More than seven months after announcing it was entertaining a proposal to use eminent domain to acquire underwater mortgages to help stabilize the local housing market, a San Bernardino County joint powers authority on Thursday rejected the proposal.
The proposal, rolled out by San Francisco investment firm Mortgage Resolution Partners last summer, intrigued cities and counties across the nation hardest hit by the subprime mortgage crisis and garnered national opposition by the real estate and mortgage industries, which joined forces in an effort to stop the proposal in its tracks.
But it was potential risk and a lack of community support, not threats of litigation and the cutting of credit to homebuyers in San Bernardino County, that prompted the Homeownership Protection Program -- the joint powers authority (JPA) composed of the county and the cities of Fontana and Ontario -- to back away from the proposal, said Greg Devereaux, chief executive officer of both the county and the JPA.
"It introduced risk into the market that we couldn't quantify," Devereaux said following Thursday's meeting. "My conclusion was that I was not in a position and didn't have the knowledge to asses that risk, therefore, it had to be a community decision."
But community support for such a program never materialized.
"It wasn't a decision a board like this should make unless there was overwhelming support in the community for going forward with that and assuming that risk," Devereaux
said. "That support never materialized. Had it, maybe it would be a different discussion, but it didn't."
The five-member JPA board unanimously voted to solicit proposals from organizations and/or individuals on ways the county could stabilize its housing market and thwart foreclosures, but took the proposal by Mortgage Resolution Partners off the table.
A formal request for qualifications will soon be going out, with responses expected in the next four to six weeks, Devereaux said.
Representatives of Mortgage Resolution Partners, who have traveled the country pitching their idea to other cities and counties over the last seven months, opted not to attend Thursday's meeting after learning the JPA would not be considering their proposal.
"We are disappointed that the JPA in San Bernardino chose not to explore all options to prevent mortgage foreclosures in their jurisdiction, a jurisdiction where roughly two thirds of the (private label securities) mortgage holders are currently underwater and some one third are already in default," said Steven Gluckstern, chairman of Mortgage Resolution Partners, in a statement Thursday. "JPA members have publicly stated previously that to not fully explore all options would be irresponsible."
Gluckstern said he and representatives from his firm are currently in discussions with two dozen other cities or counties across the nation, including cities in San Bernardino County.
One of those cities is a member of the joint powers authority -- Fontana. Mayor Acquanetta Warren on Thursday said the city, where 49 percent of its homeowners owe more on their homes than they are currently valued at, is considering the proposal separately from the JPA.
"We continue to believe that it would be irresponsible for the city of Fontana to not examine all options available to strengthen our community by helping our underwater homeowners," Warren said. "While the JPA today apparently decided to limit the scope of the options they would consider, it is our intention to go forth aggressively to help find local solutions to Fontana's mortgage and foreclosure crisis."
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