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  Interview of Richmond Mayor Gale McLaughlin by MSNBC Chris Hayes
August 4, 2013

See Interview of Richmond Mayor Gayle McLaughlin by MSNBC Chris Hayes: http://video.msnbc.msn.com/all-in-/52659101.


The following transcript

Day by day we get numbers that the country's entering into a significant housing recovery. In some areas of the country it almost looks like another bubble. 20 large U.S. cities' home prices have increased an average of 12% since last year. According to a just-released survey comparing may 2012 to May of this year. In four cities, San Francisco , Las Vegas , Phoenix, Atlanta, prices are up 20% or more year to year. Yet just like the overall economic recovery itself, it looks like this housing recovery is incredibly uneven. Certain areas are really recovering while others are not. For the areas that are not, there's still six years after the bubble burst dealing with the foreclosure crisis that no one has ever really dealt with. The areas in red and pink on this U.S. Map show the percentage of homes that are under water in any given region. That means homeowners owe more in their mortgage than the house itself is worth. Pink and red areas have 30% to 100% of their homes under water.

In Contra Costa County , California , near San Francisco , 33% of the homes are under water, according to this data. But one town in that county is finally doing something about it. The city of Richmond , California , has offered to buy the mortgages of more than 600 underwater homes at market value from the banks that hold those mortgages. Richmond 's Mayor Gayle McLaughlin says the city would help the homeowners refinance at an affordable rate. If the banks refuse to participate the city is prepared to use eminent domain to buy those mortgages. Joining me to explain this man is richmond Mayor Gayle McLaughlin. Why are you going to do this and how's it going to work?

Well, let me tell you, Chris, the housing crisis is not over in the city of Richmond , California . Just last year alone, we had over 900 foreclosures. And nearly half of the mortgages in the city of richmond are under water. And this clearly destabilizes families, destabilizes neighborhoods, and hurts the city as a whole. The banks sold my community predatory loans and now they have no solution. So the city is stepping in. We're taking these troubled loans off the hands of the banks . And we're paying them fair market value for them. And then we're working with the homeowners to help them refinance and to refinance at the current -- in line with current home values.

So we're clear about what fair market value means, current value, which means the loss, the haircut, is taken by the bank?

It's a fair market value as the industry indicates what fair market value is. It's something that, you know, under water means that the current value of the home is way under what the original mortgage was. And we're doing this. We're doing this in partnership with others. We have a private firm, Mortgage Resolution Partners, that is providing the funding and the technical assistance , and we have a community group called ACCE, Alliance of Californians for Community Empowerment, that's doing the community outreach .

Do you have the legal authority to do this?

We absolutely have the legal authority to do this. We call on the banks first of all to voluntarily sell us these mortgages at fair market value . But if they won't, we have the option to utilize eminent domain . Eminent domain is for a public purpose. And the public purpose in acquiring these mortgages is to keep foreclosures from happening in our neighborhoods, which creates blight, which creates lower property values. The blight draws crime in. And our overall economy suffers as a result of lower property values and such.

Aren't the banks going to absolutely go bananas if you do this? They're going to fight you tooth and nail , they're going to sue you, they're going to threaten not to lend. Are you prepared for what the banks are going to do if you do this?

Yes, absolutely. First of all, our agreement with MRP, Mortgage Resolution partners, is that we are totally indemnified by them. Any legal costs incurred will be made by MRP. But when the banks threaten to, you know, do -- not lend to families in Richmond , we -- families moving into Richmond , that is illegal. So we clearly think that if those policies were implemented, we have the option of bringing them to court and bringing legal action against them.

Mayor Gayle McLaughlin of Richmond , California , i hope you are as tough as you sound in this because they're going to bring a world of hurt down against you and I'm really happy to see someone taking the reins on this. Thank you so much.

Thank you, Chris.