occasion of the earthquake we would have. 10 percent isn't really the threshold of damage. when you triple it you cross that line. it's much more damage in earthquake. >> i want to thank you, harvey, thanks pat for >> good afternoon, everyone, welcome to the san francisco board of supervisors budget and finance committee meeting, for wednesday, october first, 2014, my name is mark farrell and i will be chairing and i am

joined by avalos, and eric mar. things will be on the october 7th agenda. >> we will call item three out of order, would you call ta please? >>resolution authorizing negotiation of a joint powers agreement with the city of richmond to establish a homeownership stabilization authority to assist homeowners with troubled mortgages. >> thank you, this resolution what is sponsored by avalos, so we will turn it to him. >> thank you, chair farrell and thank you for allowing this item to go first and i appreciate that and this is a resolution to start a joint powers authority that will establish a home ownership stabilization authority, this would the joint gpa, would be with the city of oakland, and after my xhepts i will be inviting the mayor of oakland, i am sorry, the mayor of

richmond, excuse me, very much. we will start at gpa with the city of richmond, california, and we have here, the mayor of richmond, california, mayor gale mcclauclin and she will be presenting what they have done in richmond to get the program going as far as they have goten it up to the gpa and she has been working for a number of years for this program and we are looking at a gpa as the action that was enabled for these things to start implementing this great stool that could be available for the home owner whose have distressed mortgages. so a fairly long introduction, and bear with me, colleagues, and this resolution will begin a program to assist home owners, with distressed mortgage its will acquire under water and delinquent mortgages to renegotiate the loans to

keep the home owners in the home, the crisis of 2008 seems far away and many aseems that the booming san francisco market means that we no longer need to worry about foreclosures in san francisco. many san franciscans are struckling with under water mortgages, at risk of foreclosure or mortgages with predatory lending features, these mortgages are in the low income communities of color, in the southern part of san francisco and if you look at a map, which i can share later how you will see that they are primarily in south east part of san francisco, and bay view hunter's point and all of the neighborhoods for thousands of home owners in the city is virtually impossible for them to attend a loan modification because their loan has been

bundled into mortgage backed securities. i want to take a step back, and talk about low income communities of color that are bearing the brunt of our still, existing delinquent loan and distressed mortgage crisis that exists in san francisco and we talk a lot in san francisco, about migration, and how difficult for family to stay in san francisco and what we are trying to create here is a tool that we could use with a city like richmond california that will enable a lot of working families and families of color to be able to maintain a property, and to become more solvent in the property and retain some of the wealth that they have accumulated through many years of work and i think that it is a mobile goal and one that the city plays a lot of lip service to and does not get to the point of actualizing the real clear programs toward this goal. and these programs will do that.

for thousands of home owners in the city it is impossible for them to obtain a loan modification because the loan has been bundled with mortgage backed securities and these are held in what is called private label security trusts or plf trust and they are bought and sold on the director's market, the difference between these loans on the individual banks and loans on the trust, is the key reason why we need to implement this program and for loans held by individual banks and the banks understand that they can lose money when the loans go into foreclosure and so they have a motivation to modify the loans, but the loans in the trust it would take a majority of the investers to renegotiate the loans which are virtually impossible. pls loans are also ineligible for most programs, that help under water home owners. so home owners who through no

fault of their own have a bad luck to have their mortgages bunled into a trust have delinq

under water so the issue of distressed mortgage ss real in san francisco, and this data shows that there are hundreds of home at risk right now and there are thousands more potentially at risk in the next few years, there is currently, no tool available to really help these home owners. so to describe how this program will work, the city of richmond is looking to form a joint powers authority with other cities to implement an innovative new system to keep the only owners in their homes and the process will go like this, the gpa will identify pls mortgages that under water, and asked the home owners if they want to participate in the program. the gapa will offer to acquire the mortgages at fair market value, if the holders of the loans refuse to sell, the jpa will move to acquire them

through imminent domain, the gpa will be authorized to require the actual homes, they would not be seizing or acquiring deeds, only the mortgages, the jpa would connect the home owner with housing counseling to refinance and modify the mortgage, and this is something in san francisco that we have been able to resource is that we do have organizations that do have counseling and help, families refinance or remodify their mortgages. but that and we are missing a vital piece that makes it compelling for the mortgage security companies to actually want to negotiate. the home owner will obtain a new lower cost mortgage and the japa will recover enough revenue to continue the program. renegotiated loans will also be eligible for up to 100,000 for the keep your home california program run by cal hfa and we recently received a letter from

esano, a non-profit formed by the national council of (inaudible) it has successful approaching to renegotiate nearly 500 delinquent loans that were at risk of foreclosure and they are interested in partnering with the jpa to help to modify these mortgages. here is a jpa description. richmond is looking to engage with a private partner that will provide legal representation for the jpa and identify the jpa and participating cities. in exchange for the providing all of the up front costs and legal costs the private partner will receive or would the private partner would receive, on the advice of the city attorney, the resolution directs the director of housing and we have the director lee here to negotiate the specifics with the jpa with the city and any of the other cities that wish to participate. prior to this resolution, coming forward, we heard a lot

of concerns that we want to make sure that we address, in this resolution, that could provide guidelines for the negotiations prior to agree to any jpa and so this resolution, includes a subpoena reer vision that we want to make sure are part of the jpa such as the jpa it will endemnify the city and cover the costs the use of the eminent domain will be linked to residential mortgages could not be used on actual homes or property, it will propose using the demain on the mortgages with the content of the home owner, so the participation by home owners in the program will be strictly voluntary and there is a history about the use of imminent domain but we want to be doing it for a program that truly meets the desire and wish and needs of the people who have distressed more amings. >> it is our hope that we meet

these terms in alleviate the concerns about this program, at the mayor's office of housing, negotiates the specifics of the jpa it will nen be up to a board of supervisor to ratify it and apply the city during the authority, approving this resolution create nose liability or physical impact. and so what we have before us is just a resolution, urging that we go into negotiations, but a final, you know, negotiated agreement, for jpa will later be before us. and we could ask, or we expect how long it will take to do that, and i think that the city attorney, could provide help with that and possibly also, lee, and the mayor from the city of richmond. and so, i want to call up actually, first i was hoping to call up the mayor who has come out from the city of richmond to talk about the efforts creating the program and truly the leadership in doing this program has come from her office in richmond, and although it is remarkable and

exciting about their idea, that we are one of and we are potentially joining, is that the whole country is watching. and there are many places around the country, that have a very similar issue on the economics of home ownership, and as richmond does, and parts of san francisco does. and that are very interested in seeing what happens here. and if san francisco is in the process of joining a jpa and going to a jpa with the richmond, and the other cities could follow suit and the more that the cities are able to follow the suit and join, the greater the potential and power that we have to negotiate how we move forward, and how we move forward sometimes, against some of the resistance that will come from the financial sector, wall street and the banks and so a lot of mayor for being here and i appreciate you coming out and i know that you are busy as the mayor of richmond and thank you for your

presence. >> thank you very much for letting me know about this and giving me an opportunity, so good afternoon, to everyone on this committee. and to the staff, and to the people in the audience here. i am really, really excited that you are considering this. and i know that have you already passed a resolution that supports rich mopped's effort and this is the nekd step and the magnitude of the crisis in riefp mondayed hit really hard and we have a maturity of the people of color, 40 percent latino, and 26 percent african american, and when the crash happened homes lost on average, 66 percent of their value, and thousands of home owners and tenants displaced in richmond and we still have 30 to 50 percent of homes under water, and in various neighborhoods of richmond and so this program will have a major impact, and the impact that it has, is

first of all, helps families, you know, stay in their homes. that is really, really, an important stabilizing effect for the family, but it is stabilizes the neighborhood as well. because when you have vacant homes in the neighborhood you have blight and then you have of course a tax on city funds to do the code enforcement, and police extra police because the crime often is attracted to blighted property. but also, the local economy improves, because people when you have a reduced mortgage that you are paying, thanks to the fact that we would be acquiring these mortgages and remodifying them so that the home owners have a lower principle and also lower payments, people have more money in their pockets so they can in fact spend more money on local business and that of course helps the local economy and so that is what has propelled us in richmond and motivated us to keep this

program going and we have already we have a draft jpa that we want to work with you on and have this discussion with you. see what you know you want to put in the jpa and this is a discussion and this is something that we can work out together. there is what we see is wall street, of course, trying to frighten people away, and i am very grateful that that has not happened here, because the fact of the matter is that is what wall street does and that is what the big corporations do, they try and pull their weight and that has been part of the problem. you know, they have gotten, you know, billions in bail outs and people have continued to suffer. and that is what we have to make clear that we as local government officials, have an obligation to stand up for what is right. and i mean, otherwise, we are, we have this eminent domain tool and i am glad that you

stress that, that is a tool and we would like to do it with a voluntary sale from the banks, but if they won't we have it in our tool to use the eminent domain to acquire these mortgage and remode identify them, because they want be remodified, these loans, these private label security loans any other way, there are these loans with investers from all over the world and they can't come together to set up terms for modifications for the home owners and so the only entity that can help is a local government that has imminent domain, authority and like i always say, we still would be happy to do it without utilizing the eminent domain if there was that willingness and we still call upon them to show that willingness, but we have an opportunity, we have a private entity and we have

their assurances of indemfiation and no cost to the city and not addressing the problem is a cost to the city because what you have is more and more people not being able to stay in their homes and more and more blight, and property values in the neighborhood go down and less property tax into the city's cofferand that is just not acceptable. and i mean, truly, this is not going to shatter the world as wall street and some of the banks might want the people to believe and they would have put a little crack in the fact that wall street is the banks can't dominate the whole financial scene. that there is such a thing as public government? and there is such a thing as people who will stand up to represent the home owners in their community and say what has happened is that the true and it is a tra vestty and people were targeted with predatory lending practices and now the banks are making more

profits than ever and these people are suffering more than ever and we would be remiss if we didn't use our power and the banks have to know, you know, that there are local elected officials that stand with their community. and hold the democracy that we were elected to serve. in the highest regard, and that we do not recoil and act in a fearful way when we know that we are right. we have had lawyers review this and of course, i would be very happy to answer any questions the city of richmond is doing fine with our, you know, we have not, and i know tha, we have not had problems with our bonds and we actually have a better bond deal now thap we did when this program first came out. bonds are totally separate from this program. you know, we have bonds that are based on your city's expenses and revenue, and how

well your budgetary matters are going. and it does not have to do with how you are utilizing a legal authority to at no cost to the city, to help your home owners. so i think that i will just stop there and unless there is any questions. >> you mentioned you know, reaction from the banks and from wall street and could you describe any way that was clearly reacted in a way that was harmful to the city of richmond? >> yeah, well i think first of all, well, right away they started calling all council members and such sisma, which is the lobbyists for wall street. and you know, i met with them the city manager met with them. the city attorney, by the way our city manager and city

attorney are totally on board with this and they have reviewed this the draft. gpa and it is just starting and we want to hear how we can build it together. but, the other thing, you know, we just sat there and we said, i said to sisma and the city manager. >> i am sorry it is security industry, financial market association? >> right. >> and the lobbying group... >> for wall street. yeah, for the big banks. and they came to richmond and we talked and i know that every city is considered and they have reached out and tried to scare people away but in reality, when we met with them, the city manager, you know, who is harvard graduate and former finance director and very well informed, and the city's finances and finances in general said to them, so what is your solution to these people who can't access modifications through the other avenues? these people who have these

pooled loans and these plas and they had no answer. they have no answer. so short of an answer from the banks and the federal government has done too little in helping these kinds of loans and loans in general. but, we, and the other and so that was one thing that i immediately saw as an intervention, and an attempted intervention, from them, the other thing that they did was when we did refinance a bond, sisma had never called or made, or interjections with those who were seeking to buy the bonds, and they put out a statement, about hey there is this program, and but then we refinanced them and waited a few days and circulated the bond again and we waited i think a couple of months and refinanced again and our bond rate and our bond situation actually was better than it

would have been the couple of months before. so, it is clear our finance director, and i think, you know, those of your staff and finance understand that what you have are two separate things, here. and whether there is fear of interjection, and i can tell you, it went away, it went away because we stood strong. so, i don't know if there are other questions? >> thank you mayor, i know that san francisco has had a number of sister cities, and i have seen richmond not just because of economic but of the people relationships but it is great to have you here and for the leadership that you and vice mayor bekels championing so much from sustainability as a season but also real concern for low income communities of color and giving them a voice as well. i am glad that supervisor avalos and in the packet we

have our over 5-year-old now report of our san francisco mayor's task force on african american migration and a lot of our recommendations are consistent with what we are doing with the resolution today and i know that the report sites that san francisco at its height had an african american population in 70, of about 90,000 people and we have shrunk in half of the population but by 2050 according to the california department of finance, the african american population will even shrink significantly to about a third of what we were at in 1970, but i know that the four closures are hitting hard in the south east neighborhoods and there are some in my district and in the richmond district that as supervisor avalos mentioned it is disproportion atly hitting many south and eastern neighborhoods in the city and i am wondering how the dem graphics are changing and because of the foreclosures but

how you are countering it like, our african american community is as well. >> right. well, we still have and i expect that it will get and continue this way, a majority of people of color but that majority right now, is around 40 percent latino and about 26 percent, african american and i think that we have 13 percent, asian. and the rest caucasian, and some native american and such but it kind of shifted a little and it was more of a third of latino and a third of african american and a third of caucasian and others, but it shifted more toward latinos, and more recently, that is a shift in dem graphics and still we have a strong, and large segment of our population that are african american and both latinos and african americans were hit hard by this housing crisis. >> i also wanted to commend you

for standing up to big powerful interests, whether it is banks, to chevron and other entities and trying to unite the diverse low income communities in your city for development that is without displacement and that is sustain able as well and thank you for being here. >> thank you very much. >> and so, first of all, thank you for being here and the way that you have spoken about it and just so a question for you because as a city obviously, and you know, we are to do a joint powers, could you tell me more about the dialogue that happened in richmond? >> about the jpa? >> yeah >> well, about, my partnering with san francisco and i have heard about it and just so that we can >> sure, i would like our city department to weigh in on this obviously, but talk about the dialogue and how it has evolved. >> yeah, well, the issue of doing a jpa, came about because we or actually it was there from the beginning, because it

is more, it is a better approach to do the economics of scale when you put loans together from the different cities. but, we also felt that a national movement is important, you know? and we have cities actually, and i got some of thefm written down here all over the country that are considering this, seattle and new jersey, and minneapolis, baltimore, and new york city, is actually considering it and just, the other day, someone from tacoma washington and an elected official called me. and so, what we want to do is build a movement a national movement so hey, you know, this is something that we are in together, and we want to correct. and the jpa will also protect and kind of put up a veil and a protection for the city and for the city and so it is the jpa itself that is the entity that

is acquiring the loans. and that and of course besers as i mentioned there is endemnification from the private partner and we will work out the details so everybody feels comfortable and it is clear that the type of approach that we use in them, and there are two types of eminent domain, a straight and a quick take. >> this will be the straight take and which means that as you take the acquire, a preresolution of, i forget what it is called, a resolution to acquire the loans. the charge will take a look at that and determine in his or her view, whether or not this will go forward, so actually the quick take will have it take it off the bat and if it turns out that someone sues you and oh, the court says that you are wrong, you know you have already taken it. but with a straight take you are not even allowed to take it

until the legal matter is determined. and we have, we have strong legal backing, we have actually a labor law firm that is backing this. and we believe that we would win, but even if we didn't win, and in terms of the legal matter, and the only cost that would incur to the jpa would be the cost of attorney fees for, you know, those who sued us which would be the big banks. >> so and again, this is part of my... and so the jpa and endemnifies and who funds the jpa. >> the jpa is the start up costs will come from the private partner. >> and unidentified today and private partner?

>> and that entity and we are working with a private partner but it could be any partner, they are the ones who will assure that the start up costs occur and cover all costs and i mean that the city, and our city has not had any and we have put up a website that took a few hours of staff time and that was it and that this is called mrp and it could be anyone but they are the only entity that we know of, and i think that there is others that are considering playing a partnership and i think that it was raised by supervisor avalos that there was a no*p pro-visit that wants to play a role in this. >> so, it is really a no lose

for the cities the way that i see it. >> thank you, thank you for being here. >> so this is a resolution urging that we go into negotiations for the gpa and it will be another matter before us and within that will be the conditions of how we enter and provisions for that and we have the guideline language here, that seeks to protect the city to make sure that the jpa will be a different entity from the city and that the private partners will be a part and the acquired mortgages acquiring and put in the conditions that will make it a voluntary program that will alleviate, and the trust that the homers might have and on the past history in san francisco where imminent domain