Foreclosure Fairness – A Win-Win Solution for San Francisco
When a home falls into foreclosure, everybody loses – the homeowner, the bank, the neighbors and the city.
That’s why we need to make sure we are doing everything in our power to keep more families in their homes – a process that will be just a little easier if the legislation I am proposing, along with Supervisor John Avalos and many others, becomes law.
How Does the Foreclosure Process Affect All Residents?
When we see clusters of foreclosures, as we have experienced in parts of San Francisco, property values in those neighborhoods start to fall. That means tax revenues we rely on to fund basic priorities from schools to libraries to public safety also decrease.
The neighborhoods themselves must cope with collateral problems, like blight, crime and the other consequences of abandoned homes. In San Francisco neighborhoods like the Bayview, the foreclosure rate has been as high as 37%.
Of course, it doesn’t help the banks when they are left with a crushing inventory of homes they are responsible for maintaining.
And the families facing foreclosure not only lose their homes, they lose much of their net worth. In a society in which families rely on the equity in their homes to help start small businesses, send children to college and retire with dignity, the wholesale loss of home equity will ripple through generations.
The Foreclosure Fairness Initiative – Holding Our Banks Accountable
Last week, along with Supervisor John Avalos, I announced the Foreclosure Fairness Initative, which is designed to close a glaring loophole in our transfer tax law.
As most of us know, when we sell our homes we pay a transfer tax to the city. Businesses also pay this tax when they sell commercial property. This transfer tax has been a growing part of our tax revenues, and I’m proud my Office has made collection of these fees fairer and more effective with programs like our investigations to find more big companies that had been avoiding paying these fees.
But as hard as it is to believe, under current city law, banks are exempt from paying this transfer tax when they foreclose on a home. Under this new initiative, the banks would have to pay the same transfer tax the rest of us pay when we sell a home or property.
By closing this loophole, the Foreclosure Fairness Initiative will give banks a greater incentive to pursue loan modifications that keep residents in their homes, so they can continue making payments on their property and prevent widespread property devaluation.
How Will The Foreclosure Fairness Initiative Affect San Francisco?
This measure was not created with the intention of raising revenue for the city. In normal years with few foreclosures, like 2005, it would generate less than $200,000 in new revenue. In years where there is a high volume of foreclosures, like 2008, the initiative could generate an additional $8 million.
But the point of closing the transfer tax loophole is not to make the banks pay more in taxes, it is to give them a greater incentive to keep our neighbors in their homes. If the bank can’t find a way to do that, then it is only fair they pay the same transfer tax we pay – a revenue stream that will help make up for the loss of vital revenue driven by the foreclosure crises. But our hope is that by closing this loophole we will give banks the extra incentive they need to help keep families in their homes.
Earlier this year, my office released a first of its kind audit, which concluded that the overwhelming majority of foreclosures in San Francisco had irregularities or legal violations.
We must address the foreclosure crisis on many fronts. I hope you will join me in strong support of the package of state legislation known as the Homeowners Bill of Rights being advanced by Attorney General Kamala Harris and others. We must also continue to advance sound programs like Don’t Borrow Trouble that combat predatory lending and provide sound financial counseling to homeowners and potential homeowners.
But we can take a simple, fair and effective step right now in San Francisco to fight foreclosures by passing the Foreclosure Fairness Act. I am confident that the Board of Supervisors will pass the Foreclosure Fairness Act, and I am hopeful that if it is on the ballot in November, San Franciscans will send a message that by working together, the banks, homeowners and the city can create a better economic future in San Francisco.