Forcing Teachers into Foreclosure: Thank you Governor Brown

The challenge with being involved in your government is having the time and energy to dig through the information to find the facts. Most of the time, the average citizen (like myself) only reacts to a public policy change when it lands on our doorstep. I have been following the debate regarding Governor Brown’s shutting down of the state’s Redevelopment Agencies. I have attended many functions over the last year where developers swore that this would have a huge impact on their ability to develop homes for “in-fill” areas. Simply put, without government subsidies it would not be cost effective to create new town homes in a transitional neighborhood of San Jose because affordability would be out of reach for the average resident.

If you listened to the debates, why should property taxes go to big developers? Pet projects like parking garages in Los Angeles and high rises in San Jose, were considered foolish in a time of economic recession. Makes sense to stop providing subsidies to wealthy builders. Or so it seemed at first glance. But redevelopment money is not just for big developers.  Redevelopment money was  intended to rebuild neighborhoods by providing encouragement to builders to take a risk. Redevelopment money was meant to fuel jobs in areas of the county where there were very few jobs to be had. Redevelopment money was meant to provide an opportunity for lower income families to own a home. Redevelopment money was meant to support public servants like teachers and firefighters the ability to afford a home in Silicon Valley when their salaries alone where not enough.

The Governor was successful at making sure developers did not get subsidies. But what he also did is gave teachers and other public servants no choice but to accept foreclosure. Why? If a teacher is facing a hardship, loss of job (teacher cuts), divorce, or health issues and can no longer pay their mortgage they would normally have the option of a short sale. However, many teachers and other public servants like fire fighters, police, and paramedics, utilized redevelopment funds to provide down payment assistance through low interest loans when buying a home. But now, the redevelopment agencies are closing and per the San Jose short sale manager for these loans, there is a moratorium on these negotiations for short sales or loan modifications normally processed through the department. Which directly leads anyone who has one of these loans into potential foreclosure. In a short sale, all lien holders must be willing to approve a short pay off of the note. So even though the senior lien holder might approve the short sale, if the second lien is owned by the City of San Jose through redevelopment funds, there will be no approval.

Even more illogical is the fact that the closure of redevelopment agencies was meant to save the state money. But if a teacher is forced to accept foreclosure over a short sale then not only does the state loose any potential chance to recoup money on the junior redevelopment funded lien but now they have a public servant who has damaged credit and more likely to sink further into financial challenge and need welfare help. This simply does not make sense.

When a home owner submits for short sale approval they must provide every possible financial statement to support the fact they can no longer afford this home.  Two year tax returns, bank statements, monthly bills, 401k, pay stubs, and a personal letter describing their hardship.  Too bad we as tax paying citizens are not provided the same full disclosure when decisions like ending redevelopment agencies are made.  This is not a decision that only effected “fat cat developers”.  This decision effects many more average Americans than any of us most likely realize.  This public policy change has now landed on my and my clients’ doorstep and this blog post is the first step to my response to our state government in regards to this issue.

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