We're All In This Together

by: Eric Garcetti

Mon Feb 23, 2009 at 17:29:23 PM PST

Last week, President Obama laid out his administration's Homeowner Affordability and Stability Plan to deal with the foreclosure crisis. I wanted to weigh in on it since, as President of the Los Angeles City Council, it's been an issue my office has been working extremely hard on for months at the local level.

Obama's plan would devote $75 billion from the TARP funds as well as $200 billion in additional funding commitments to Fannie Mae and Freddie Mac to help between 7-9 million families avoid foreclosure and stay in their homes. This is particularly important here in California where, according to RealtyTrac, in 2008 alone California saw more than 520,000 of its homes receive foreclosure filings, a jump of 110% over 2007.

I was heartened by this plan because, while it's not perfect, it does several things that I think are very important. 1. It provides incentives to servicers who lower interest rates and to borrowers for keeping current on their loans; 2. It helps restructure loans and reduce monthly payments for responsible homeowners who wish to stay in their homes; the plan does not reward speculators, house flippers or dishonest lenders; and 3. The plan reflects the reality that I've been dealing with on the ground here in Los Angeles for months now: that solving this crisis is not just about saving homeowners' homes, this is about saving entire communities.

From The Treasury's executive summary:

The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country. [...]

The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs.

It goes on:

Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.

The impact of a foreclosed home on its neighborhood can be devastating. Not only does each foreclosed home reduce nearby property values by as much as 9 percent, but a boarded up house invites crime and leads to blight, a particular concern in the Los Angeles area.

More...

To this end, in October I called on Countrywide to cease and desist their illegal eviction practices after they attempted to evict a tenant in my district. Then in December, I authored a new law to stop evictions of tenants in foreclosed properties because we have to protect the innocent victims of the foreclosure crisis.

In addition, my office has worked closely with One-LA, a grassroots coalition of community organizers, religious congregations, and neighborhood groups who have been at the forefront of helping families renegotiate the terms of their loans with banks.

In many ways, President Obama's plan represents the federal government catching up with what we've been doing at the local level for months now. I can't tell you how nice it is to have a partner in the White House again and a President who really gets it. The thrust of this plan acknowledges that on a very real level, if our neighbor is in foreclosure, so are we and that saving my neighbor's home saves mine. In other words, it reflects that progressive virtue that drives me in my work every day: that we're all in this together.

[Ed: Slightly edited from original version - Todd]