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Today, Professor Robert C. Hockett joined my 2 p.m. Housing, Human Services, Health and Culture committee via webconferencing to present report findings and recommendations on our local foreclosure crisis.
Last Spring the Council voted on Resolution 31434 and agreed to review the data on the causes of foreclosures and the practices of lenders, including inequities people face when foreclosure proceedings occur. Further, the Council decided then to explore all legal options to assist low-income homeowners who continue to suffer from the housing crisis.
The Council hired Professor Robert C. Hockett, a noted Cornell University law professor and resident consultant with the Federal Reserve Bank, to prepare a report on local solutions on the foreclosure crisis. From the report given today we learn that in Washington, foreclosures were, for a time, delayed because some programs delayed foreclosure. Today though, because these programs did not address the root causes of negative home equity, Washington’s underwater loans are increasingly falling into foreclosure.
According to the report, more than one third of Seattle’s home mortgage total – about 42,000 homes – is underwater with an average negative equity of approximately $92,000. Nationally, 19.4% of home mortgages are underwater, with average negative equity of approximately $73,000. Washington’s twin negative equity and foreclosure crises are steadily growing worse. My goal in leading the Council review of this report will be to focus on recommendations that address the root cause of the problem rather than temporary fixes. I believe that Council deliberations should focus on strategies to target negative equity and find means of keeping people in, or returning to, their homes.
There were three tools proposed in the report that would target negative equity and accomplish the goal of principle reduction. They are:
- Lease Swaps
- Eminent Domain
- Land Banking
As a next step, the HHSHC Committee will request the City Attorney, the Budget Office, and & Council Central to study whether the broader strategy of Principle Loan Reduction makes sense for Seattle, including whether the three specific strategies as recommended in this study would work to prevent vulnerable residents from losing their homes and assess the financial and legal risks to the City if it chose to pursue the strategy.