L.A. Councilman Alarcón Boosts Foreclosure Mitigation Programs

The foreclosure crisis that is sweeping the nation and Southern California has hit the city of Los Angeles' Council District 7 especially hard. What have been the impacts of the foreclosure crisis on the residents of CD 7?

Among our 15 council districts, CD 7 ranks second in terms of the highest number of foreclosures of single-family homes. We have been hardest hit, and we have ranked among the nation in terms of the concentration of foreclosures. It has been rough, and you can't drive through the neighborhoods-whether it's Sun Valley, Pacoima, or Mission Hills-and not see "for sale" signs everywhere. With that comes a sort of deterioration of the community in terms of its physical appearance.

How many foreclosures have occurred to date in L.A.'s CD 7?

Since January 2007 we have had over 2,000 homes foreclosed. From July through September of 2008, we had 629 foreclosures. Through the Valley as a whole, we've had an average of 1,000 foreclosures a month over the last 2.5 months. Obviously the unemployment rate is extremely high. The 12 percent measure that the experts have given us is really more like 20 percent in our district. A lot of people have pulled themselves out of the unemployment role and entered into underground economies. There is not one family I have talked to who isn't experiencing some kind of economic problem.

What remedies and initiatives are being advanced to aid homeowners in distress?

I am probably the number one critic of the city of Los Angeles' response to foreclosures. Eric Garcetti and I have been outspoken on the issue of foreclosures since I returned about two years ago. There is so much more that could be done. We set aside a couple million dollars for first-time home buyer assistance, but that doesn't address the foreclosures. It really allows for maybe 50-75 families to be able to enter into their first home.

We are also working with Neighborhood Legal Aid in Pacoima and ONE L.A. to design a pilot project that would try to get leverage over the banks to provide a discount up to 60 percent. Then the city would come in with a soft second. If the banks come in with a 60 percent discount we could then guarantee the second. We need to renegotiate the loans so that they are in real value terms. The owners could then pay a mortgage they can afford.

Another opportunity we have is my motion to divest from banks that have been irresponsible. In my first stint on the City Council, I introduced the motion to divest from the Swiss banks because of the failure of the Swiss government to deal with the reparations issue. We only had $5 billion dollars in our portfolio at that time. The Swiss Ambassador came to my office and pleaded to pull the motion. Three weeks later they negotiated a deal. I saw the incredible power of our investment portfolio to leverage, to create a mini community reinvestment act strategy.

We have $25 billion in our portfolio now. We should divest from banks that are unwilling to provide first time homebuyer loans and are unwilling to put their banks into working class communities. Pacoima only has one bank and dozens of check cashing operations. We are pushing the un-banked community to get banked. That's wonderful, but they don't have a bank. There are many banks that have been responsible that we should put our dollars in. We should use that leverage to force them to help us out, to provide discounts on renegotiated loans-to lower the principle. The Obama stimulus package does not lower the principle.

We have currently about $140 million of indebtedness to the Community Development Block Grant (CDBG) program. We get five times the CDBG allocation in terms of indebtedness. We've used about $180 million of that with about $140 million remaining. We certainly need to use that for targeted strategies to create jobs; we can also use it to develop foreclosure programs.

You shared earlier that the secondary effects of foreclosures ripple through an entire community. What city strategies are being offered to support the neighborhood assets that make a community livable, in addition to the housing relief ideas that you've put forward?

One of the things I am most excited about with the second federal stimulus package is the Neighborhood Stabilization Program. It provides an opportunity for us to develop model communities where we can have concentration of dollars and resources going into specific communities to turn them around, turning visible blight into a very nice neighborhood. The foreclosures themselves are creating blight. One foreclosure out of 100 homes is not a problem. But when you get three foreclosures as an average for one block, the boarded up homes begin to become more noticeable and become a visual blight.

Secondly, 65 percent of the families that live in Los Angeles, at least, are living in homes that they do not own. That means that they don't have an investment on the infrastructure of those homes. They allow them to deteriorate. They won't water their lawns if they are renting. They are not repainting their homes. That has a dramatic deterioration effect. The stabilization program would not only assist in the resale of the foreclosed properties, but it would also help with the repair of the property.

We are focusing on Pacoima in my district, but it will actually touch on Sylmar, Panorama City, North Hills, and Mission Hills. We will stabilize target neighborhoods.

One program I would like to reinvest in is the Handyworker Program. We are going to literally have tens of thousands of homes throughout Los Angeles, even in nice neighborhoods with higher incomes, in need of repair. That is particularly true with senior citizens, but a lot of people need help to make those repairs.

In February the L.A. City Council approved your motion, the "Council District 7 Foreclosure Prevention Strategy," to create a program to alleviate foreclosures in CD 7. Elaborate on this demo's design and purpose.

That program developed from the East Valley Homeownership Opportunity Program. It provides money for the sale of foreclosed properties. It doesn't really address the family as they are in the process of foreclosure.

Specifically, it provides a soft second for the potential homebuyer. It allows them to get into homes that they otherwise would not qualify for. It's targeted at working class folks. The income requirement is somewhere under $71,800 a year for a family of four. They can get up to $75,000 of assistance. Again, it is a pilot program that we are hoping will be used on other places-in fact it's rather similar to what the stimulus package provides for.

What we really need are programs that address those people going through foreclosure. We haven't seen enough banks that are willing to renegotiate the principles downward on their loan. That would have the most dramatic impact. I believe that has to come in the next stimulus package. Until we get to the process of creating incentives for banks to lower their principle or disincentives for them if they act irresponsibly, it is going to take longer for us to recover from this recession.

What jobs are being created to complement the agenda of providing more housing opportunity? Many in L.A. believe that the city has not had an economic development strategy for a long time and has lost jobs and investment as a result. What opportunities for job creation are being contemplated?

We are using community redevelopment to create a Best Buy and a Costco, and there is a Lowes opening next month. As much as those are retail operations that are taken for granted in some communities, the jobs are critical in Pacoima. The other job opportunity that we really have to exploit is the opportunity in the logistics field of goods movement. Pacoima is strategically located to take advantage of those opportunities. We are creating a truck driver-training academy at Lopez Canyon Landfill where we train 35 to 40 young people a month to get their Class A driver's license. I hope that we see something more related to healthcare from future stimulus packages. One of the ways to grow our economy is to grow jobs in the health arena. One thing we are doing is working with the community college district to expand Valley College into Panorama City. This is part of their agenda. I want to create an expanded nursing program. We are importing 30,000 nurses a year into California; that should be a job opportunity for Californians.

The primary growth we will see is going to be in the retail area. That is good news in some ways, but it is also not so good news in other ways. In terms of the immediate construction benefit, good paying jobs will be created. Over the course of time I hope that we rely more on the jobs in the health related fields and logistics than we do on retail. It is just not enough to support your family in Los Angeles.

If we do this interview in January of 2010, what accomplishments will you hopefully be sharing?

I'm hoping that we are in a position now to try a lot of things that haven't been tried. President Obama is providing stimulus; the question is whether or not we are using our stimulus effectively. I'm hoping that in January we will have very firm demonstrations of how the stimulus package was exploited in the Los Angeles region. Some of the shovel-ready projects will be completed by January. I hope that we can demonstrate how we got people back to work and how those projects are better serving the public. The housing market will have stabilized somewhat by then, in the sense that property values will have flattened. The average home, I think, will level out at $230,000. That would give us a target. A lot of people fear purchasing homes now because they don't know where the market is going. They don't know whether it is going up or down. They are fearful of that.

We're going to be mid-stream in a budget that I predict will be $500 million less than what it is today. I'm not going to sit here and say that things will be rosy. I am hopeful that we see other models we can replicate for opportunities and that we use every opportunity we can to get more support from the state and federal government. I also think we need to explore the private sector more, and by January, hopefully, the private markets will have settled and they will be able to reassess their level of community support. There has been a dramatic reduction in the kind of support we used to get from the private sector. I believe we need that support to meet the quality of life challenges in Los Angeles.