Council passes resolution relating to principal reduction, foreclosure

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City of Seattle

Councilmember Nick Licata

Council passes resolution relating to principle reduction, foreclosure

SEATTLECity Council unanimously adopted a Resolution today relating to principle mortgage reduction and foreclosure.

The resolution establishes a City of Seattle Interdepartmental Team, or IDT, which will evaluate whether principal reduction and other foreclosure prevention programs effectively provide assistance to low- income homeowners. The IDT is scheduled to report back to Council on March 15, 2014 with recommendations of which approaches Seattle should consider in an effort to help low-income homeowners and revitalize communities impacted by the foreclosure crisis.

Principal reduction programs rewriting mortgages to reflect the actual value of a home, as proposed in the report, Post-Bubble Foreclosure-Prevention and Mitigation Options in Seattle, authored by Cornell University’s Robert C. Hockett, commissioned by the Council earlier this year.

City Councilmember Nick Licata, chair of the Housing, Human Services, Health, and Culture committee, said, “Principal Reduction may aide in our economic recovery by returning some of the money that is going to the banks back into people’s hands thereby helping the economy too,” said Licata. “Programs that accomplish mortgage principal reduction for homes that are ‘underwater’ (when more money is owed on a home than the home is worth) are better strategies to pursue than traditional mortgage prevention programs that either provide limited monetary assistance or lower monthly payments.”

The IDT is expected to report to the City Council in June 2014 on the type of low-income homeowner mortgages that a program should target, as well as presenting a draft strategic plan for the development of the program, which will include a list of the potential partners to fund the program.

[View in Council Newsroom]