Los Angeles Cuts Down Foreclosed for Sale Properties
A program to help about 20 to 30 residents in Pacoima and nearby communities in the northeast part of the San Fernando Valley whose homes are in danger of getting forclosed for sale will be discussed by the city council of Los Angeles.
The plan would be backed with a $1 million funding given by the Community Redevelopment Agency and would be used to pay the second mortgages of distressed homeowners so their lenders would be encouraged to save houses from becoming foreclosed for sale properties.
Eric Garceti, city council president, said the plan would improve the lives of residents in the community.
The plan would make available up to $75,000 for troubled borrowers who would pay the money before they sell their homes. The money would be paid directly to mortgage lenders who agree to modify the loans and to reduce the monthly payments.
City officials expect many of the loans to be reduced by as much as $100,000. The city and the lenders would profit from any appreciation of the home’s value when it is sold.
Housing officials said that write-downs in mortgage loans are needed in California areas like Pacoima which have been hit with lots of foreclosed for sale properties. Home values have declined to about half of their price levels during the housing boom. Also, many borrowers in the area took out risky types of mortgages with no down payment and with low initial monthly payments.
Stephanie Haffner, head lawyer for the Housing and Consumer Advocacy Group for Neighborhood Legal Services, said low income borrowers were enticed by brokers and lenders who did not care if the borrowers understood the terms or not or if they could afford to pay the loans or not.
Another community organizer and Neighborhood Legal officer, Yvonne Mariajimenez, said the Pacoima community should be helped by relief programs because the residents were victimized by predatory lenders. However, the plan could attract criticism because it gives money directly to borrowers. There is also the question of the willingness of lenders to reduce principal balances and bear more losses, even if the losses are slightly lower than what they would lose when their properties become foreclosed for sale.
Jumana Bauwens, spokesperson for Bank of America, said it would be difficult to modify loans because many loans have been packaged into securities and sold to investors. Residents who are worrying their houses would become foreclosed for sale have been working with One LA, the local unit of the Industrial Areas Foundation.
The proposal was created by the One LA group and introduced in the city council by Councilman Richard Alarcon.
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