City of San José Diverts Nearly $1 Billion from BofA  as Bank Foreclosure Scandal Mounts

It's happening.  Cities are starting to say to big banks, "Stop harming our communities!"   They are passing ordinances that would invest more of the public's dollars in banks committed to stopping foreclosures, and pull city money from those that continue to kick families out of their homes at record pace.

Yesterday, San José Vice Mayor Judy Chirco, City Councilmembers Sam Liccardo, Madison Nguyen, Rose Herrera and Kansen Chu, and grassroots leaders from PICO affiliate PACT San Jose announced that the city has diverted nearly $1 billion from Bank of America based on the bank's poor record of modifying loans to stop preventable foreclosures.   

The San Jose City Council voted unanimously in December 2009 to make bank's loan modification performance a criterion in deciding where the city will invests its money.  As a result, the City has moved almost a billion dollars from Bank of America this year.  In the last quarter of 2009, the City had over $1.3 billion in BofA compared to $417 million in the 3rd quarter of 2010.  The City of San José now holds just 20% of its investments in BofA.  Bank of America is no longer the largest bank in Silicon Valley.

The San Jose policy is the first of its kind in the nation to tie the level of city investment that a particular bank receives to its foreclosure prevention practices.  You can watch TV coverage of yesterday's event here.
 
Yesterday's event occurred on the same day that the U.S. Treasury released data showing that the Administration, even amidst the controversial robo-signing scandal, is still not doing enough to hold the nation's biggest banks accountable for commitments they made to prevent foreclosures when they accepted federal bailouts in 2008.  According to the Treasury report:
 
* Over the last 18 months, banks have offered permanent loan modifications to just 466,000 homeowners.  But in just the first nine months of the year, nearly 2.7 million homes have received foreclosure notices, and millions more are on the brink of foreclosure.
 
* Banks did just 27,480 permanent modifications in September, a number that pales in comparison to the more than 100,000 bank repossessions of homes during that same month.  
 
* Most troubling, there are 76,500 homeowners who have been waiting for more than six months in the limbo of a trial loan modification.  Banks are supposed to make a decision on whether someone is eligible for a permanent modification within three months.   One-half of all borrowers in limbo are being strung along by one bank: Bank of America. Incredibly, more than one-half of all families who have trial modifications from Bank of America have been waiting for longer than six months to receive a permanent modification. 

* Bank of America also has the worst record of customer service in the foreclosure prevention program, ranking last in Average Speed to Answer a Homeowner Call, Call Abandon Rate and Servicer Time to Resolve Third-Party Escalations.

Luckily, while the Administration continues to turn a blind eye to the banks, local officials like those in San Jose are starting to pick up the banner, calling on banks to do much, much more to keep families in their homes or else lose city deposits.

San Jose City Councilmember Madison Nguyen said at yesterday's event, "The homeowners in my district need Bank of America to make a strong effort to work with them. Homeowners are not asking Bank of America to buy back their bad loans like many of these sophisticated investors are asking BofA to do. The homeowners in my district want to keep their homes. They simply cannot pay the high, adjusted rates of their B of A home loans.  Banks need to work with homeowners to provide sustainable loan modifications that start with reducing principal."

PACT faith and community leaders and San Jose city officials called on other cities to follow their lead in adopting social responsibility investment policies to hold banks accountable for ethical policies and practices to keep families in their homes and rebuild the economy.

"Our City has already taken action, and this is the time for other cities to take action. I invite the other 10 largest cities in the United States to look at where their money is and stand with your homeowners and families. I invite Bay Area cities to do the same," said City Councilmember Rose Herrera. "This is not only an ethical action, it is an economically responsible action. Each foreclosure costs our city an estimated $27,000 in lost tax revenues. That means every two to three foreclosures cause another teacher, another police officer or another firefighter to lose their job at a time when the City simply can't afford that."

City Councilmember Sam Liccardo reported that he recently worked with San Francisco to develop their own policy modeled after San José's. Even tougher legislation is pending in Los Angeles as well.

To find out more about passing a similar policy in your city, contact us at news@piconetwork.org.