#171 Fall 2012 — Third Places

Beating Bank-Owned Blight

When Oakland residents raised hell about trashed foreclosed houses harming their neighborhoods, the city got on board and changed the way it handles code violations on bank-owned properties.

Photo courtesy of ACCE

An example of a blighted Oakland property going through foreclosure.

When Oakland residents raised hell about trashed foreclosed houses harming their neighborhoods, the city got on board and changed the way it handles code violations on bank-owned properties.By Lin Chin

The city of Oakland, located across the bay from San Francisco in Northern California, has a culturally diverse population of about 400,000. Working class households are concentrated in Oakland’s flatland neighborhoods, which were disproportionately affected by the onset of the ongoing foreclosure crisis. From 2007 to 2011, about 1 in 14 Oakland households lost a home to foreclosure.

Compounding the devastation, entire neighborhoods were plagued by the blight and health and safety hazards caused by the banks’ failure to effectively monitor and maintain their foreclosed properties and the city was expending limited public resources to clean up blighted bank-owned properties one by one.

Angered by being forced to bear the cost of bank-owned blight, a group of community residents who later formed ACCE (the Alliance of Californians for Community Empowerment) said “enough is enough” and pushed the city to adopt policies to hold the banks accountable.

In December 2007, ACCE’s statewide organizing director Anthony Panarese, ACCE member-leader Beverly Williams, and other concerned Oakland residents launched a grassroots campaign calling on elected officials to do something about what Williams calls a “community-wide crisis.” Community leaders coordinated walking tours and a bus tour with U.S. Congresswoman Barbara Lee in East Oakland to showcase the extensive damage.

Williams vividly remembers the devastation. “We came to a house in deep East Oakland that looked just a little overgrown from the front, but when you turned the corner, the mess was absolutely shocking. Wood and bricks had been stripped, and there was a vermin infestation. We asked ourselves, ‘Why are we, the people of Oakland, paying the bill of the banks?’ And so we started taking action against the banks.”

Community members collected garbage from blighted bank-owned properties, put it on trucks, and personally delivered it to the banks. They attended bank shareholder meetings, staging protests outside while addressing bank executives inside through public comment. Some members even risked arrest for civil disobedience in order to attract attention to the problem of bank-owned blight.

Working With the City

In addition to actions against the banks, ACCE members also called on the city to hold banks accountable. Margaretta Lin, director of strategic initiatives at the city’s Housing and Community Development Department, credits tireless advocacy by outraged community residents for pushing the city to action. “These community leaders helped city officials connect their demands with human stories of suffering,” she says. “One city official said that he got religion by going on the foreclosure tour and hearing testimony from residents about the devastating blight and damage it caused to neighborhood stabilization and emotional health.” The attention and support of key city leaders allowed community members to move from a fractured, reactive approach to a collaborative, proactive partnership with the city.

These actions led to the passage in 2010 of the city’s vacant foreclosed properties registration program. But a registry wasn’t enough.

Under the traditional code enforcement approach, the city would wait to receive a blight complaint to inspect a property. It would then send notice to the owner of violations and re-inspect after the abatement period. If the violations weren’t fixed, it would pay to fix them and place a lien on the property taxes for the cost.

“The reactive model was tremendously resource-intensive, both in time and money,” explains Ray Derania, City of Oakland building official. “The cost recovery sat on title until the bank got around to selling it, at which point the liens became a barrier to the sale, especially for first-time homebuyers.” Meanwhile, he notes, “the perpetrator — in this case the bank — was pretty much insulated from the consequences of allowing the property to deteriorate.”

Owner by Owner

So Oakland went proactive. Because Wells Fargo is the city’s bank, the city began there. But even with that relationship, “at first, we weren’t sure who the appropriate contact at the bank was — a very common problem for both local government and homeowners,” says Lin. “But we eventually got in touch with Wells Fargo’s director of local government affairs, who worked with us to convene the right people, including senior officials who came from out of town.” At this first critical meeting, the city explained the devastation of the foreclosure crisis on the community. Wells Fargo agreed to work with the city to pilot a new proactive blight inspection program.

The city inspected all properties owned by Wells Fargo or against which Wells had issued a notice of default, and then aggregated code and registration violations across all Wells properties. Wells cleaned up its blighted properties, resolved title issues, and paid outstanding fees and penalties, without the need for a costly, time-consuming appeal process. These outcomes, the result of persistent pressure from residents and proactive intervention by the city, were described by ACCE activists as “unprecedented at the time.”

“Wells Fargo came to the table in the spirit of partnership and demonstrated a willingness to work through complex and time-consuming challenges that were new to all of us,” says Lin. “Ironing out the details of a new program was not an easy process, but Wells kept an open mind.”

Derania notes that the city’s strategy paired carrots and sticks. The banks benefited because the city’s data allowed them to evaluate whether their property managers were performing. But the city also enforced a $1,000/day penalty for blight violations, “which helped to make Oakland properties a priority.”

The Wells Fargo contact connected the city with his counterparts at other banks to replicate that success. “We were able to say to the next bank, ‘Here’s a program that we did with Wells. We’d like to work with you to achieve similar win-win results,’” says Lin. So far the city has had similar results with Bank of America, Chase, Fannie Mae, Freddie Mac, Deutsche Bank, and U.S. Bank.

Under the new proactive programs, from Summer 2011 to Fall 2012, the city registered over 1,600 properties, collected over $1.6 million in fees and penalties, inspected over 2,900 properties, and got lenders to clean up all the properties that were cited. “You can see the difference!” exclaims Williams. “In my neighborhood, there is a bank-owned vacant property that is maintained and a privately owned property that is blighted. Both sites used to be dumping grounds.”

Policy Changes

The city and community advocates did not rest on the laurels of the new bank pilot program, instead pursuing complementary policy changes. The city found 54 percent of NOD (notice of default) properties were blighted, even higher than the 46 percent of REO (real-estate owned, or foreclosed) properties. In June, the Oakland City Council voted to require banks to register both NOD and REO properties, whether occupied or vacant, inspect those properties on a monthly basis, and actively maintain all REO properties and any NOD properties that are vacant and abandoned. The property manager for all occupied REO properties has to be certified and local. For legally occupied properties, the lenders have to keep the utilities on. The city is working with Wells Fargo again to pilot the new program.

The new registry also requires information that will enable the city to adequately monitor and track properties throughout the entire foreclosure process, including information on the new buyer and the property’s condition. The city will use this information to develop policies and programs to help Oakland residents avoid default and foreclosure in the first place. The city will use blight penalties to fund new foreclosure prevention and mitigation efforts, including a revolving loan fund to help homeowners repurchase their own homes at current market value.

Persistence and Practicality

Panarese of ACCE emphasizes the importance of persistence, clear messaging, and a balanced strategy combining legislative solutions, public pressure through direct actions, and collaborative processes: “There was no coordinated strategy between ACCE’s direct actions against the banks and its collaboration with the city. Our priority was to drag the banks’ practices into the light for everybody to see.”

On the other hand, “Some community advocates tip too far to one side or the other, insisting ‘We won’t talk to the city.’ But if you aren’t clear about what you stand for — if you only say what you are against —people won’t understand what you are trying to achieve.”

For her part, Williams is still putting on the pressure to achieve justice for her community. “I envision the community having control over vacant, abandoned, and foreclosed properties, and to see our city become clean again,” she says. “Right now we are on the right track and still have a way to go, but it’s happening and it’s about time.”


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