UC Berkeley Study Looks At Underwater Mortgage Problem, Supports Richmond’s Eminent Domain Plan
RICHMOND (KCBS) – A new report from UC Berkeley’s Haas Institute for a Fair and Inclusive Society shows the widespread problem of underwater mortgages continues to affect cities throughout the country, including several in the Bay Area.
The report, titled “Underwater America: How the So-Called Housing ‘Recovery’ is Bypassing Many American Communities” is a first-of-its-kind look at the magnitude of the underwater mortgage issue.
Read The UC Berkeley Report (.pdf)
“According to the data that we’ve looked at, the overwhelming proportion of cities and zip codes with the worst underwater mortgage problem are those with a high proportion of Latino and African American families,” said Peter Dreier, Chair of the Urban and Environmental Policy Department and Professor of Politics Occidental College, and a co-author of the study.
The report found that almost 5 million families have lost their homes to foreclosure since 2008, and foreclosures continue at rates higher than prior to the Great Recession. For African Americans and Latinos specifically, between 2005 and 2009, they experienced a decline in household wealth of 52 percent and 66 percent, respectively.
Bay Area cities with the highest percentages of underwater homes are Vallejo, Fairfield, Antioch, and Richmond. Co-author Saqib Bhatti said they support local governments taking matters into their own hands to give homeowners relief.
“What that means is taking steps, like the Richmond CARES program, which would involve using reverse eminent domain to acquire the mortgages from investors if they are unwilling to sell them,” Bhatti said.
In the 100 hardest-hit cities in the U.S. with populations over 100,000, the number of underwater homeowners ranges from 22 to 56 percent. In those cities in 2013, more than 320,000 homeowners went into default or foreclosure.
Among the recommendations to address the crisis: to have loan holders and investors reduce the principal on underwater mortgages to current market values, and if they are unwilling or unable to do so, to allow these loans to be purchased by publicly-owned or nonprofit entities that are willing to restructure them with fair and affordable terms.
The authors of the study said if bold action is not taken, entire cities will suffer the ripple effects of deteriorating neighborhoods.