"Richmond rhymes with enrichment," Gayle McLaughlin, the mayor of the California city, boasts on the city's website. In reality, Richmond does not rhyme with enrichment. The slogan, however, is apt for the first American city poised to seize mortgages by eminent domain. City pols claim that the scheme is legal because the city would pay "fair market value" for private property in the furtherance of public good. Call the scheme Richmond Hood, in honor of Robin of Sherwood Forest.
It turns out Richmond does spell enrichment -- for Mortgage Resolution Partners, a startup in which San Francisco Chronicle columnist Willie Brown was an initial investor.
The plan originally was billed as a means to help Richmond by "preserving home ownership, restoring homeowner equity and stabilizing the communities' housing market and economy by allowing many homeowners to remain in their homes." Folks figured that meant fixing up homes and eliminating blight in depressed neighborhoods, Councilman Nat Bates recalled. "Lo and behold," he added, "we find out that we have folks with million-dollar homes" that can be helped.
As the Chronicle's Carolyn Said reported, with MRP's help, Richmond threatened the seizure of 624 underwater mortgages. The vast majority of the loans, 444, are current on their payments; 180 are delinquent. The three most expensive mortgages are for $1.22 million, $962,307 and $888,000 for homes in Richmond's priciest hood, Point Richmond on the waterfront.
The city offered $679,834, $543,608 and $510,727 to purchase those three mortgages. For a $4,500 fee, MRP helps homeowners get lower loans, and the city pockets profits in the process. (MRP would not talk to me on the record.)
So far, no surprise, no bank has taken up Richmond on its "fair market value" proffers. Still, the purveyors of Richmond Hood contend that the deal benefits the public.
Enter the cold embrace of reality. In August, Richmond tried to refinance $34 million in A-minus-rated bonds. No one bought them.
Richmond homeowners who have kept up their mortgages should be asking themselves, "If I want to sell my house in three years, will potential buyers be able to secure a mortgage in a town known for robbing banks by fiat?"
"It sounds good, the eminent domain, and I'm not in love with the lending institutions, because I do feel they've taken advantage of a huge number of our citizens," said Bates, who plans to introduce a motion Sept. 10 to withdraw the city's purchase-or-go-to-court offers. "They're a hard-nosed group of people. But at the same time, I can't in good conscience go out and take these people on when they do have certain rights."
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