San Fernando Valley Sun
By Andres Chavez
Aug 19, 2009
On Aug. 14, the Los Angeles City Council unanimously approved a final report creating a one million dollars pilot program to help homeowners in Pacoima who are facing foreclosure keep their homes. The program creates incentives for banks and other lenders to reduce the principal amount of the loan and thus lowering monthly payments.
Using Community Redevelopment Funds, the program would provide "silent second" loans up to $75,000 if the lenders reduce the principal owed by borrower. For example, a homeowner is "underwater" by $70,000, that is, the loan is for $70,000 more than the house is worth in the current market. Under the foreclosure reduction pilot project, the City would pay $35,000 and the lender would reduce the loan by $35,000 and so reduce the principal by $70,000. In other words, the city and the lender would each pay half of the "underwater" amount. In the above example, that was $70,000 or $35,000 and $35,000. The City's half would never exceed $75,000. When the home is sold, a portion of the profits would be used to repay the City and the lender.
"Today, we are one big step closer to keeping Los Angeles homeowners who are facing foreclosure in their homes with an affordable house payment," said Council member Richard Alarcon. In January, 2009 he introduced the motion which created the pilot project. Approved by the City Council in May, 2009, the motion was then forwarded to the Community Redevelopment Agency Los Angeles (CRA/LA) to receive Board approval to fund the program and to work with the Los Angeles Housing Department (LAHD) to develop the guidelines for the program. The report approved by the City Council on Aug. 14 included the CRA/LA funding approval and LAHD report and Memorandum of Understanding (MOU) with CRA/LA.
The pilot project plan was originally presented to Council member Alarcon by One LA-IAF, a broad-based, nonpartisan organization of dues-paying member congregations, schools, unions and non-profits committed to building power for sustainable social and economic change. One LA-IAF and Neighborhood Legal Services have been strong advocates on behalf of homeowners facing foreclosure. The organization worked with CRA, LAHD and Council member Alarcon over how the foreclosure pilot project would be conducted and will continue to work with all parties for the duration of the program.
Other City Council members want the program replicated throughout the City of Los Angeles. They are working with the CLA, City Attorney and the CRA/LA to find avenues and funding sources.