Wells Fargo Bank, National Association et al v. City of Richmond, California et al

Filing 49

Declaration of John Ertman in Support of 45 Reply to Opposition/Response, 46 Opposition/Response to Motion, 45 Motion for Preliminary Injunction, 46 Motion to Dismiss filed byDeutsche Bank National Trust Company, Deutsche Bank Trust Company Americas, Wells Fargo Bank, National Association. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J, # 11 Exhibit K, # 12 Exhibit L, # 13 Exhibit M, # 14 Exhibit N, # 15 Exhibit O, # 16 Exhibit P, # 17 Exhibit Q, # 18 Exhibit R, # 19 Exhibit S, # 20 Exhibit T, # 21 Exhibit U, # 22 Exhibit V, # 23 Exhibit W, # 24 Exhibit X, # 25 Exhibit Y, # 26 Exhibit Z, # 27 Exhibit AA)(Related document(s) 45 , 46 ) (Tsai, Rocky) (Filed on 8/29/2013)

EXHIBIT N

From:
Sent:
To:
Subject:
Attachments:

Trina Jackson [[e-mail]]
Thursday, May 16, 2013 3:56PM
[e-mail]; Tom Butt- external; Jim Rogers -external; Jael Myrick
5/17: Important! FW: Webinar and strategy session on Using Eminent Domain to End the
Foreclosure Crisis
image005.png; Eminent Domain FAQ May 2013.docx; Prinicpal Reduction via Eminent
Domain- 2 page Fact Sheet.docx; image008.jpg; image009.png; image010.jpg

Please let me know if you'd like me to rsvp you for the webinar tomorrow at lOam regarding using Eminent Domain to end the
foreclosure crisis. Thank you.
Trina Jackson
Liaison to the City Council
[phone] p
www.ci.richmond.ca. us

-----Original Message----From: David Sharples [mailto:[e-mail]]
Sent: Thursday, May 16, 2013 12:38 PM
To: Trina Jackson
Subject: FW: Important! FW: Webinar and strategy session on Using Eminent Domain to End the Foreclosure Crisis
Hi Trina,
I wanted to invite Councilmembers Beckles, Rogers, Butt and Myrick to be on the below webinar
I wanted to invite you to be on a really important webinar and strategy session on Using Eminent Domain to End the Foreclosure
Crisis, co-hosted by Local Progress and the Home Defenders League. This is a webinar which will include experts, scholars and
elected officials from around the country. Its very important that you click on the below link to RSVP if you are available to be on the
webinar May 17, at 10 a.m. pacific. Please also find attached a new Frequently Asked Questions document re: Using Eminent Domain
to End the Foreclosure Crisis
https://docs.google.com/forms/d/lxpsvvi2CAU4gFwAu4hSASWlj6UXs58Jo S-KbxOiA-k/viewform
Thanks,
David Sharples
ACCE

Five years after the housing market collapsed, America's economy is still weak. Unemployment and under-employment rates remain
extremely high and families are struggling. The foreclosure crisis remains a major drag on our sputtering economy: homeowners are
burdened by huge debts and record-high foreclosure rates continue to sap wealth and savings out of neighborhoods.

On May 17,2013 at 1 p.m. EDT, join policy experts and members of Local Progress for a national web briefing session to discuss
how municipalities can help end the foreclosure crisis and generate economic growth by using eminent domain to reset mortgages to a
fair market value. We'll talk about the innovative and powerful new proposal that cities around the country are considering in order to
protect families and rejuvenate their local economies.

1

RSVP
here<http://click.icptrack.com/icp/relay.php?r=&msgid=O&act= 1111l&c= 1261605&destination=https%3 A%2F%2Fdocs.google.com
%2Fforms%2Fd%2F1xpsvv12CAU4gFwAu4hSASW1j6UXs58Jo S-KbxOiA-k%2Fviewform> for the call-in information and
briefmg packet.

Panelists:

Mayor Gayle McLaughlin (Richmond, CA)
Councilmember Darrin Sharif (Newark, NJ)
Mayor Andre Quintero (El Monte, CA)
Professor Robert Hockett, Cornell Law School
Amy Schur, Home Defenders League & ACCE
Moderator: Ady Barkan, Center for Popular Democracy

May 17, 2013 at 1 p.m. EDT

RSVP
here<http://click.icptrack.com/icp/relay.php?r=&msgid=O&act= 11111&c= 1261605&destination=https%3A%2F%2Fdocs.google.com
%2Fforms%2Fd%2Flxpsvvi2CAU4gFwAu4hSASWlj6UXs58Jo S-KbxOiA-k%2Fviewform> for the call-in information and
briefmg packet.

2

Eminent Domain as a Tool for Preserving Homeownership,
Resetting Mortgages, and Aiding Local Economies
Frequently Asked Questions
Q: Is this a legal use of the eminent domain law?
A. Yes, we believe it is. While this will definitely be raised by the Wall Street interests,
numerous legal experts are confident of its legality and there is precedent for using
eminent domain for similar purposes and in a similar manner in the past.
Q: Will this program take people's homes?
A. No. The entire goal ofthis program is to keep people in their homes. Mortgage loans are
often bought and sold many times. In this case, the City will become the owner of the
loan for a short period of time, during which they will help the homeowner refinance into
a new loan with reduced principal, saving the homeowner thousands of dollars every year.
Q: Is this just another scheme that could in fact leave homeowners worse off?
B. No. We have developed a series often core principles that any program must meet to get
our support. One of those principles is that no homeowner must be left worse off as a
result of the program, and another is that it is a voluntary program. We believe that if the
program is designed correctly, only those homeowners who benefit will opt into the
program.
Q: Will homeowners be forced or pressured into this program against their will?
A. No. Again, homeowners will have a choice as to whether or not to enter into the program,
and will be encouraged to consult a BUD-certified housing counselor before making that
decision.
Q: How will the City pay for this program?
A. The City can pay for the program by partnering with private investors who have the
capital to acquire the loans and cover the costs of the program, both operational and legal.
The City would be in charge, making all programmatic decisions and designing the
program, but the money would come from these investors.
Q: Are there private investors ready to do this, and how do we know they can be trusted?
A. There is at least one group we know of that is ready to arrange private funding: Mortgage
Resolution Partners (www.mortgageresolutionpartners.com). They are already partnering
with various cities to explore options to address the underwater crisis. There may be
other groups as well. The credentials and history of any potential partners should be
explored. In order to get our support, any private partner must agree to our core
principles that include essential homeowner, tenant, community, and taxpayer
protections.

Q: Will the private investors make money off of this?
A. Yes. These investors will be able to make money off the difference between the market
value of the old mortgage loans and the proceeds of refinancing them (reduced by
program costs). This will not cost homeowners or the City anything, and at the end of the
day, homeowners will have substantially lower mortgage payments.
Q: What's the risk for the City?
A. Public entities can create an authority to provide a degree of protection. There is a real
chance Wall Street banks may sue. Our core principles state that the implementation of
the program should not cause taxpayers to incur significant expenses, such as the legal
costs of defending the program, and that the program must indemnify taxpayers from
legal and financial liabilities. We will not support any program that does not meet these
criteria. We believe that some potential partners, like MRP, will commit to this. This is
a critical question we should ask any private investor group that the City considers
partnering with.
Q: Won't this create a huge administrative expense for the City?
A. One of our core principles is that the implementation of the program should not cause
taxpayers to incur significant expenses. We will not support any program that is not able
to abide by this principle. We believe that some potential partners, like MRP, will
commit to this.
Q: How will tenants in rental units be affected?
A. Tenants often face eviction after their landlords go into foreclosure. We believe that any
program must be designed to maximize the benefit to tenants and minimize tenant
displacement. By reducing principal on underwater properties and stabilizing property
values, we believe this program will help tenants by making their landlords less likely to
default. Furthermore, the foreclosure crisis has driven up the cost of rentals because
millions of families who used to own a home have been forced into the rental market. By
ebbing the coming tide of foreclosures, this program will also ease pressures on rent
pnces.
Q: Who is against this?
A. The leading group opposing this is the Securities Industry and Financial Markets
Association (SIFMA), which is the trade association for the banks, securities firms, and
asset managers. SIFMA's Chair-Elect is a the Chief Operating Officer of Morgan
Stanley, and its membership includes the securities units of Bank of America, JPMorgan
Chase, Wells Fargo, Citigroup, Goldman Sachs, and AIG. These are the same firms that
caused the foreclosure crisis and lobbied to prevent federal relief for homeowners. Now
they are trying to stop our communities from taking action at the local level to fix what
they broke.
2

Q: Some realtors are worried that this will reduce neighboring home values. Is this true?
A. No. The concern stems from the misunderstanding that through this program properties
are being sold at below market value and so will factor into the "comps" - what
comparable homes are selling for in the area - when the price of other homes is
determined. This is not the case. These homes are not in fact being sold. The loan is
being sold, or taken through eminent domain. The house itself will not be going through
the sale process. This program will in fact bolster home values since it will reduce the
number of foreclosures, thereby preventing further negative impact on area home values.
Q: Will the future cost of credit in our community go up, as the opposition is saying?
A. SIFMA and other Wall Street groups are threatening that future mortgage lending in
communities that adopt this program will be more expensive. They claim that having
loans taken from investors using eminent domain creates uncertainty in the market and
therefore SIFMA's member are threatening to not buy loans from these communities.
There are several reasons why we believe this is a threat intended to frighten localities
out of taking action, rather than a realistic prediction of what would happen:

1) Industry observers point out that there is enough competition in the mortgage market
that where there is money to be made there will be lenders ready to make loans, and
investors willing to finance them. Trade associations may make threats, but they do
not actually control the profit seeking behavior of their members, the institutions that
actually make and trade loans.
2) As proposed, this program will only be used with loans owned by Private Label
Securities (PLS)- pooled loans owned by groups of private investors. This program
is not being proposed for any loans owned by Fannie Mae, Freddie Mac, the FHA or
the VA. These (quasi) government agencies are buying or insuring 90% of new
loans being made (different from the many lenders originating loans). We trust that
our government will not redline our community and refuse to buy or insure future
loans.
3) This program is being proposed in response to the current crisis. This use of eminent
domain only makes sense, and meets the legal bar of a "public purpose", because of
the large numbers of homeowners who are deeply underwater. Also, if cities so
choose, in an abundance of caution, they can impose a sunset on the program, to
reassure the financial industry that they do not intend to implement such a program as
a normal or even periodic, course of business.
Q: Has SIFMA really threatened to redline communities that dare adopt such a program?
A. Yes. SIFMA has threatened to try to prevent loans made in our communities from being
traded on the secondary market, making lending in our community more difficult.
3

Our cities are taking action locally to fix the mess that Wall Street created, and now
SIFMA, the trade association that represents these Wall Street institutions, is threatening
to refuse loans from our community. They peddled predatory loans to our communities
and now they are trying to bully us out of helping our homeowners survive this crisis.
The finance industry has a long history of drawing on this threat when they are opposing
a new program or regulation. When our local governments considered policies to curb
predatory lending, we heard these threats. Some states proceeded to pass laws
prohibiting certain predatory lending practices, and the cost of credit in those states did
not go up. Too often, Wall Street's threats succeeded in scaring elected officials,
predatory lending went uncurbed, and we ended up with a devastating foreclosure crisis.

4

Plan to Preserve Homeowners hip, Reset Mortgages &Aid Local Economies
May 2013

The Crisis Continues: Lost Homes, Lost Wealth, Neighborhoods Devastated, Recovery Slowed
•

Americans as a whole lost40% of their wealth from 2007-2010.1

•

African-American and Latino households have been particularly hard-hit, both because they were
targeted for predatory loans and because a particularly high percentage of their wealth is in their homes.
From 2005 to 2009, inflation-adjusted median wealth fell by 66% among Hispanic households and 53%
among black households nationally. 2 Nearly 25 percent of loans in low-income neighborhoods and 20
percent of loans in high-minority neighborhoods have been foreclosed upon or are seriously delinquent.

•

Communities and cities are harmed by destabilized neighborhoods, lower property values, reduced
property tax revenue, and added costs borne by cities to deal with the rise in vacant properties.

•

1.8 million families lost their homes to foreclosure in 2012, and another 5.1 million3 are in foreclosure or
delinquent. Currently, there are still some 13.8 million4 US homes underwater.

It's Time to Tackle the Underwater Crisis: Preserve Homeownership &Aid Local Economies
•

•

1

Top economists say that housing remains the single biggest impediment to economic recovery and that
what's needed is principal write-down.s
No matter how many top economists and leaders call for a widespread principal reduction program, Wall
Street bankers have been unwilling to take this step to help fix what they broke. It is because of Wall
Street's recklessness and greed that the U.S. has seen the greatest loss of homes and wealth in
decades, taking an enormous toll on families, neighborhoods and the broader economy. And it's not
over, with 14 million households still underwater.

http://www. federal reserve.gov/pu bs/bulletin/2012/PDF/scf12. pdf
http://www.pewresearch.org/daily-number/recession-takes-its-toll-on-household-wealth/
3 http://www.lpsvcs.com/LPSCorporatelnformation/NewsRoom/Pages/default.aspx
4 zillowblog.com/research/2013/02/20/nearly-2-million-american-homeowners-freed-from-negative-equity-in-2012
5 Joseph Stiglitz and Mark Zandi, August 12, 2012 http://www.nytimes.com/2012/08/13/opinion/the-one-housing-solution-left-mass-mortgagerefinancing.htm I?_r=O
2

•

And unsuspecting homeowners who are unlucky enough to have their loans sold to pools of private
investors (trusts/private label securities/mortgage-backed securities) are often told that principal reduction
is not allowed given the terms of these Wall Street investment deals. This is likely true in some cases and
likely not in others.

A Local Solution with a Big Impact: A Partnership to Acquire and Restructure Loans
•

Finally, there's a way for local communities to step in and take action to help homeowners and
communities. Cities can acquire certain underwater loans and restructure them so that homeowners can
refinance into a new loan in line with the current value of the home and current market interest rates. The
city never takes possession of the homes themselves, but rather just the mortgage loans.

•

This can be accomplished through a partnership with experts who have the legal and financial expertise
to carry out the program and with investors who have the capital to acquire the loans and cover the costs
of the program, both operational and legal. The city (or city/county joint-powers authority, if established)
would be in charge, making all programmatic decisions.

•

By recognizing the current "fair market value" of these loans, as opposed to the inflated value on the
books, the loans can be acquired at a price that allows for a new mortgage to be written that no longer
has the homeowner underwater.

•

How can cities "acquire" these loans at "fair market value"? Two ways: First, the City can make an offer
to purchase the loans (it's possible that eminent domain is then needed to free the loan from the trusts
they are packaged into). Second, if the investors that own the loans are unwilling to sell, the City can use
its "eminent domain" authority to acquire the loans at "fair market value."

•

Tremendous impact for homeowners, communities, cities: If just the five most severely underwater US
cities used eminent domain to write down the principal on all underwater homes, homeowners in those
cities would save $6.2 billion a year on their mortgage payments, and as they spent that money it would
create 91,000 jobs in those five cities alone.

2