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Concerned about a rising tide of foreclosed properties that would drag down home values, a city-county agency has recommended forming a land bank to buy the properties and resell them to buyers.
Last month, the City-County Reinvestment Task Force voted to study the possible nonprofit entity that may or may not include some public government participation.
“There are a lot of possible options, including a private, nonprofit partnership working through an agency such as the Housing Commission, or the city’s redevelopment agency,” said City Councilman Tony Young, who co-chairs the task force and represents the 4th District, in Southeast San Diego, an area that has been particularly hard hit by rising foreclosures.
Foreclosures in San Diego County for January increased to 6,003, compared with 1,723 for the same month in 2007, according to Default Research Inc. of Mount Pleasant, Pa.
The task force, jointly funded with city and county money, monitors the area’s private banking sector on its lending activities and develops strategies for reinvestment.
The idea of a land bank has been bouncing around for several months at the task force to address the surge of foreclosed homes that are concentrated in certain neighborhoods. Some houses have been vacant for months, and because of neglected maintenance, are the cause of blighted neighborhoods, Young says.
Young cites a house in his neighborhood of Valencia Park that is being offered as a foreclosure sale and could be vacant for a long time.
There’s no question that because of rising interest rates on adjustable rate mortgages and declining home values, some people are going to lose their homes, Young says.
“The question is: ‘How are we going to manage this process?’ ” he said.
The task force panel looking into forming the land bank is working with the Living Cities Foundation, a New York-based partnership of private corporations, foundations and the public sector, which promotes economic development and livable housing in U.S. cities.
One operating land bank in Michigan’s Genesee County was formed in 2002 in response to a flood of foreclosed properties in an area that has been decimated from the ongoing contraction of the domestic auto industry.
The bank involves the local county’s treasurer’s office buying tax liens on foreclosed properties, collecting on back taxes, demolishing or refurbishing the properties, and reselling to real home buyers rather than speculators.
At least one major lender, Washington Mutual Bank, which has been active in taking back many local homes that have defaulted on mortgages, has been contacted by the task force about possible involvement in a local land bank.
Gary Kishner, a spokesman for Seattle-based WaMu, which has 71 branches in the county, says that while the bank has been contacted, it has yet to decide whether it would actively participate in the entity.
Efforts are under way by a number of mortgage lenders to work directly with borrowers who are defaulting on their mortgages, but the reality is foreclosures are rising, and will likely continue through this year, Young says.
“This is one way we can make lemonade out of lemons,” he said.
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