In a renewal of the growing political alliance between moderate Republican California Governor Arnold Schwarzenegger and progressive Democratic Oakland Mayor Ron Dellums, Schwarzenegger came to Oakland last week to announce the launching of a pilot project to help Oakland homeowners hit hard by the nation's subprime lending and home foreclosure crisis.
Under the project, founders Tom Steyer and Kat Taylor of the Oakland-based OneCalifornia Foundation are donating one million dollars for the creation of a “Community Homeownership Fund” to help selected distressed Oakland homeowners refinance their mortgages and reorganize their credit. Families admitted to the program will receive financial literacy counseling, free banking services at foundation-affiliated OneCalifornia Bank, and have access to a line of credit to cover the gap between their current payment and a negotiated new rate with their lenders. If the project is successful, it will be expanded to other parts of the state.
Oakland has been one of the areas of the state hardest hit by the subprime crisis, ranking 10th in the nation in foreclosure filings against homeowners hit with rising interest payments.
At a Fruitvale district press conference flanked by Dellums, Steyer and Taylor, and members of the Fruitvale Unity Council, Schwarzenegger said that “when people lose their homes, the neighborhood loses, the neighbors lose, the local businesses lose, the city and the state loses. There are no winners here.”
While saying “there is no simple solution or silver bullet to the subprime mortgage crisis, this is a tremendous example of the private sector working to solve a community problem.”
However, asked by a reporter if the state would intervene to provide tax relief for embattled homeowners by deferring payment on owed taxes, Schwarzenegger threw cold water on that idea, saying tersely, “we are going to be collecting.” Referring to the state's looming $10 billion budget deficit, the governor said that “as everyone is out there struggling, we are struggling too. We have to show fiscal responsibility.”
The state will play no role in the pilot project, but by throwing his name and prestige behind the project, Schwarzenegger appeared to be encouraging Oakland's role as a state center of pilot project innovation, as well as using it, as he said, to “encourage foundations all over the state to follow this fantastic example.” With little or no state money available to help blunt the effects of the subprime lending and home mortgage foreclosure crisis, Schwarzenegger, like Dellums, is counting on privately funded programs to fill in the gaps.
Steyer said that the program, which would initially enlist between 20 and 50 Oakland families, would work with lenders to keep the mortgage rates at the “initial teaser rates,” and would loan money to homeowners to help them restructure the debt on their houses “to get a first mortgage they can afford. It will cost the homeowner nothing on a current monthly basis, and it will allow them to stay in their houses.” While Steyer said this would only be a small step towards alleviating the crisis, “our goal is to jump in the water and start swimming, and then to figure out how to do more.
Sherry Powers, who manages the homeowner center for the Unity Council, said that in connection with the OneCalifornia pilot project, the council would provide foreclosure prevention workshops for homeowners. “Many of these homeowners did not have any financial counseling prior to buying their homes,” Powers said, saying this was one of the reasons homeowners were lured into mortgages that they could not afford.
Meanwhile, Dellums called the OneCalifornia Foundation project “an extraordinary pilot program.” He said that the program will “deal with only one aspect of the subrime mortgage crisis,” and that he and his staff are working on setting up a meeting with lenders and bankers in Oakland “to come together to address the entire panorama of issues” surrounding the crisis.
The Oakland mayor has been counting heavily on building a relationship with Schwarzenegger to help fund his proposed “model city” programs for Oakland. Under Dellums' proposals, Oakland would become “the model city,” for the state of California, with the city funneling in an array of state and private foundation-funded pilot urban development projects that can be tested in Oakland and then farmed out to other areas.