If you believe some members of the Richmond City Council, the city's plan to seize underwater mortgages through eminent domain and repackage them at a discount will stave off foreclosures, keep homeowners in homes and make everyone happy. But not everyone is.
Constance Delaney, a 30-year resident who lives in a modest home near City Hall, thinks the city is eyeing a dangerous path, overstepping its authority, exposing itself to lawsuits and overstating the need for action.
"I take exception to the mayor marketing our city as falling apart," Delaney said. "Richmond has not been devastated by mortgages, and she's giving a distorted view of what's happening."
That mayor would be Gayle McLaughlin, foremost advocate of a plan called Richmond CARES, who says a sour economy has buried 50 percent of hardworking homeowners under debts greater than their homes' market values. ("That's just an emotional plea," said Delaney. "It's B.S.")
Whatever the percentage is -- it keeps getting smaller as property values go up -- the need for drastic action is only one of many questions about this program. Begin with the fact that it targets only 624 of Richmond's 19,000 owner-occupied homes. If half of them are underwater, why seize only 3 percent?
Why did none of those 624 include homeowners with second mortgages, who presumably most need help? Who will profit from this deal? Who will fund the new loans and at what interest rate? And if the city is so gung-ho, why hasn't it acted?
City Manager Bill Lindsay fielded those and other questions for the better part of an hour, acknowledging that not even he is sure the plan is legal. Attorneys have offered differing opinions.
He said the 624 homes represent only the program's first phase, and helping 624 is better than helping no one. Homeowners were not selected by need, and those with second liens were excluded because dealing with two lenders complicates things.
Mortgage Resolution Partners stands to get a $5,000 fee per transaction (the city also gets $1,500), but it will not fund the loans. Lenders will have to be located, and there's no guarantee on interest rates.
A major hurdle is locating cities to partner with Richmond in a Joint Powers Authority -- no one is knocking at its door -- because it doesn't want to act without someone sharing liability. (MRP has indemnified Richmond against legal action, but with no financial guarantee it's little more than a promise.) The City Council hasn't yet authorized the use of eminent domain because of that concern.
The city manager concedes that complexities abound. The city would control the program, but it has no staff to manage it, so that would fall to MRP. Assessors must value each mortgage, and lenders willing to fund 100 percent of that amount plus transaction fees must be located. Then there's the matter of getting a court to find merit in an eminent domain claim.
Because any action will be met with lawsuits, Lindsay believes it would take at least a year to seize the first mortgage -- well after McLaughlin is termed out of office, by the way. It makes a guy wonder why anybody would keep plowing this field, unless it's some sort of symbolic statement.
"This isn't about evil banks," Lindsay said. "It's a blight-abatement strategy. It's about preserving neighborhoods and encouraging homeownership."
Constance Delaney thinks it's foolish and unnecessary. I'm inclined to agree.
Contact Tom Barnidge at email@example.com.