A coalition of fair housing and civil right groups filed an amicus brief in federal court today, supporting the City of Richmond’s opposition to a motion for preliminary injunction filed by trustees Wells Fargo Bank and Deutsche Bank. The trustees (Wells and Deutsche Bank) seek to block the City’s plan to help homeowners by restructuring underwater mortgages.
The brief, filed by the law firm Relman, Dane, & Colfax PLLC, on behalf of the National Housing Law Project, Housing and Economic Rights Advocates, Bay Area Legal Aid, the Law Foundation of Silicon Valley, and the California Reinvestment Coalition, argues that the actions the securitization industry has threatened to take to block the program, known as Richmond CARES, would amount to illegal redlining and would violate federal and state fair housing and fair lending laws, including the federal Fair Housing Act.
Richmond is 40% Hispanic and 25% African-American, and the fair housing and civil rights groups argue that the Securities Industries and Financial Markets Association’s (SIFMA) plan would therefore have a disparate impact on minority borrowers.
Kevin Stein, Associate Director at the California Reinvestment Coalition, explained: “Banks continue to fail at keeping Richmond families in their homes, without any real consequences from their regulators. Instead of fighting the city and threatening to redline Richmond, the banks should refocus their efforts on helping homeowners, especially since more than half (51%) of them are underwater in Richmond.”
Last summer, the Securities Industries and Financial Markets Association (SIFMA) announced that in response to Richmond’s plan to help homeowners, SIFMA would block any future mortgages made in Richmond from being accepted in the most desirable part of the secondary market for mortgage-backed securities (MBS). By restricting access, the cost of credit would likely rise dramatically for Richmond borrowers.
Marcia Rosen, Executive Director of the National Housing Law Project, explained: “The Banks’ attempt to prevent Richmond from responding to its foreclosure crisis is especially egregious given their role in the predatory lending underlying the crisis. And the assertion that the injunction is necessary to protect the public interest from their own threatened redlining of the city must be seen for what it is — discrimination in violation of the Fair Housing Act that would further harm this beleaguered city and its residents.”
“What the securitization industry says it will do to the people of Richmond if it loses in the city council and the federal courthouse is racially discriminatory redlining, and it is illegal under federal and state law. We fully expect that if the industry ever tries to go forward with its redlining plan, a court will step in and stop it,” said Glenn Schlactus of Relman, Dane & Colfax, a civil rights law firm based in Washington, D.C.
Maeve Elise Brown, Executive Director at Housing and Economic Rights Advocates, explained, “The mortgage servicing industry has lost money for investors for years by failing to work with homeowners on foreclosure avoidance options, particularly principal reduction. The industry knows that principal reduction is the wise financial choice for investors and homeowners alike. But now, disingenuously, the industry claims that a plan with principal reduction will hurt investors. The fact is, the eminent domain proposal is likely to save investors money over the years to come, as well as maintaining communities and saving the city from tremendous losses.”
Hearing: A hearing on the trustees’ motion for a preliminary injunction and the City of Richmond’s motion to dismiss the case will be held on September 12, 2013, at 10:00 a.m. at the U.S. District Court for the Northern District of California, the Honorable Charles R. Breyer, presiding.
San Francisco Resolution supporting Richmond introduced: A resolution supporting the City of Richmond’s program was introduced today by San Francisco County Supervisor David Campos, recognizing the damage done to local communities by the foreclosure crisis, and supporting Richmond’s efforts to confront the problem head on.
The City of Richmond’s local principal reduction program Richmond CARES, launched with a vote by City Council in April, will acquire certain underwater mortgages, through regular purchase or eminent domain if necessary, in order to restructure the troubled mortgages and help the homeowners modify or refinance, getting them mortgages with reduced principal in-line with current home values. Community, labor and faith groups supporting the program say it will allow the City to preserve wealth in local hands, especially in communities of color and low-income communities that have been decimated by the foreclosure crisis and see no end in sight. In Richmond, 51% of all residential mortgage holders are still underwater.
In August, more than 50 fair housing, labor and community groups sent a letter to Congress (link to letter), declaring that federal agencies should respect the right of cities like to pursue local principal reduction programs without facing redlining or illegal discrimination by the big banks or federal agencies.