When the speculators move in

IN RECENT months, the "Google Bus"--a private shuttle that ferries tech employees to and from their high-powered corporate jobs each day--has made San Francisco famous as a hotspot of gentrification and class conflict.

The fleet of white buses is seen as a symbol of "Silicon Valley's excesses," as Business Insider wrote, explaining, "The buses ferry workers to and from Apple, Facebook, Google and other companies in Silicon Valley, an hour's drive south. They hum with air-conditioning and wi-fi. They are for the tech elite, and only the tech elite."

A divide has emerged, with the booming tech industry on one side and the not-so-booming local residents on the other. And at the heart of this conflict is a housing crisis.

Thanks to rabble-rousing activists, tenants and homeowners, this crisis is now widely acknowledged, even by tech-friendly San Francisco Mayor Ed Lee. In a city that is two-thirds renters, it is no surprise that most of the attention has focused on longstanding tenants uprooted from their rent-controlled apartments by land-grabbing speculators. Progressive organizations have led dozens of anti-eviction protests and a series of neighborhood tenant conventions that were attended by well over 1,000 residents.

This resurgent movement is pushing new proposals within the Board of Supervisors and on the next citywide ballot with the aim of curbing speculators. The mounting pressure has even forced Mayor Lee to support an effort in the California state legislature to limit the Ellis Act, a state law enabling speculators to evict tenants despite rent control.

In the midst of this important discussion about tenants' rights, very little has been said about homeowners fighting foreclosure. In fact, in addition to the spike in tenant evictions, San Francisco is poised for another significant wave of foreclosures. And with speculators scrambling to get their hands on any property, whether a foreclosed home or a-rent controlled apartment, it's important that homeowners, tenants and local communities stand up together in this fight to keep residents in their homes.

In 2008, when the Great Recession was just underway, struggling homeowners were in the national spotlight. Banks were collapsing under the weight of toxic debt that had piled up after first-time homebuyers and longtime homeowners alike were coaxed into "sub-prime" mortgages--oftentimes with interest rates that ballooned beyond affordability.

For Wall Street, these steeply ascending interest rates fomented a debt-trading bonanza, but for homeowners, the rates led to financial and personal catastrophe. Thanks to the banks' racist practice of predatory lending, households of color were particularly hard hit: They lost between $164 billion and $213 billion through "sub-prime" loans taken out in the eight years preceding the crisis.

For San Francisco, the crisis led to a foreclosure cluster bomb in the Bayview, the last largely African American neighborhood in the city. The neighborhood had more foreclosures than any other in the city, with around 1,500 in the first four years of the recession. These foreclosures have contributed to the ongoing out-migration of African Americans from the city. A look at recent census data shows a 20 percent decrease in the African American population in San Francisco between 2000 and 2012.

African Americans are now only about 6 percent of San Francisco's population, yet the Bayview currently represents about 15 percent of all foreclosures listed on the city's foreclosure database. Add in two neighboring zip codes, and the results are clear: Nearly half of all foreclosures listed are in the southeast corner of the city, which also happens to have the highest density of African Americans and Latinos. Stopping this foreclosure trend is clearly linked to slowing the out-migration of people of color from our city.

One home you can find on the foreclosure database is that of 65-year-old Bayview resident Charlie Batte. Batte is about to be put on the street along with her husband, two of her five children, and two grandchildren.

Batte moved to San Francisco from Louisiana 60 years ago at the age of five and has been living in her current home for the past 15 years. She has worked for 42 years at a nearby hospital doing clerical work. She and her husband are also dedicated community servants, taking time out once a month to cook for the homeless. Batte's husband has recently been battling cancer, a struggle that has only been made more difficult by the prospect of losing his home.

If speculator Raymond Grisnell has his way, the Battes' long history in San Francisco will soon come to an end.

Grisnell bought the Battes' home from Wells Fargo while the Battes were in the midst of refinancing their loan. For those who have never read California's Homeowner Bill of Rights--and apparently Wells Fargo executives count themselves in this crowd--the practice of selling a home while pretending to refinance the mortgage is known as "dual-tracking," and it is illegal. Add this crime to the practice of predatory lending, which landed Batte with the sub-prime mortgage in the first place, and it becomes clear who is really at fault.

Perhaps in an admission of guilt, Wells Fargo has agreed to rescind the sale of the house and modify Batte's loan, but Grisnell would first have to agree to sell the home back to Wells Fargo. Instead, it seems that Grisnell would rather make a quick buck by flipping the home--selling it at a higher price than he purchased it for--and putting yet another family on the street. The Battes received an eviction notice from Grisnell in mid-March.

When the foreclosure crisis was at its peak, activists, unions and community organizers were well aware of the need to defend homeowners such as the Battes. In 2011 and early 2012, during the high point of Occupy Wall Street and the Arab Spring, a vibrant series of home "re-occupations" by evicted homeowners, sit-ins at bank counters, and protests at the homes of bankster CEOs not only brought out huge crowds, but sometimes successfully beat back the banks and kept people in their homes.

With a decline in foreclosure rates and a withering of momentum after Occupy Wall Street dissipated, homeowner defense campaigns began to appear less urgent. For the Batte family, however, stopping the foreclosure crisis is more urgent than ever.

In 2009, the Obama administration attempted to solve the foreclosure crisis with the Home Affordability Modification Program (HAMP), which provided loan modifications to about 1 million homeowners in risk of default. Private loan servicers took the HAMP model and extended it to another 6 million at-risk homeowners. As a result, about 7 million total borrowers across the country had their monthly payments reduced to a reasonable amount.

While this move may have slowed the foreclosure crisis for a time, it didn't prevent about 28 percent of the original HAMP borrowers from re-defaulting and facing the prospect of losing their home yet again. To make matters worse, the HAMP loan modifications were set-up based on the assumption that borrowers would recover from their hard times after five years and be ready to return to the pre-Hamp premiums.

This assumption turned out to be little more than a fairy tale. In fact, since the Great Recession hit, 95 percent of all economic growth in the U.S. has been for the benefit of the richest 1 percent of society--while the bottom 90 percent have actually gotten poorer.

Despite modest job growth, real unemployment--including those who are underemployed--is still around 14 percent, while those who found new jobs tend to be stuck in part-time, low-wage positions. Just like prior to the crisis, Americans have resorted to buying with credit in order to scrape by. Consumer debt soared in the last two years to $2.8 trillion, 22 percent higher than in 2006 before the crisis.

In other words, if you were struggling to pay your mortgage five years ago, you are almost certainly struggling to pay it today. Despite this cold reality, HAMP loans are expected to start resetting to pre-HAMP premiums this year, resulting in dramatic increases in monthly payments.

In California, median increases are expected to be around $300, but could reach as high as $1,724. Imagine increases on this scale rolling out for 7 million borrowers over the next few years. We're talking about $400-$500 billion of mortgage debt at risk, not to mention millions of struggling families facing foreclosure.

While the picture looks bleak across the county, the San Francisco housing market is on particularly shaking ground. According to Ed Donaldson, co-chair of the SF Chapter of Alliance of Californians for Community Empowerment (ACCE):

There is an imbalance in the marketplace across the country and particularly here in San Francisco. On the southeast side of the city where you see investors and speculators come in with cash and out-compete homebuyers who really want a home to live in. That imbalance between investors and actual homeowners creates instability in the market. Although we are seeing prices go up, it is an artificial bubble. At some point, those investors are going to pull out and sell, and it's going to destabilize the market.

To make matters worse, Donaldson estimates that the city has around 1,100 HAMP loans that will reset in the coming years on top of another 1,100 loans that are already delinquent. Mix in around 300 "underwater" homes--those homes that have a lower value than the original value of the mortgage--and you get about $1.5 billion in potential losses.

But the real costs have nothing to do with dollar signs. The case of the Batte family is a reminder that an increase in foreclosures on this scale will result in the tragic destruction of families and communities, particularly communities of color.

To their credit, the Batte family has chosen to stand up and fight their foreclosure. They have joined forces with several other homeowners who are also facing eviction. As members of ACCE they are launching a campaign to pressure both Wells Fargo and Grisnell to agree to reverse the sale of Batte's home. Hopefully, their strategy of targeted phone banking and peaceful protest will draw enough attention to the case that Grisnell will be forced to reverse the eviction and Wells Fargo will be forced to refinance.

In the face of an ongoing housing crisis that has been decried at all levels of city government, one would think that a 60-year resident in the hardest-hit neighborhood in San Francisco, who was the victim of predatory lending and illegal dual tracking, would have more defenses at her disposal than an activist campaign employed after her home was sold and her eviction became pending.

Time and again, however, this has proven not to be the case. If San Francisco wants to maintain any credibility as a city that cares for its residents, it will need a much more aggressive plan to stop foreclosures and evictions in the here and now.

For starters, housing activists and politicians should look across the bay to the Richmond CARES program. Under the CARES program, the city of Richmond would circumnavigate stubborn banks that refuse to refinance a borrower's loan by purchasing the loan using the authority of eminent domain and capital from a third-party investor. The city would then refinance the loan at a reasonable rate.

In Richmond, the program is being used strictly on "underwater" homes, but the same program could be applied to almost any home loan at risk of default. This is because the third-party investor would be purchasing the loan at what's known as "fair market value" which is considerably less than the market value quoted by realtors. This is the equivalent of buying something at wholesale cost rather than retail.

The "wholesale" rate is generally only used between banks, but if it were utilized for the public good any number of loans could be written down, dramatically reducing foreclosure rates and stopping the exodus of families like the Battes.

If the destruction of family and community is not sufficient reason to embrace such a program, there would be a cost benefit, too. A family forced out of its home will be that much more dependent on city services. For a city that already spends between $100 and $200 million on homeless services a year, the prospect of another few hundred families losing their homes is no small matter.

Despite the obvious advantages of a CARES-type program for San Francisco, such a use of eminent domain would be an affront to the profits of banks and speculators. That means that the passage of such a program, let alone its implementation, will require considerable public pressure in the form of a broad grassroots movement. This was the case in Richmond and has been the case so far with the housing movement in San Francisco.

The early victories of foreclosure fighters back in 2011-12 were all dependent on sit-ins, occupations of post-eviction homes and protests, all of which were particularly potent when they had broad public support beyond those participating.

Likewise, the new attention given to the city's housing crisis and the new legislative proposals aiming to curb the worst abuses of speculators would be hard to imagine without the recent Google bus blockades, the large anti-eviction marches in the city's Mission neighborhood, the countless protests outside of Twitter and speculator offices, and the series of tenants' conventions that brought out hundreds of angry tenants.

Even with this welcome ferment, cases like Batte's are reminders of how far we still have to go and how urgent the crisis is for those hardest hit. There is still a crying need for a united, broad-based movement led by both tenants and homeowners that can defend all those struggling to survive in San Francisco.

As a case in point, consider the outcome of the recent tenants' conventions: an anti-speculation tax that will hopefully appear on the next citywide ballot. The tax would impede speculators like Grisnell, who hope to buy up existing properties and then sell them immediately for a profit. If passed, this would be a huge victory for struggling homeowners and tenants since both often face eviction from the same speculators.

This ballot initiative could be a rallying point for the multitude of forces who are working against gentrification. Indeed, a bottom-up mobilization in November, if successful, could be a basis to push forward even greater demands in the future.

In the same vein, a CARES program for San Francisco that uses eminent domain to defend homeowners against banks and speculators could set a precedent for direct intervention by the city to defend the interests of its residents over the interests of banks, speculators and tech moguls.

While this would be a dramatic change of course for the current city administration, it is the kind of action that will be necessary to reverse the negative impacts of the tech boom, stop the eviction crisis, and preserve the ethnic, political and cultural diversity that has made San Francisco such an amazing city in the first place. This is exactly the kind of demand that the housing movement and all frustrated residents of San Francisco should be raising.