A new bill written up by California Assemblymember Bob Blumenfield (D-San Fernando Valley) calls for a $20,000 fee to be charged to banks for every foreclosure they carry out in the state.
Aimed at reducing foreclosures in the hard-hit region, Assembly Bill (AB) 935 would fine mortgage lenders or loan servicers $20,000 per foreclosure in the form of a “foreclosure mitigation charge,” creating incentives to offer loan modifications or refinance alternatives.
Blumenfield said each foreclosure costs the local governments an average of $20,000 in the form of public safety calls and arrests, unpaid property taxes, inspections, trash removal, lawn maintenance, and other expenditures.
Each borrower loses some $7,000 in fees, and each foreclosure lowers neighboring home values by one percent.
The bill would supposedly generate up to $16 billion over the next two years, as nearly 800,000 foreclosures are expected in the Golden State.
So where would the money go?
AB 935 wound send 20 percent of the proceeds to K-14 public education, 20 percent toward public safety, 20 percent to redevelopment activities, 20 percent to cities and counties to pay for mitigating the effects of foreclosures on communities, and 20 percent toward small business loans.
California has seen more foreclosures than any other state, and is expected to see two million homes go through the process between 2008-2012.
This translates to roughly $632 billion in lost home value, $3.8 billion in lost property tax revenue, and $17.4 billion in costs borne by local governments.
For Los Angeles County during the same period, 381,000 foreclosures are expected, resulting in $150 billion in lost home value, $918 million in lost property taxes, and $2.8 billion in maintenance costs to local governments.