Today’s discussion was hel
d in a joint meeting of my own Finance and Culture Committee and Councilmember Clark’s Committee on Housing, Affordability, Human Services and Economic Resiliency. Councilmembers considered presentations specific to mortgage principal reduction and other foreclosure prevention programs for homeowners who are struggling in Seattle, and options to revitalize the communities impacted.
As you may recall from my earlier blog posts, Resolution 31495 directed the formation of an Interdepartmental Team (IDT) to explore principal reduction and other foreclosure prevention programs that can help low- income homeowners who have significant negative equity and may be at risk of losing their homes due to foreclosure. Since 2006, nearly five million families nationally have lost their homes to foreclosure, nine million Americans have lost their jobs, and ten million families now owe more on their mortgages than their homes are worth. Foreclosures in Seattle have adversely impacted communities of color in Seattle with nearly 8% of Seattle’s African-American and Latino homeowners foreclosed upon to date as compared to 4.5% for white homeowners.
The IDT recommended several viable alternatives to foreclosure. Because of the significant legal and financial implications of the untested strategies proposed in the Hockett Report outweigh their potential benefits, the City IDT does not recommend pursuing Hockett Report recommendations as possible City programs.
In addition, panelists from Reset Seattle, a coalition of organizations working on promoting principal reduction, including the NAACP, United Black Clergy, Casa Latina, Natural Resource Law Group; and, Washington Community Action Network, also reported to the Joint Council Committee. They urged the IDT to go beyond recommending expansion of outreach and coordination of current programs, and to also seek innovative new solutions, including models that allow an underwater homeowner to rebuy their home at fair market value and reset their mortgage. I agree that the City must find new, creative ways to provide assistance to Seattle homeowners who are struggling. With mortgage debt overhang impeding economic recovery, principal reduction on underwater homes may aide in our economic recovery.
Today’s IDT report was preliminary, so that IDT members could get input from the Council and the public, with final recommendations expected soon. In June, they will provide a secondary report to the Joint City Council Finance Committee and Housing Committee that will include a strategic plan with a timeline and program development deliverables as well as potential partners with whom the city could work to fund a program.