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