LOS ANGELES – A new survey released last week showed voters are concerned about the influence of special interest money on ballot initiative campaigns and the use of the initiative system to attack people’s civil rights.

Voters said they want greater transparency regarding funders behind ballot measure campaigns, greater review and oversight of initiatives, and more information to help make decisions when voting, according to Greenlining Institute, a non-profit public policy organization and the authors of the survey.

“85 percent of registered voters in California think that it is important to know who is funding initiative campaigns (both for and against measures) when they make their decision,” said Michelle Romero, program manager for Greenlining’s Our Democracy program and one of the authors of the survey at a press conference in Downtown LA on February 3.

Romero said these special interests groups like oil and chemical companies fund initiatives and hide behind “a warm and fuzzy name that sounds great but tells voters nothing, like Californians for Responsible Government, or Californians for Apple Pie and Cute Puppies. If Californians for Apple Pie and Cute Puppies is actually a front for oil and chemical companies or some other special interest, voters want to know,” said Romero.

The ballot initiative system has come under fire as of late. Ballot initiatives are often referred to as the people’s way to create a new law or challenge the state’s constitution by paying a $200 filing fee and gathering a certain number of signatures (about 500,000 – 800,000) within 150 days. But lately, it’s mostly a tool for rich, well-funded corporation to create laws that would benefit them or attack minorities. The survey revealed that 73 percent of voters believed that the rights of certain groups are often attacked via ballot initiatives, and 41 percent felt their own rights had been attacked. For example, the English-only initiative proposition 8.

And according to the survey, most minorities don’t even know what a ballot initiative is or the process of creating a law.

“If you have $2 million dollars, your law will make it into the ballot,” said Robert Stern, president of the Center for Governmental Studies, adding that the $2 – $3 million is due to the high number of signatures required in a short amount of time. But a really well funded ballot initiative campaign could cost as much as $10 million, he said.

“Ballot initiatives and referenda have a tremendous impact on the lives of Californians and can be a wonderful tool for democratic action,” said Sen. Loni Hancock (D-Berkeley) in a separate statement.

“However, the process has frequently been hijacked by corporate interests intent on misleading voters to benefit their own narrow interests. The Greenlining Institute has written, ‘Corporations and other special interests now dominate what was supposed to be a vehicle for people’s democracy.’ I share their concern and look forward to working with Greenlining on ways to improve the system,” added the statement.

Greenlining is suggesting ways to improve the process.

Among the several suggestions offered by Greenlining is to reduce the negative influence of big money, develop a responsible system that includes a form of oversight of the initiative process, increase civic participation and create a more open and transparent initiative process.

SACRAMENTO, Calif. (AP) — Gov. Jerry Brown’s appointee to head the department that oversees banking, financial and consumer regulations in California led a trade association that fought against tighter lending restrictions before the subprime mortgage crisis exploded and was an executive with Washington Mutual when the now-failed bank was among the most aggressive marketers of loans to high-risk borrowers.

Jan Owen, a Democrat, also is named in a congressional inquiry into whether lawmakers and certain executives received preferential treatment for home loans, although she was not accused of wrongdoing.

Consumer advocates said they are watching Owen’s decisions carefully to see how she performs in her role as commissioner of the California Department of Corporations. The Democratic governor appointed her in December to the $143,000-a-year position, and she started in January.

Owen, 59, of West Sacramento, has a long resume in California, including stints in both business and government, but it is her history with organizations that were at the heart of the mortgage meltdown that stands out in a state that has one of the highest home foreclosure rates in the nation.

Owen served as state director of government and industry affairs at Washington Mutual from 2002 until its collapse in 2008, one of the largest bank failures in American history. It was taken over by JP Morgan Chase, where Owen stayed on as vice president of government affairs until 2009.

“It is of concern if a person who takes a job there, at that pay level in particular, has such experience, particularly with the mortgage bankers association, JPMorgan and Washington Mutual,” said Rick Jacobs, president of the Courage Campaign, which advocates on behalf of policies for poor and working-class families.

“These are big institutions, some of which don’t even exist anymore because of what they did in the mortgage business, and what they did to California,” Jacobs said. “That should be watched very carefully.”

Owen declined to be interviewed by The Associated Press for this story, but a spokesman for the Department of Corporations, Mark Leyes, responded to questions by email and telephone. He said Owen’s professional background is an asset because she understands consumer issues.

“Understanding these industries and how they function— and fail — improves the ability to regulate effectively,” Leyes said in an email.

He said the department protects consumers by licensing and regulating the network of financial services and securities businesses, including brokers, dealers, investment advisers, financial planners and lenders. Because Owen “really understands how these complex industries operate, she knows what to look for and how to crack down,” Leyes said.

Officials with several consumer groups said they were hesitant to openly criticize Owen’s background because they will have to work with her in her new role. Lawmakers similarly were hesitant because Owen’s appointment still has to be approved in the Legislature. Although Owen’s appointment requires confirmation by the state Senate, she is allowed to work for up to one year before lawmakers decide.

Some consumer advocates who have worked with Owen in the past praised her, saying she was responsive to their concerns.

Orson Aguilar, executive director of the Greenlining Institute, a Berkeley-based national policy group that advocates for racial and economic justice, said he often found himself on the opposite side of the table from Owen on consumer protection and affordable housing issues when she was an executive at Washington Mutual.

“I think people would be surprised, but definitely she was somebody who was easy to work with and she got it. She just didn’t pay lip service, she tried her hardest” to help poor communities, he said.

Before joining Washington Mutual, Owen was executive director of the California Mortgage Bankers Association from 2000 to 2002, where she worked on behalf of lenders on regulatory issues that she now is in charge of enforcing.

Owen was among those who argued against a 2001 bill that attempted to control high-interest predatory lending several years before the collapse of the housing industry, which helped propel the state’s unemployment rate to more than 12 percent during the height of the recession.

SB60 by then-Sen. Joe Dunn, a Democrat, would have required lenders to assess whether potential recipients of high-interest, high-risk loans had the means to repay them and required the attorney general to document complaints against lenders.

The bill sought to end the “abusive practices imposed upon a captive market,” according to its text.

“These abusive tactics, known as ‘predatory lending’ practices, range from the charging of exorbitant fees and interest rates from those least likely to afford them, to aggressive sales of costly and unnecessary services, to outright fraud aimed at forcing foreclosures and allowing seizures of property,” the bill said.

That was 2001, long before most Americans had heard about the complex lending and financial instruments that contributed to the collapse of the housing market and billions of dollars in bank bailouts.

A report that year in American Banker, a trade magazine, notes that a hearing on the bill was canceled and said Owen’s office contacted the senator to try to “work with him” on it. A newsletter for bankers association members from 2001 quotes Owen as saying the legislation and other bills like it would turn lenders away from California, which would lead to complaints that low-income buyers and the elderly could not receive loans.

“There is a fine line between protecting consumers and making the process so cumbersome and risky that lenders will simply do business elsewhere,” she said in the newsletter.

Dunn’s bill died in committee that year.

The former senator, who is now executive director of the State Bar of California, did not return a call from The Associated Press seeking comment.

Leyes, of the Department of Corporations, said industry groups argued that the law duplicated existing federal regulations, although those did not cap interest rates or fees on loans. He noted that the association did not take an official public position on the bill.

“The industry wasn’t supportive of Dunn’s bill and similar efforts that year or in that time period. Jan was employed by the association, the CMBA, and she needed to represent their point of view,” he said.

Leyes said a similar bill by then-Sen. Carole Migden passed later. The Mortgage Bankers Association also lobbied against that bill.

The association also is listed as an opponent of the California Financial Privacy Act by then-Assemblyman Tim Leslie, which sought to prohibit financial companies from sharing customers’ data unless customers opted in. That legislation, AB21, died in a committee in 2002.

The California Reinvestment Coalition is one of many groups that lobbied in the early 2000s for tighter lending standards and more restrictions on high-interest loans. Its associate director, Kevin Stein, said he did not recall whether Owen spoke out publicly against the Dunn bill but said her resume raises some concerns about whether she will be an effective advocate for consumers.

Stein called Washington Mutual a “perfect example of what happens when regulators don’t regulate.”

“So she’s aware of that, and maybe there’s some appreciation that she might have for the role that regulations can and should play,” he said.

A spokesman for the governor, Gil Duran, said is uniquely qualified to lead the department.

“Jan Owen is a highly experienced and respected commissioner with a deep knowledge of California’s complex industries and regulations. Gov. Brown picks appointees based on their qualifications,” he said.

Owen’s name also is cited in two congressional investigations.

They include a 2009 inquiry into the collapse of Countrywide Financial Corp. as a potential “Friend of Angelo” — a reference to former Countrywide chief executive Angelo Mozilo, who helped high-profile clients get discounted mortgages.

Once the country’s largest lender, Countrywide played a major role in the collapse of the housing market because it aggressively pushed complicated home loans to people with a questionable ability to repay.

An April 2003 email exchange cited as part of the House Oversight and Government Reform Committee’s investigation begins with an email message from Owen to Pete Mills, then-senior vice president of legislative and government regulatory affairs for Countrywide Home Loans.

“Don’t forget name and telephone number of the guy for refi for us,” Owen wrote.

Mills then emailed another Countrywide executive, asking him or “one of your top people,” to help Owen. In addition to noting her government affairs position at Washington Mutual, Mills refers in his email to Owen as “a good friend of Countrywide from her days as executive director at Calif. MBA.” A follow-up email urges another staffer to offer Owen a discount of half a percentage point on her loan and “no junk fees.”

Leyes said Owen does not remember ever receiving a refinancing offer from Countrywide, and public records reviewed by The Associated Press do not show her or her husband having any loans from the company for the two Sacramento-area homes they have owned.

The report concluded that Countrywide loan officers waived fees and knocked off points for VIP borrowers at no cost, saving them thousands of dollars in deals that were not available to regular applicants. It does not say whether Owen received a loan with preferential terms.

“She didn’t seek any preferential treatment even though she may have kind of innocuously asked into the terms that Countrywide provided for a refinance,” Leyes said. “What’s unfortunate is that that got included in that report back then and it didn’t get challenged or corrected at the time.”

Owen’s name also surfaced in a July 2010 House Ethics Committee investigation that cleared Rep. Laura Richardson, D-Long Beach, of wrongdoing in the foreclosure of her Sacramento home, an action that Washington Mutual later rescinded. Owen was among the bank officials who dealt with Richardson’s case.

Before she worked for the trade association and the banks, Owen was chief consultant to the Senate Banking Committee in the Legislature from 1992 to 1995, a deputy commissioner at the Department of Financial Institutions under former Gov. Gray Davis from 1996 to 1999 and acting commissioner from 1999 to 2000, when she left to head the bankers association.

La Opinion
by: Yurina Melara Valiulis

Los votantes de California quieren mejor información sobre las iniciativas estatales, incluyendo saber quién está financiando las campañas y el impacto que tendrían.

Una encuesta realizada por The Greenlining Institute revela que el 85% de los votantes registrados para votar en California consideran que es importante saber quién está detrás del financiamiento de las iniciativas y un 51% considera que la información debería ser pública a través de comerciales de televisión.

Orson Aguilar, director ejecutivo de The Greenlining Institute, dijo a La Opinión que aunque las iniciativas de legislación es una buena herramienta de la democracia participativa, el proceso está viciado y actualmente sólo funciona para las corporaciones y los sindicatos que tienen el dinero para pagar de 2 a 3 millones de dólares para llevar la iniciativa a la boleta electoral.

“La organización o corporación que tiene mucho dinero controla la iniciativa. Vemos que el votante está frustrado y quiere saber quien está pagando, quien está a favor y quien está en contra”, explicó Aguilar.

Robert Stern, presidente del Centro de Estudios Gubernamentales –quien forma parte de la Junta del Concejo del Proyecto para una Reforma de Iniciativa- recordó que el proceso de iniciativas de ley en California comenzó en 1911, con el objetivo de darle voz a los ciudadanos comunes de modificar o agregar leyes estatales.

“Hace cien años, las personas vieron el proceso de las iniciativas como una forma de lograr que la mayoría de votantes tuvieran voz sobre leyes que la legislación estatal no lograba ponerse de acuerdo… para lograr leyes se necesita que dos terceras partes de los legisladores estén de acuerdo y estoy es muy difícil de lograr”, dijo Stern.

Algunas leyes que los votantes californianos han logrado pasar sin la necesidad de la legislatura han sido el impuesto al tabaco, el establecimiento de un límite al impuesto de la propiedad y la ley sobre el uso de marihuana medicinal.

Otras iniciativas que han afectado los derechos de minorías y que han sido cuestionadas en las cortes, son: Proposición 8, que impide el matrimonio homosexual; y, la proposición 14, que establece el inglés como el idioma legal.

Kathay Feng, directora ejecutiva de California Common Cause, dijo que se necesita una reforma al proceso de las iniciativas de ley para regresarle el poder a los votantes de California y evitar que sólo las corporaciones que tienen millones de dólares, puedan influir en la agenda estatal.

El problema que enfrenta la Junta del Concejo del Proyecto para una Reforma de Iniciativa, que está conformada por 35 organizaciones relacionadas con la participación cívica, es que para modificar el proceso de iniciativa se necesita promover una iniciativa de ley. Es decir, se necesitan entre 2 a 3 millones de dólares.

Aguilar aseguró que no tienen esa cantidad de dinero para promover la iniciativa de ley y que no hay interés de la legislación en modificar el proceso.

In 1911 California voters, frustrated with the hold Southern Pacific Railroad and other wealthy special interests had on Sacramento politics, created the ballot initiative system to help regain the citizen’s voice in government.  And yet, here we are 100 years later, discussing the need to reform the ballot initiative system in order to again help regain the citizen’s voice in government from wealthy special interests.

“The ballot initiative system is far from its original mission and vision,” stated Michelle Romero of the Greenlining Institute, a national policy research institute.

Romero is leading a project, sponsored in part by California Forward, that is taking a good look at what’s gone wrong in the California initiative process and how Californians feel about it.  Greenlining’s findings were released in a briefing Wednesday at the State Capitol.

“The initiative process is something I am really deeply concerned about because it’s being hijacked by special interests,” said Assemblymember Paul Fong at today’s briefing.

Fong cited a 2010 initiative backed by $16 million from PG&E (which would have limited competition for the corporate behemoth) and another consumer-unfriendly initiative backed by $15.8 million from Mercury Insurance as examples of how special interests have “hijacked” the process.

Senator Loni Hancock was on hand at the briefing and added to the legislative perspective on the initiative process stating, “We have seen industry-sponsored initiatives that are there basically to get an economic advantage for a particular industry, initiatives can have wonderful titles that actually are very, very deceptive.”

The problem, as stated by Romero, has to do with access: some have access to the initiative process while others don’t.   Romero explained that one of the main causes of this disparity is—you guessed it—money.

In 1911 when the process was first implemented, in order to file an initiative you had to gather at most about thirty thousand signatures and there was no limit on the time to do so. A person with a good idea could organize groups of people in a grassroots fashion to collect this amount of signatures at little to no cost.

Fast forward 100 years and a century’s worth of population growth and now you have to gather north of 800 thousand signatures in a period of 150 days. This impossible sounding feat can only be accomplished with a minimum of two or three million dollars to pay a signature-gathering firm.

But that is just the beginning. The $3 million will only aid in qualifying an initiative for the ballot.  The cost of launching a public campaign to convince voters to actually pass an initiative could easily top $10 million.

According to the survey results released today by The Greenlining Institute, the problem goes beyond the initiative-industrial complex with its effect the civil rights of California’s citizens.

Results from a survey of a representative sample of Californians showed that 73% of California voters believe that the rights of various groups of people are often attacked via the initiative system—and 41% feel that their own rights have been attacked.

So what can be done?

Greenlining’s survey results showed Californians favoring greater disclosure in initiative campaign funding, establishing a citizen’s commission or panel of judges to review potential initiatives for legality or errors, and having additional information available to them in the official state voter guide regarding the estimated impact of an initiative on measures such as unemployment rates or poverty rates.

The Greenlining Institute continues their research into ballot initiative process reform with the objective of advocating for reforms that would create a more open and transparent process, increase civic participation, incorporate a form of oversight where needed, and reduce the negative influence of big money in the initiative process.

Greenlining welcomes collaborators and stakeholders to assist in their efforts to achieve this objective.

Stacy Danielson is a Communications & Events Associate at California Forward

In the words of housing consultant John Burns, bulk sales of REOs could be a “game changer” for the U.S. housing market.

The Obama administration this summer floated the idea of selling foreclosed homes to investors, who would agree to rent them out.

The interest in a REO-to-rental program was so high that interested parties flooded the government with nearly 4,000 RFIs — or requests for information — in September when the topic hit fever pitch.

The pool weighing in on the matter is vast.

It includes the requisite professors, consultants and think tanks.

But it also encompasses investors big and small, lenders, mortgage insurers, property management firms, out-of-work homebuilders, mortgage and real estate trade groups, entrepreneurs of all stripes and nonprofits.

“There is significant interest, and there is interest up and down the spectrum,” said Alon Cohen, a housing policy adviser for the Center for American Progress, a Washington think tank, on noting keen interest among small to large nonprofits.

What’s not to like about a bulk REO rental initiative?

It could stabilize home prices and neighborhoods, improve REO asset recoveries, keep rental rates in check and reduce the shadow inventory, according to John Burns, chief executive of Irvine, Calif.-based John Burns Real Estate Consulting.

“I know that there were small mom-and-pops that submitted and there were billion-dollar hedge funds that submitted,” he said.

But Burns and others admit it’s not that simple. The challenges are many.

Will the government get an acceptable price by selling in bulk? Will investors make an acceptable return? Will managing a portfolio of single-family properties prove too difficult? Will investors reap a windfall and then leave neighborhoods in slum-like conditions?

“(Home) prices are already very low so the opportunities, and demand are already there,” notes Oliver Chang, U.S. housing strategist at Morgan Stanley.

“Even without government intervention, private capital is already beginning to flow in. With bulk REO sales, the industry moves from niche and cottaged to institutional,” Chang said.

ACCESSING THE PROBLEM

Housing has been in the doldrums for about five years now, and the Obama administration has struggled to give it a lift.

Home prices slumped again over the summer although sales gained traction in what is traditionally the busiest season for the industry.

The REO market continues to make life challenging for homebuilders as sales of new homes dropped another 2.3% in August for the fourth-straight monthly decline and the lowest level since February.

The inventory of new homes hit a new record low.

Growing in concern is the backlog of foreclosure cases and the glut of real estate owned properties held by major servicers and the GSEs.

The government currently owns about half of the REO inventory in the country. Fannie held more than 135,000 REO at the end of the second quarter, more than double the 61,000 owned by Freddie. The Federal Housing Administration had 43,856 REOs as of Sept. 15, with about 19,200 of those under contract.

About 4.25 million properties were at least 30-days delinquent but not yet in foreclosure in August, with 1.9 million of those at least 90 days past due, according to Lender Processing Services, suggesting the REO inventory is set to grow.

The home ownership rate, meanwhile, has fallen to its lowest level in 13 years to 65.9%, down from a peak of 69.2% in 2004. The overall decline, whether from foreclosures, short sales, an inability to get financing, or personal preference is pushing up the demand for rentals.

Illinois is just one example of this shift. One in four homeowners in the state is underwater on their mortgage, according to statistics from the Woodstock Institute, a housing group that advocates on behalf of minority neighborhoods in Chicago.

The rental market has gained steam over the last 12 months in the city as previous homeowners become renters, said Tom Feltner, vice president at Woodstock.

“We’ve seen rents rising in many neighborhoods. At the same time, we’ve seen an interest in homeownership decline. There is serious pressure on the affordable rent housing in Chicago. Renting REOs definitely is a step in the right direction to relieve some of the pressure on the affordable housing market.”

In August, the Obama administration — via the Federal Housing Finance Agency — put out its RFI seeking input on new options for selling single-family REO held by Fannie Mae, Freddie Mac and the Federal Housing Administration.

REO sells at a steep discount. So reducing the overhang of distressed properties — and ultimately raising home prices and home sales — is a priority for many housing market participants, including two of the biggest trade groups in the nation, the Mortgage Bankers Association and the National Association of Realtors.

“Existing government programs should be modified to support financing and availability for local investment,” the MBA wrote in a letter supporting bulk REO sales. “Providing affordable, responsible financing options to investors not only eliminates REO properties, but also empowers neighborhoods by giving local residents an increased stake in its success.”

NAR wants any REO-to-rentals or a lease-to-own government program to be narrow in scope. The trade group, which has about 1.1 million members, is concerned properties might be expedited to foreclosure to enable a bulk sale.

“In any kid of lease-to-own joint venture program, it should be in small, specific geographical areas and not run by a large institution or administered by the government,” said Charlie Dawson, associate policy representative at NAR.

Instead, NAR wants to see local investors and local nonprofits.

“Keep this as local as possible so you have people who really understand the market and are more hands-on,” Dawson said.

NAR wonders if bulk deals would be too large, in the $50 million to $1 billion range.

THE NICHE INVESTOR

While the government may be interested in luring big national players, local and regional investors aren’t waiting for a bulk deal from the GSEs.

They are building their portfolios of REOs one at a time to rent or resell.

Orange County, Calif.-based G8 Capital is already in the game.

The investment firm supports the idea of finding ways to clear government inventory using mechanisms common to the private sector.

“About half of the buyers that we deal with are investors that are buying properties. In a lot of cases, they are buying properties as rental properties,” the company said.

Besides representing investor-clients, G8 also is investing on its own behalf.

“We have held onto about 350 properties — most of which are condos — in the past year and a half. We started building this rental portfolio, and we are seeing significant opportunity going forward.”

Salt Lake City-based Green River Capital, an REO asset management firm, announced plans recently to operate a national program to rent out previously foreclosed homes.

In March, the REO asset management company became one of three firms handling REO sales and upkeep for Freddie Mac.

Green River’s investment in a new rental program followed on the heels of the RFIs that flooded into the Obama administration on how to handle government-held REO properties.

The company said its rental program would be conducted on a regional basis and include single-family homes, duplexes, condominiums and town homes.

Green River plans to reach out to delinquent homeowners who might be able to stay in their homes as renters, as well as to new tenants.

“With the housing market’s continuing challenges and President Obama’s recent request for firms to propose alternative rental approaches, GRC’s enhanced, nontraditional servicing program allows our clients to conserve their properties and prevent losses,” said Joe D’Urso, president of Green River Capital.

Homebuilders have also diversified into REO to find new revenue sources for the dried-up new home market.

The MacDonald Cos., a small homebuilder from Kerrville, Texas, began buying up REO a couple years ago and providing a lease-to-own program.

“I can’t imagine why more people haven’t done it, especially when there are whole streets available in some markets,” said Granger MacDonald, president of the central Texas firm. (See more on homebuilders investing in REO in sidebar, page XX.)

Mom-and-pop shops are also at play.

Victor and Teresa Avramenko, a couple from Canada, bought their first American property two years ago. They now own five houses in the Phoenix area and they plan to buy another three to five.

One they use for their U.S. visits and the rest are rentals. Foreign investors pumped between $30 billion and $41 billion into the U.S. housing market for the 12 months that ended March 31.

WILL THE BIG BOYS PLAY?

Small investors see the value of investing in REO, but will big hedge funds and investment firms feel the same way?

Dain Ehring, founder of CoreLogic Dorado, said motivating private capital to buy REO makes the most sense of the various options being floated by the administration.

“That’s one extremely viable way to get through all the shadow inventory that the market hasn’t gone through,” he said. Ehring is especially interested because he believes CoreLogic Dorado’s cloud computing tools may be able to help make the transfer of those REOs to private investors more efficient.

“We’re looking at ways we can automate the purchase of those houses and do it in a way that (investors) can understand and have a clean asset.”

But money could be a hurdle, he noted.

“Right now it’s onesies-twosies. You’ve got to do it in a big, big way and bring in some big money. So when you do that, then you’ve kind of got to institutionalize it.”

The big-money players — hedge funds and private equity funds — still have too much fear and uncertainty to step in, Ehring believes.

Investor Ron D’Vari, co-founder and chief executive of NewOak Capital, sees challenges on the seller and buyer side.

“Most institutions are not in favor of bulk sales, but I am sure they are doing mini-bulk or asset-by-asset bid,” he said.

“Bulk auctions are typically very challenging as the buyers are not going to be able to do their homework, which is super expensive, for a (bid) that they may lose. Many institutional buyers actually stay away or bid very low due to their light due diligence,” D’Vari said.

WHY DO ANYTHING?

“I don’t see a problem moving the inventory right now,” said Todd Mobraten, president and COO of Res.Net, an online real estate tracking system used by real estate agents, servicers and homebuyers.

“I don’t see any issue liquidating REO. We are connected with every REO player in the industry. We have 160 companies that use our software on a daily basis to liquidate REO. None of them are having a problem moving that inventory.”

It’s not unusual for local investors to go to a delinquent borrower in a house that is listed for a foreclosure auction and offer to buy the house and lease it back. But Mobraten is skeptical about whether that could work on a mass scale.

Christopher Thornberg, founding partner with Los Angeles-based Beacon Economics, also questions the administration’s proposal.

It’s definitely a bad idea if you are a multifamily landlord, he notes.

“If you want a bunch of people buying up these REOs, it’s going to cause a bunch of vacancies in the apartment stock.  I guess if you prefer to have the single family tight and the multifamily loose, maybe that’s OK.”

Still, Thornberg questions whether the administration “should be favoring one part of the market and not the other. In any case, I don’t understand what the purpose of this is. If investors want to go out and buy and rent, they’ll go out and buy and rent. Are we supposed to subsidize people to do that? I don’t think we need to subsidize people to do that. Just let prices fall further.”

Plenty of bright entrepreneurs have seen opportunities with REO and have already bought them up, he contends.

MAKING IT WORK

Tom Eggleston is one of those entrepreneurs who figured out how to make an REO rental program work.

A former homebuilder now with real estate firm called RENU Management, he has some ideas for both big and small players.

The Indianapolis-based entrepreneur envisions a national pool auction in about 40 markets with 400 REOs in each portfolio for large institutional investors and hedge funds, and local pool auctions in about 10 markets with 100 properties in each portfolio for local and regional investors.

All would be subject to a five-year hold and rent, with limited exceptions.

“The savings are that you don’t have institutional or branded marketing like multifamily does, so the marketing is limited to asset-specific marketing. Our method of marketing is to utilize about 50 websites — high-traffic sites where renters are looking for single-family properties, including duplexes and quads.”

As a management firm, the company receives favorable rates for the ads, which generate a tremendous response. The firm pays on commission for showings and as leases are signed, which is similar to how multifamily works.

The savings come from not having to do upfront brand marketing, such as maintaining a website or advertising locally to draw traffic.

The firm pays licensed real estate agents on a commission basis to lease the REO it manages. On the capital expenditure side of things, single-family residences will likely be more expensive in terms of repair costs, Eggleston said.

“With the volume of repairs that our units generate, we do achieve very favorable cost arrangements with our contractors.” RENU offers 24/7 repair to its tenants, similar to multifamily properties.

“I think we have some upfront savings on the marketing side and some higher repair and maintenance costs under the scattered-site model, but generally similar in terms of financial performance, which I think would surprise people,” Eggleston said.

“I think they assume there is a huge premium in the expense structure to manage single-family (properties). We find with the right processes, it is very comparable.”

Richard Green, professor at the University of Southern California’s Lusk Center for Real Estate, compares bulk REO sales to “essentially what we did with the Resolution Trust Corp. after the savings and loans blew up in the late ’80s and early ’90s.”

Going that route “imposes lot of pain in the short run but it gets it over with. I think there are places in the country where it probably would be helpful just to clear the decks.”

NONPROFITS SEEK CONSIDERATION

Greenlining Institute’s constituents are concerned about whether absentee investors will adequately maintain properties, so bulk sales raise the specter of neighborhood disinvestment and decay.

“The folks we’re working with are dealing with homes that are left abandoned, or not properly maintained, or not even brought up to the appropriate standards that then make tenants suffer from health and other issues,” said Orson Aguilar, executive director of the Berkeley, Calif.-based public policy research firm. ”There need to be rigid standards when it comes to the rehab and maintenance of the properties that are sold to investors.”

Any effort to dispose of these REOs should further Fannie Mae and Freddie Mac’s mission to preserve affordable housing and help first time homebuyers, he said.

“We think it would be really unfair to help enrich a group of investors who are lucky to have enough cash to buy these bulk (properties) but don’t invest in the communities where these properties are located,” Aguilar said.

Any national plan to facilitate mass sales of foreclosed homes should require the investors purchasing those properties to partner with local nonprofit groups, according to the Greenlining Institute.

“We’re talking about a huge transfer of wealth to a group of investors in the name of stabilizing the market,” according to Aguilar.

Cohen of the Center for American Progress said there could be some monetary benefit for the GSEs to work with nonprofits.

That might be more viable then selling to investors, who may have a hard time making competitive returns on REO and may demand a significant discount on the front end to make it work.

“A mission-driven nonprofit doesn’t need to make the numbers work and should, as a result, be able to offer a higher price. A nonprofit also is likely to spend more money on the rehab. What if mission-driven organizations can offer more money, thereby giving the GSEs the short-term maximum value they are seeking?”

If the GSEs and the FHA provide cash-strapped nonprofits access to capital to buy up REO, then they could, in return, achieve short-term high returns on their REO combined with long-term neighborhood stabilization.

“We know there is a track record of investors coming in from outside and just flipping properties. You buy it for 20 cents on the dollar and you flip it for 30 cents on the dollar and you make out like a bandit. That’s not helpful if you are trying for housing stabilization,” Cohen said.

“Look, we don’t need to vilify anybody. If you are an investor and you say my investment term is five years, then you’ll do a five-year investment.”

Nonprofits, however, are interested in holding the properties longer and thus will invest more in rehab on the front end, he said.

For John Burns, it all boils down to two key issues.

“We need to keep the distressed transactions off the market,” he said, “and we need to make sure people don’t go homeless. Rental REO solves the problem.”

– Liz Enochs, Jacob Gaffney, Kerri Panchuk, Jon Prior and Jason Philyaw contributed to this report.

California Clean Money Campaign

Last week, the California Assembly Appropriations Committee voted AB 1148, the California DISCLOSE Act, to the Assembly floor for a full vote next Tuesday, January 31st.  Coming two days before the second anniversary of the Supreme Court’s infamous Citizens United decision that unleashed unlimited anonymous spending on campaigns across the country, the vote moves forward a bill that would shine a spotlight on political spending so voters know who is behind the ads they’re seeing.

Over $235 million was spent on ballot measures in 2010, almost all of it by veiled actors hiding behind innocuous-sounding names that deliberately mislead voters about who is paying for them.  Independent expenditures have increased more than 6,000% since 2000.  It will come as no surprise that a recent study by the New York City Public Advocate showed that such anonymous spending groups are significantly more likely to fund negative advertisements.

Assemblymember Julia Brownley, author of AB 1148, said it best when she said that Californians need to know who is paying for political ads when millions of dollars by special interests and wealthy donors are influencing the direction of our state.

Sponsored by the California Clean Money Campaign, AB 1148 will make sure that voters know who is paying for political ads by requiring television, radio, and print ads to clearly identify their three largest funders with their names and logos.  These requirements will apply to both ads for or against ballot measures and independent expenditure ads for or against state and local candidates.

The difference in clarity to the voters would be immense.  In 2010, the largest-spending ballot measure committees had names like “Californians to Protect Our Right to Vote”, “Stop Hidden Taxes”, “Californians for Fair Auto Insurance Rates”, “Citizens for an On-Time Budget”, and the ”California Jobs Initiative Committee”.  Most voters had no idea who the largest funders of those committees actually were.  With AB 1148, they would.

The state’s budget likely would benefit dramatically from this kind of increased disclosure.  Much of the state’s budgetary problems are due to legislators being handcuffed by ballot box budgeting and other limitations passed by special interests whose ads don’t reveal who they are.  Voters who can make more informed decisions will make better decisions.

These are all part of the reasons why AB 1148 is endorsed by nearly 300 statewide and local organizations and leaders, including the League of Women Voters of California, the California Alliance for Retired Americans, California Common Cause, California Church IMPACT, CALPIRG, the Greenlining Institute, the Green Chamber of Commerce, the Planning and Conservation League, Sierra Club California, and taxpayer advocates like Ted Costa.  Two of the three largest cities in the state, Los Angeles and San Jose, just unanimously endorsed AB 1148, and its endorsers include both Democratic and Republican local elected officials.

As an amendment to the Political Reform Act of 1974, AB 1148 will require a 2/3 vote in both the Assembly and State Senate to go into effect, or passage by the voters if the legislature puts it on the ballot by a majority vote.

Though it can be difficult to achieve a 2/3 vote in the legislature, AB 1148 already has substantial support in the legislature.  We are particularly excited that Assembly Speaker John Pérez has joined on as a co-author of AB 1148 in the fight for real transparency and disclosure in political advertising – making a total of 34 co-authors in the Assembly.   Assembly Appropriations Chair Felipe Fuentes (D-Los Sylmar) and Assemblymembers Tom Ammiano (D-San Francisco), Bob Blumenfield (D-Woodland Hills), Steven Bradford (D-Gardena), Charles Calderon (D-Whittier), Nora Campos (D- San José), Wes Chesbro (D-Arcata), Mike Gatto (D-Glendale), Isadore Hall (D-Compton), Jerry Hill (D-San Mateo), Holly Mitchell (D-Los Angeles), and Jose Solorio (D-Santa Ana) all voted Yes on AB 1148 in the Appropriations Committee.

Most importantly, support for increased disclosure is one of the rare issues in which there is nearly universal public support across the board:  86% of Democrats, 78% of Republicans, and 88% of Independents favored increasing public disclosure requirements of initiatives in the October 13, 2011 California Field Poll.

Disclosure isn’t just an issue that voters say they support but would forget about come election time.  As the nearly 300 endorsing organizations and 20,000 people who’ve signed petitions for AB 1148 testify, people across the state are paying attention.  And in a January poll commissioned by the Greenlining Institute, 59% of voters said they’d be less likely to vote for an elected official who had voted against improving funder disclosure on political ads.

Of course, AB 1148 has already engendered the kind of opposition you’d expect from organizations representing the biggest special interests in the state who would rather continue being able to hide from voters when they pay for political ads.  But with overwhelming bipartisan support from a public that is engaged and cares deeply about transparency and disclosure, we’re hopeful that enough Democrats and Republicans will come together to do the right thing and pass it on Tuesday.

Culver City Patch
by Kelly Hartog

On Jan. 18, the 14-member California Citizens Redistricting Commission held a public input meeting at Culver City Council Chambers to hear possible amendments to the California Government Code sections 8251-8253.6.

A group presentation was submitted by California Common Cause; the Asian Pacific American Legal Center; California Forward; Claiming Our Democracy; The Greenlining Institute California; the California Citizens Redistricting Commission; the National Association of Latino Elected and Appointed Officials (NALEO) and the League of Women Voters of California.

The main focus of the group’s suggested changes centered on budget and timing issues, including ensuring the public has adequate time to comment on the process and that transparency remain key.

Read the full article here.

La Opinion
by: Araceli Martinez Ortega

SACRAMENTO.— Catherine Sandoval, quien creció en el este de Los Ángeles se convirtió ayer en la primera mujer latina en ser confirmada como miembro de la Comisión de Servicios Públicos de California (CPUC) por el Comité de Reglas del Senado.

Aunque será hasta hoy cuando se lleve a cabo la confirmación por el pleno del Senado, se da por un hecho que no tendrá problemas para recibir los votos y convertirse en uno de los 5 comisionados de la CPUC, además de la única mujer.

Sandoval de 51 años, fue designada al cargo por el gobernador Jerry Brown en enero de 2011, tiempo en el cual ha estado ya en pleno ejercicio de su cargo, pendiente de su confirmación, que debe hacerse un año más tarde.”Este puesto es tan importante porque todos pagamos por la electricidad, agua, teléfono y nuestra meta es que los precios no suban tanto y haya competencia e innovación en el mercado”, dijo Sandoval en entrevista con La Opinión antes de entrar a la audiencia de confirmación en el Comité de Reglas del Senado, a la que se hizo acompañar por toda su familia.

Ser la primera mujer latina en convertirse en miembro de la CPUC, aseguró es un gran honor y una gran oportunidad para servir a la gente de California sobre también a quienes no hablan inglés y enfrentan barreras adicionales para acceder a los servicios públicos.

Sandoval, de 51 años, se graduó en Artes de la Universidad de Yale; estudió jurisprudencia en la Escuela de Derecho de Stanford; e hizo maestría en Ciencias Políticas en la Universidad Oxford donde se convirtió en la primera latina en recibir la reconocida beca Rhodes.

Al cargo trae su experiencia como asesora en vivienda para la Agencia de Negocios, Transporte y Vivienda; su trabajo en la Comisión Federal de Comunicaciones; y como litigante en la firma de abogados Munger, Tolles y Olson así como profesora de Derecho de la Universidad de Santa Clara.

Como miembro de la CPUC, tiene un sueldo de 128,109 dólares al año y el cargo dura seis años.

Samuel Kang, abogado general del Instituto Greenlining, con sede en Oakland, dijo que podría decirse que la CPUC es la agencia es la más poderosa y estrechamente escudriñada en el estado., “por lo que cualquier nombramiento en un ambiente tan demandante necesita una combinación inusual de intelecto, integridad y liderazgo, y bajo esas medidas, el gobernador no pudo encontrar mejor selección que Sandoval”.

La abogada latina fue cuestionada durante horas por los legisladores sobre el trabajo y las políticas de la CPUC sobre todo porque la confirmación viene en momentos en que la confianza pública en la CPUC ha sufrido una serie de problemas incluyendo la falta de prevención en desastres. como la explosión de gas en San Bruno en 2010, una desgracia que ocurrió antes de que Sandoval llegara al cargo

With the upcoming anniversary of the Citizens United decision, the U.S. Supreme Court ruling that allowed corporations to make unlimited campaign contributions, California Assembly member Julia Brownley (D-Santa Monica) is pushing a bill to ensure that corporate entities making political donations are required to at least disclose those contributions.

The California Disclose Act, AB 1148, specifically addresses accountability in election campaign ads, forcing corporate sponsors to step out from behind cryptic political action committee (PAC) names when they fund political advertisements.

“Currently the top two donors must be disclosed on political ads, usually behind meaningless campaign committee ads,” said Michelle Romero, manager of the Our Democracy program at the Greenlining Institute, which is supporting the legislation. “We hope to really pierce through the committee names to the top three donors behind ballot measure expenditure campaigns.”

Romero’s ideal realization of this bill would be to require political ads to list donors by the name of the corporation, rather than just its made-up PAC name. “Instead of saying, ‘This ad was paid for by the Committee for Responsible California,’ the ad would list the logos and names of top donors,” said Romero. “For example: the donors are Chevron, Comcast, etc.”

Yet other states have taken even bolder steps to counteract the Citizens United decision. The Montana Supreme Court recently affirmed a ban on unlimited corporate spending on political campaigns, seemingly defying the U.S. Supreme Court. But the Montana judges said that due to the rural state’s low-budget elections and the ability of a few large corporations (particularly mining interests) to drown out everyone else, the Citizens United case did not apply to Montana’s Corrupt Practices Law, which bars corporations from using company resources to make political contributions.

“The government is supposed to represent the people,” Romero said, “not corporate interests.” said Romero.