The county and the cities of Ontario and Fontana have closed out the cooperative foreclosure fighting effort the three embarked upon five years ago.
In 2012, the lingering effects of the 2007 mortgage meltdown and the ensuing recession were yet resounding throughout San Bernardino County. Unemployment in the county stood at 12.6 percent. Overall, 264,122 of the 488,422 single family homes in the county’s 24 incorporated cities and towns and unincorporated areas had at some point in the previous four years been underwater. Of those 264,122 homeowners whose homes cost more than their then-assessed value, 63.7 percent or 168,246 had received notices of default.
In an effort to stem the tide of foreclosures county residents were facing, then-county executive officer Greg Devereaux championed and in part constructed a tentative plan which was adopted by resolution of the board of supervisors on April 10, 2012, approving a joint exercise of powers agreement between the County of San Bernardino and the cities of Ontario, Fontana and Hesperia to explore the development of a program to assist homeowners within their jurisdictions who resided in properties with negative equity. The city councils of both Ontario and Fontana took actions approving entering into the joint powers agreement.
At that time, more than 5,000 homeowners in Ontario, a similar number in Fontana and more than 3,000 homeowners in Hesperia were in arrears on their mortgages, with lending institutions inching toward foreclosure proceedings against many of them.
Simultaneously, county officials, as well as their counterparts in Ontario and Fontana, along with then-Hesperia mayor Russ Blewett, had concluded that lending institutions’ practice of sitting on foreclosed homes was stagnating the local economy and blocking recovery.
The joint powers authority, officially known as the Homeownership Protection Program Joint Powers Authority, chartered itself with the power of eminent domain, which had traditionally been used to condemn and acquire property for public use. The joint powers authority was contemplating utilizing condemnation procedure to force lenders to hand over the mortgages that were in arrears so that they could be refinanced to provide the homeowners with more affordable payments. The plan was that upon the condemnation of the properties in question, the owners of the loans would be forced to sell at a price deemed to be fair market value, pursuant to a court’s determination.
On June 5, 2012, the Hesperia City Council voted down the invitation to join the Homeowner Protection Joint Powers Authority, with Blewett able to get only a single vote, that of councilman Bill Holland to support joining the organization.
On June 19, 2012, the county board of supervisors approved a first amended and restated joint exercise of powers agreement with Ontario and Fontana. San Francisco-based Mortgage Resolution Partners, an investment group, was lined up to work with the joint powers authority. Mortgage Resolution Partners had created a niche for itself by working to counteract the proliferation of so-called securitized mortgages, i.e., the practice of bundling mortgages which were then sold to massive numbers of investors. That practice was seen as a contributory factor to the mortgage crisis because it created a situation in which a single lender no longer held the mortgages, preventing homeowners from renegotiating their loans when the value of their property had plummeted.
Mortgage Resolution Partners, having already secured the backing of investors representing over a billion dollars in ready capital to fund the effort and take possession of the mortgage notes in line with the market value of San Bernardino County homes they were tied into, said it would assist homeowners in getting renegotiated loans that reflected the actual value of the property. Mortgage Resolution Partners was seeking to get a fee on each transaction.
Eminent domain long has been derided as a potentially onerous and overreaching power of government. The contemplated expansion of that power triggered the objections of eighteen real estate and banking business and trade entities, which maintained the plan to use eminent domain constituted “very serious legal and constitutional issues,” that would prove “immensely destructive to U.S. mortgage markets by undermining the sanctity of the contractual relationship between a borrower and creditor.”
The Homeownership Protection Program Joint Powers Authority thus never actuated its aggressive effort to directly interrupt the wave of foreclosures in the county. Nevertheless, it is believed the existence of the authority to do so modulated the degree to which those foreclosures took place.
This week, more than two months after Greg Devereaux took his leave as county administrative officer, Gary Hallen, the county’s director of community development and the head of its housing agency, told the board of supervisors, “The joint exercise of powers agreement for the Homeownership Protection Program between the County of San Bernardino and the cities of Ontario and Fontana was created to develop a program to assist homeowners within the parties’ jurisdictions. The Homeownership Protection Program Joint Powers Authority served to assist in preserving home ownership and occupancy for homeowners with negative equity, assist homeowners avoid the negative impacts of underwater loans and to address the significant number of foreclosures and its impact to local economic vitality and health of the communities served. The economic conditions that were the impetus for the creation of the Homeownership Protection Program Joint Powers Authority no longer exist; therefore, the parties wish to terminate the agreement and dissolve the Homeownership Protection Program Joint Powers Authority established thereunder. The termination of the agreement was approved by the authority’s members’ governing bodies for the Cities of Ontario on May 16, 2017 and Fontana on May 9, 2017.”
The board agreed to pull the plug on the authority this week.
-Mark Gutglueck