I am underwater.
So are at least 40 percent of the other homeowners in Manteca.
Between what I paid for my home in 2008 and what the assessor says it is worth there is a $90,000 gap.
I’m underwater, but I’m not treading water. Nor do I suspect the vast majority of other Manteca residents are in trouble just because they have principal balances on their mortgages higher than the market value of their home.
When I signed my mortgage there was no clause that said if values dropped they would drop my remaining principal accordingly. By the same token there was no language that required me to give the bank any “profit” beyond the price I paid for the home if there is increased equity if and when I sell.
There is no way I could have paid $185,000 in cash for my home. The bank took a calculated risk on me and I have an obligation to honor that trust.
The City of Richmond doesn’t see it that way.
Richmond wants to force mortgage companies to sell loans on 624 underwater homes within their city limits. If they don’t, Richmond is threatening to use government powers to sue the mortgage firms. The plan is to use the FHA to refinance the homes at current market rates and give them back to the homeowners with reduced principal and in many cases reduced interest rates.
This would make mortgage lenders big losers and the people with the underwater properties big winners. It would also put a lot of money in the pocket of a private firm — Mortgage Resolution Partners — that came up with the idea. It also will mean higher interest rates for anyone else who wants to secure a mortgage to buy a home in Richmond in the future. Lenders would rightfully want to protect themselves against the increased risk of doing business in the Bay Area city.
Keep in mind the city is not doing this because the lenders on the 624 properties used deception or illegal practices to get the people who bought the homes to borrow the money to do so. The homes are simply underwater. There is no litmus test on whether the owners can truly afford the payment or even an examination of their spending habits to see if they are squandering $200 a month on premium cable TV and going to movies while squawking about tight family budgets.
What Richmond is doing is the pure unadulterated seizure of private property — the homes secured by the mortgage loans. They are also helping a private firm benefit from repackaging the loans plus transferring a portion of the property seized to the homeowner essentially at no cost.
If being underwater is such a detrimental thing for a city to have households be in when it comes to debt then Richmond had better ban residents from buying new cars without putting 20 percent down. New vehicles are typically that far underwater the second you drive them off the lot and that doesn’t seem to bother anyone.
If creating equity in the market place so no one loses and no one wins is a civic priority for Richmond, where were they in 2004 when new home builders would sell a house for $360,000 by accepting a $1,000 down payment?. Six months later when the home was finished and the loan finally processed the home was worth $385,000. Why didn’t Richmond step up to level the playing field since the builder still owned the home while it was being built. Why wasn’t Richmond upset about the unfairness of the builder losing $25,000 on a home?
Perhaps it had to be with the fact some construction workers are Big Gulp drinkers. Richmond doesn’t take too kindly to those that drink sugary drinks hence their unsuccessful attempt last November to impose a citywide soft drink consumption tax.
Richmond leaders claim they had to take steps such as pushing the sugary drink tax and adopt the mortgage seizure plan that is now being legally challenged because state and federal officials weren’t stepping up.
Richmond, which has a notorious crime rate and a fairly large share of blight, might want to worry about the basic functions of city government before using their powers to try and force what they perceive as politically correct fixes on personal soda consumption and private sector home transactions.
This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at firstname.lastname@example.org or 209-249-3519.