Do cities have tourniquets that can be used to stop the subprime mortgage bleeding?
They like to think so, but the answer appears to be no. Instead, cities are increasingly focused on two things: First, increased code enforcement to make sure that abandoned houses and neighborhoods aren't rundown. And second, finding a silver lining in the dark cloud by helping first-time homebuyers purchase repossessed houses.
That, at least, was the take-home message from the Regional Housing Summit in Riverside last week, put together by the Southern California Association of Governments. The Inland Empire – with its plethora of starter homes – has been especially hard-hit by the subprime mortgage crunch. No surprise in the era of $4 gas, considering how far the Inland Empire is from the major employment centers in L.A., Orange, and San Diego counties.
"We've had meetings to try to talk people out of walking away from their homes," said Riverside Mayor Ron Loveridge. But he admitted it may not do much good. Loveridge did say that the city is retooling its first-time homebuyer program to try to get houses out of bank "repo" as quickly as possible. Only repossessed houses may be bought with first-time homebuyer funds.
Both Loveridge and Rialto Councilmember Deborah Robertson said their cities are adopting new ordinances to crack down on problems with abandoned homes and make sure that the current owners – even if they are banks – maintain those houses so that neighborhoods don't become rundown. Loveridge acknowledged, however, that it can be hard even to determine who the owner of the property is because the subprime mortgages were bundled and sold as securities on Wall Street.
Cities with redevelopment agencies may yet wind up bailing out subprime borrowers. AB 2594, which would give redevelopment agencies the power to provide subprime refinancing, has passed the Assembly and is now pending in the Senate. The bill wouldn't mandate that redevelopment agencies bail out subprime borrowers, however.
-- Bill Fulton