03-27-2012 CC RPT 02 - Laserfiche WebLink

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^ ��^"�:t�lt"��: (e� ,f�t�� , City Council Memorandum ity TO: HONORABLE MAYOR AND CITY COUNCIL FROM: DEVELOPMENT DEPARTMENT DATE: March 27, 2012 ITEM NO: 2 WARD: ALL SUBJECT: SEIZING OUR DESTINY /ECONOMIC DEVELOPMENT ACTION PLAN - FORECLOSURE WORKSHOP ISSUE: The issue before the City Council is to receive a comprehensive overview of foreclosure conditions and programs to address the foreclosure crisis. RECOMMENDATIONS That the City Council: 1) Receive this foreclosure update; 2) Direct staff to work with stakeholder groups to evaluate legislative changes and potential new programs to address the foreclosure crisis; and 3) Report to Development Committee with recommendations within ninety (90) days. BACKGROUND Following the housing market downturn, the Riverside - San Bernardino - Ontario Metropolitan Statistical Area (MSA) has consistently been ranked one of the hardest hit areas in the state of California and the nation. In 2008, at the beginning of the foreclosure crisis, the Riverside - San Bernardino - Ontario MSA had the fourth highest metro foreclosure rate nationwide. Currently, the MSA has the third highest foreclosure rate nationwide. Some of the major factors to the nation's foreclosure crisis that began in late 2007 include: • Borrowers took out complex loans, often with interest only payments and no ability to make higher monthly payments when their mortgage rates reset upwards; • Lenders did not validate borrower's income or assets to ensure they would be able to afford the mortgage long term; • Home values were inflated; • Financial institutions sold and leveraged sub -prime mortgage backed securities; • Borrowers were unable to obtain refinancing of short term adjustable rate mortgages due to the drop in assessed property valuation below the principal amount due on mortgages; and 2 -1