On April 1st, Mayors, homeowners and advocates called on federal officials to stand with local communities, including Irvington and Richmond, over Wall Street lobbyists that have threatened illegal retaliation against their cities because of an anti-foreclosure program known as Local Principal Reduction.
In a telephone press conference, Mayor Gayle McLaughlin of Richmond, CA, and Mayor Wayne Smith of Irvington, NJ, released two letters signed by more than two dozen local officials from across the country — one to Mel Watt, the Director of FHFA, and one to Attorney General Eric Holder — along with 11,000 signatures from around the country asking that the Department of Justice investigate fair housing violations by SIFMA, the leading lobby organization for Wall Street mortgage securities traders.
McLaughlin and Smith lead cities on opposite ends of the country with large populations of underwater homeowners, specifically homeowners who are people of color. Both of their cities have initiated steps toward beginning a new local foreclosure prevention program known as Local Principal Reduction or “reverse eminent domain.”
“Although separated by two coasts; today Richmond and Irvington spoke with one voice,” Mayor Smith said. “The friendly condemnation of toxic mortgages is necessary to save our main streets from the predatory tactics of wall street. I stand proudly with Mayor McLaughlin in the fight to keep our citizens in their homes.”
The letters were transmitted to Watt and Holder via email today and have also been sent via US Postal Service.
Under previous leadership at the FHFA (under Watt’s predecessor Ed DeMarco), officials took an aggressive stance against Local Principal Reduction in a way that harmed communities of color. The ACLU, ACLU of Northern California, ACLU of New Jersey, and the Center for Popular Democracy, on behalf of the Home Defenders League, the Alliance of Californians for Community Empowerment, and a group of community organizations, filed a FOIA request to find out why.
“For years, cities and communities of color were targeted by predatory lending practices and sold toxic subprime mortgages, resulting in a foreclosure crisis,” said Udi Ofer, Executive Director of the ACLU of New Jersey. “Now those same cities that were targeted by predatory lending should be able to consider their full range of options to rescue homes from foreclosure, and to stabilize communities that are facing blight because of discriminatory lending practices.”
In response to the FOIA request, FHFA produced over 1,000 pages of records, detailing extensive contact between the financial industry and high-level FHFA officials. Last week, the FHFA produced another 450 pages of records. The records include a series of emails that show FHFA’s senior officials followed instructions from SIFMA, a leading financial industry trade association, to intervene when San Bernardino, California, was considering Local Principal Reduction using eminent domain solution.
John Relman, a partner at Relman, Dane & Colfax PLCC, and national legal expert on fair housing, said that it appears SIFMA and the banks have retaliated against cities that explored Local Principal Reduction as a foreclosure prevention mechanism, that illegal redlining has occurred, the banks are in violation of the Fair Housing Act, and that the illegal acts have disproportionately impacted minority homeowners.
Some key information from the FOIA request:
LINK TO EARLIER FOIA MATERIALS DATED JANUARY 15 2014: https://www.aclu.org/legal-document/federal-housing-finance-agency-foia-documents-eminent-domain?redirect=racial-justice/federal-housing-finance-agency-foia-documents-eminent-domain