Letter Asks Congress to Resist SIFMA Lobbyists’ Pressure to Block Local Principal Reduction Programs that Use Eminent Domain
Washington, D.C. – On Wednesday, a coalition including some of the nation’s largest labor unions and leading fair housing groups issued an open letter asking members of Congress to rebuff repeated efforts by Wall Street lobbyists to unfairly bar local municipalities which enact local principal reduction from receiving federally-backed home mortgage loans. The letter is being hand-delivered by homeowners and community groups at the local district offices of dozens of members of Congress as well as in Washington D.C.
“We urge you to reject any proposals mandating that HUD or the FHFA discriminate against homeowners in cities that make use of their eminent domain authority to achieve principal reduction,” says the letter signed by 52 groups including the AFL-CIO, SEIU and Americans for Financial Reform.
In an effort to stop local communities from finding the solutions to the housing crisis that the federal government has thus far failed to provide, Wall Street lobbyists led by SIFMA are attempting to undermine the last, best hope of hundreds of thousands of families across the country who are at risk of falling into foreclosure and homelessness.
“For federal agencies like the FHA and FHFA to do what Wall Street’s advocates are asking—introduce new policies to redline qualified buyers in municipalities that adopt policies not to Wall Street’s liking—flies in the face of our fair lending and housing laws and policies,” said James Perry, Executive Director of the Greater New Orleans Fair Housing Action Center (GNOFHAC) and a board member of the National Fair Housing Alliance, a signer of the letter to Congress. “Arbitrarily rejecting or raising costs for qualified home buyers is illegal under fair housing standards. Using this new form of redlining against communities that remediate the effects of predatory lending is likely to have disparate impact on communities of color that were targeted for—and are still suffering from—high cost and predatory loans.”
In cities like Richmond, CA; North Las Vegas, NV and El Monte, CA, local elected officials, with the support of grassroots constituencies of local residents and advocates, are enacting local principal reduction programs, primarily by offering to purchase mortgages at risk of foreclosure and by asserting their right to use eminent domain to take those mortgages and reset them to fair market value in order to keep homeowners in their homes. By renegotiating the value of underwater mortgages, more families can remain in their homes and cities can stop the hemorrhaging of wealth in local communities that is destroying neighborhoods and eroding local tax bases for vital services.
“The foreclosure crisis isn’t just a national crisis,” said Yolanda Andrews, a Newark homeowner at risk of foreclosure and a member of NJ Communities United a group advocating for local government action to address the foreclosure crisis. “Cities, towns and communities like mine are suffering the consequences of this crisis and we have every right and every reason to find solutions like local principal reduction programs using eminent domain to protect homeowners, to revive our local economy and stop the erosion of our local tax-base. Federal agencies should not be in the business of implementing new forms of discrimination in the lending market or punishing cities that pursue local solutions. Members of Congress should reject this new form of redlining out of hand.”
According to a recent report released by the Alliance for a Just Society, Home Defenders League and New Bottom Line, in zip codes with majorities of people of color, average lost wealth per household was $2,198, over 1.7 times the average lost wealth of $1,267 in majority-white zip codes. The Home Defenders League is a national organization fighting against foreclosures and for a just resolution to the mortgage crisis with 24 community-based affiliates and member families across the country.