Menlo Park Tries Some Innovative Idea To Fight Foreclosure

Tonight is a very special night for Menlo Park’s people, the city council thinking of proposing an innovative approach to prevent foreclosure for harassed homeowners. This will come with a huge up-front price tag.

“To me, the most important thing is to keep people in their homes and not disrupt families, not take kids out of school,” stated Councilman Andy Cohen. “This is the only program on the horizon that does that.”

The Foreclosure Prevention Program aims owner-occupied houses with credits more than 90 days past due.

EARN told that the monthly housing cost of a homeowner can go down to almost half. In what is basically “silent second mortgage,” the city will raise about 30 percent of the house’s price as a cash investment, parting the house owners with mortgage for about 70 percent of the house’s fair market price at the present down interest rates.

Looking for conurbations

For-profit companies are looking for cities to test whether their policy works or not. EARN, a for-profit company paired with nonprofit Northern California Urban Development, an East Palo Alto group to build a program to work on this. Big banks are showing interest in such programs, said Shapiro. Even small credit unions like Community Trust in East Palo are ready to do the refinancing for the people of Menlo Park and for East Palo Alto.

“This is aimed at keeping people in their houses in their communities, rather than having the houses turn over and flip,” quoted Marc Prioleau, one of the founding board member of NCUD.

Huge up-front cost

This program is not so easy to implement, as it needs a huge capital investment upfront. This money might be blocked for years because the repayment can be delayed for years. The proposal of investing $100,000 or so in an aberrant home may not go well with a lot of taxpayers.

Shapiro still hopes that after a proper demonstration in cities, it can draw some foundations or organizations like California Public Employees’ Retirement System or California State Teachers’ Retirement System to offer assistance.

“The city has to be the catalyst,” Shapiro said. “We have work to do to convince (potential partners) of the value of this as an investment.”

Other plans have failed

While adjusting mortgages to turn them more reasonably priced has become a sacred grail of foreclosure-preclusion endeavors countrywide, plans that decrease the chief on the mortgage have turned to be unsuccessful as banks are reluctant to state what they are owed. Still almost half of the modified mortgages end up into default.

“I haven’t seen too many write-downs of principal,” stated Keisha Woods, the program manager with East Palo Alto Community Alliance and Development Corp, that counsels stressed homeowners. “If they can get over that hurdle of getting the lenders to cooperate, this would give people who don’t have too many options a way to stay in their homes.”

Public may be divided

This program might face immense public opposition, thinks Cohen. He also thinks that the program will find support also.

“We have a large contingent of the populace that wants to preserve Menlo Park, don’t want vacant homes, don’t want the public safety danger they create, don’t want the nuisance, don’t want the blight,” he further added. “It’s actually better for everyone if we can keep people in their homes. Our dream is to set an example, and create a model that would work.”

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