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By Cecilia M. Vega, Matthew Yi,Kelly Zito, Chronicle Staff Writers
San Francisco Chronicle
San Francisco has emerged relatively unscathed from the mortgage crises sweeping the nation, but a coalition of city leaders is predicting that reality may soon change. To deal with it, the group called on major subprime lenders Thursday to change the way they do business with homeowners on the brink of foreclosure.
San Francisco Mayor Gavin Newsom said that predatory lending practices have been unconscionable and that major lenders should step up their outreach to at-risk homeowners.
The number of foreclosures in San Francisco makes up just 2 percent of foreclosures in the Bay Area, city leaders estimate, and Newsom said city residents have "been fortunate to date."
But, he warned, "It could hit here, and if it does it’s going to hit very acutely and very immediately and that’s why we want to be prepared."
Newsom and Assessor Recorder Phil Ting, Supervisor Sophie Maxwell, who represents the Bayview District, and Supervisor Tom Ammiano, who represents the Mission District, gathered at a City Hall news conference Thursday and asked nine leading financial institutions to sign an agreement aimed at curbing mortgage defaults and foreclosures. "We want to keep people in their homes and that’s the most important thing," Ting said.
Officials asked institutions such as Bank of America, Wells Fargo, Citigroup and Washington Mutual to agree by today to:
– Stop administering stated-income or no-documentation loans, in which borrowers are not required to provide proof of income or assets in order to qualify.
– Contact borrowers at risk of default, or who have already defaulted on their loans, at least six months before their interest rates are scheduled to go up.
– Provide funding to counseling agencies and legal services working with delinquent borrowers in an amount comparable to the profit earned on subprime loans made to San Francisco borrowers.
– Modify loan terms for homeowners making timely payments.
Dustin Hobbs, a spokesman for the California Mortgage Bankers Association, said today’s deadline isn’t realistic. City leaders mailed letters to banks outlining the requests last week.
"It’s an unreasonable demand. Anything this extensive and far reaching would require a lot of deliberation by any company," he said, but also noted that many lenders have already instituted such programs.
Cities and counties across the Bay Area have seen a record jump in foreclosures in the past year. But the problem is far smaller in San Francisco, in part because the city does not have an overabundance of new housing units, and prices have proven more stable - allowing more homeowners on the brink of foreclosure to sell their homes at a profit.
A number of adjustable-rate mortgages have increases scheduled in the first quarter of 2008, which is one of the reasons Newsom wants to act now.
In the third quarter, there were 66 homes lost to foreclosure in San Francisco, compared with 22 in the third quarter of 2006, according to DataQuick, a real estate research firm. That total represents only a sliver of the 3,242 homes repossessed by lenders in the nine-county region. Contra Costa County had 1,159 foreclosed homes in the third quarter of this year, an 874 percent increase over the previous year.
Advocacy groups, in general, have lauded political attempts to stave off foreclosures and require banks to change their lending practices. However, they point out that it may be difficult and unwieldy to monitor and enforce the loan-modification process.
And San Francisco officials conceded Thursday that they can only hope institutions comply with their request.
John Eller, head organizer at the Association of Community Organizations for Reform Now in San Francisco, called it "a good first step."
"We know (the agreements are) toothless right now because they’re just calling on the lenders to do the right thing," he said. "But the city has to be ready to use its legal knowledge and financial resources to make this a priority."
As local governments push to get a handle on the mortgage crisis, state lawmakers are doing the same.
Assembly Speaker Fabian Núñez, D-Los Angeles, outlined a package of bills to help curb future subprime lending meltdowns, and asked Gov. Arnold Schwarzenegger to call a special legislative session so lawmakers can pass the measures before the year’s end.
This is a "mortgage crisis that has swept the nation and has hit California harder than any other state in the country," Núñez said during a Thursday news conference at the state Capitol.
A spokesman for Schwarzenegger declined immediate comment, saying that the Republican governor was in flight from Southern California to Sacramento, and that this was the first time that the governor’s office had heard about the speaker’s call for a special session.
Last week, Schwarzenegger announced a plan in which four major subprime lenders agreed to maintain the initial, lower interest rates for some subprime borrowers whose rates are scheduled to increase.
The Assembly Democrats’ legislative package will include bills to ban negative-amortization loans; require lenders to consider the borrowers’ ability to pay mortgage for the life of the loan; ban prepayment penalties for certain types of loans; and require financial counseling for borrowers of certain high-cost loans.
The subprime implosion not only affects individual homeowners, but the state as a whole, Núñez said, adding that mounting foreclosures could translate to California losing nearly $3 billion in property tax revenue and about $1 billion in sales and transfer tax revenue.
Those losses would be especially hard to swallow considering the state’s budget deficit that threatens to hover around $10 billion for the next fiscal year.
"This is a crisis that is accelerating and exploding," said Assemblyman Ted Lieu, D-Torrance (Los Angeles County), who chairs the lower house’s banking and finance committee.
Lieu added that while no legislation could change the terms of an existing mortgage loan, the lawmaker called on lenders to help stem the tide of foreclosures by allowing homeowners who face rapidly rising interest rates and mortgage payments to keep their introductory rates, low interest rates that usually last just a year or two before they rise.
Assembly Democrats have set up a Web site for homeowners facing foreclosure. You can find it at links.sfgate.com/ZBRF.
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December 6th, 2007 at 2:19 pm
I’m all for getting lenders to lend responsibly, but extending payments, renegotiating loans, etc. is also rewarding bad BORROWING. I was told that I could afford a condo that had a payment that was 3/4 of my monthly take home. I GOT THAT LOAN and turned it down because I was responsible and saw that I couldn’t afford the payment. These borrowers and lenders have enflated our housing market and if there isn’t a “crash” or a “correction” then us RESPONSIBLE borrowers will be force to dream the American Dream and not live it here in San Francisco.
http://www.allaboutthedragon.com/