Holding local elected office in Richmond is not for the fainthearted. The city's mayors and City Council members take more than their fair share of guff. That is why I think it only fair to give Richmond officials the benefit of the doubt.
We should take them at their word that their intentions are pure -- that they are trying to do what's best for the city and residents, and putting personal political agendas second. This view is being sorely tested, however, as Mayor Gayle McLaughlin and her council allies cling to their plan to intervene in residential lending markets on behalf of underwater homeowners in Richmond.
It is no secret the organization to which I belong, the West Contra Costa Association of Realtors, has actively opposed the idea of using eminent domain to seize mortgages. We are in the business of helping homeowners and homebuyers, and we support responsible home-retention methods, including loan modifications and principal write-downs, mutually agreed upon by borrower and lender.
However, we believe the unprecedented use of eminent domain to seize mortgages at pennies on the dollar would disrupt residential lending in Richmond, with potentially cataclysmic consequences for real estate values and homeowners.
We also understand that reasonable minds can disagree on such matters. What is not open to debate is that recent developments necessitate a re-evaluation of the potential risks and rewards of the eminent domain-for-mortgages plan.
At the outset, the city, through its partner, Mortgage Resolution Partners, a company formed by former Wall Street financiers, identified borrowers who might benefit from the program.
In July, the city sent solicitation letters to holders and/or trustees of 624 of these mortgages, urging them to voluntarily sell the loans at steep discounts or face the prospect of the loans being taken via eminent domain.
Now consider what's happened since. Long before the council could take the next step, the public cost started mounting. Investors in mortgage-backed bonds filed a federal lawsuit, claiming the eminent domain threat amounted to white-collar theft.
Regardless of the merits of the claim, the cost of the city defending itself has siphoned city resources and future litigation holds the potential of massive legal judgments against Richmond.
Next, investors in municipal bonds eschewed Richmond's debt offerings, spooked by the financial unknowns of the city's course.
As a result, Richmond is booking millions in lost savings on debt refinancing and faces the prospect of higher borrowing costs that eventually mean less money for vital public services. And now, on the positive side, we're seeing a resurgence of Bay Area real estate values reaching the East Bay and city of Richmond in big way.
According to DataQuick, a widely relied upon real estate information service, Richmond home values in the third quarter are up double digits in every neighborhood over the same period one year ago. Presumably, once underwater homes are breaching the surface across all Richmond neighborhoods -- and becoming less of a foreclosure threat.
So, what's a local elected official to do? Presumably, it's time to take a breath and reassess, at the very least. In the case of Richmond's mayor and her allies, it is a question of priorities. What's most important? Is it city residents and their interest in fiscally sound municipal government, or is it scoring political points, making headlines, and attempting to play Robin Hood to a dwindling few?
Jeffrey Wright is an independent Realtor and the former president/CEO of the West Contra Costa Association of Realtors.