that adds up to a minimum of $650 billion and as much as $1 trillion. This report is the first time the full set of costs to homeowners and taxpayers have been quantified in California — the hardest hit of all states with the most number of foreclosures. The costs to the state outlined include:

Homeowner Cost: Home value losses to foreclosed homes and neighboring homes total a minimum of $632 billion—$337,379 value loss per foreclosure to the surrounding community.

Property Tax Cost:
As housing values decline, property tax revenue losses are estimated to at least $3.8 billion-- $2,058 property tax loss for every foreclosure.

Local Government Cost:
Foreclosure-related costs for multiple agencies and multiple levels of government for maintenance of blighted properties, sheriff evictions, inspections, public safety, trash removal, and other costs are estimated to be $17.4 billion and higher—$19,229 cost for every foreclosure.

The legislation in one of three bills in the Homeowner Protection Package — a bold set of policy solutions to address the foreclosure crisis, including:

Wall St Foreclosure Fee to Recoup Losses – AB 935 (Blumenfield): This bill would impose a fee of $20,000 on a foreclosing party in order to mitigate the economic impact of foreclosures on cities, counties, schools districts and the state.

Fair and Legal Modification – SB 729 (Leno/Steinberg): This bill would require loan servicers to give homeowners a yes or no decision on their loan modification application before beginning the foreclosure process. It also allows homeowners to bring legal action with specified remedies when serious violations occur.

Mortgage Title Transparency – AB 1321 (Wieckowski)
: This bill would mandate recording of all mortgage deeds/trusts and assignments, and payment of the requisite fees. It would also require that the mortgage note be filed prior to issuing a Notice of Default to ensure that the foreclosing party has the right to foreclose.

“The big banks caused the economic collapse, got bailed out with taxpayer’s money, are back to paying themselves millions in bonuses, and what do we get?” asks Peggy Mears, a leader of the Home Defenders League. “Californians are paying the price, over and over again, for the greed of the big banks.”

“Foreclosures uproot families, devastate communities, and contribute to our budget crisis,” said Blumenfield. “While some profit from it, our state pays the hidden costs of foreclosure. My bill will help stop this downward spiral by creating a financial incentive to help keep families in their homes.”

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The coalition is led by the Home Defenders League (a project of the Alliance of Californians for Community Empowerment), PICO CA (People Improving Communities through Organizing), CRC (California Reinvestment Coalition) and SEIU Locals 1000, 521, 721 and 1021. 

Californians are paying the price, over and over again, but not entirely because of the greed of the big bank[er]s (although they are greedy, immoral, and other things). Californians are paying a price for being asleep at the switch while the Clinton and Bush administrations, aided and abetted by a corrupt congress, shut down regulation of Wall Street, and thwarted law enforcement. Read the Financial Crisis Inquiry Commission Report [poorly written as it is] and then follow up with some research of your own to gain a better understanding of how lack of citizen involvement in politics allowed a disaster to occur. For just one example, do a Google search on John Dugan (Controller of the us Currency) and Angelides to find the retort of Commissioner Angelides to Dugan You tied the hands of the states and then you sat on your hands!
Look up John Dugan on Wiki. Read Robert Scheer's book, The Great American Stickup. Its short, to the point, entertaining, and informative.
Then get active!
Meanwhile - about foreclosures: I don't see how you could impose a fee of $20,000 on a foreclosing party without running into questions of constitutionality. A mortgage is a contract. How can you charge a large fee to allow enforcement of a contract? Keep me posted on this one.
Requiring recording of all mortgages might fly . . . aren't 90% of mortgages recorded anyway?

Over 50% of the mortgages made since 2000 went through the MERS system that many believe is illegal.
http://www.nytimes.com/2011/03/06/business/06mers.html?ref=todayspaper
Part of the MERS system involved by-passing state laws and recording systems. With only about 50 employees processing so many loans, it was cost-effective to avoid the recording system we use in CA with its associated fees.
Some judges have tossed MERS loans out of court due to inadequate paperwork. One state stopped letting MERS loans go to court.
This is part of the massive illegality we talked about on another post.