A lot of serious solutions are now being offered to help distressed homeowners stay in their homes, and in the process, help the struggling national and global economy. Yesterday, I told you about efforts underway in Washington D.C. by Democrats and Republicans alike to infuse capital into the solution equation. Today, I’m happy to highlight what I think is another fantastic opportunity to quickly and appropriately help solve the housing crisis and keep families in their homes.

Los Angeles City Councilmember Richard Alarcón yesterday introduced a motion aimed at decreasing the devastating affects of foreclosures in Los Angeles, California. The motion, which can be viewed here as a PDF file, instructs the City of Los Angeles to explore the divestiture of its $25 billion portfolio in banking and other financial institutions that fail to cooperate with foreclosure prevention efforts. These efforts, according to Councilmember Alarcón, include:

• Temporary moratoriums on foreclosures
• Renegotiation of mortgage principles to reflect current values
• Good faith negotiations with homeowners

As Alarcón pointed out when he made yesterday’s motion, the foreclosure crisis has hit every corner of the United States, and bold steps are required to reduce the number of foreclosures and stabilize hemorrhaging  neighborhoods. His motion would call for a report exploring which banks are failing to cooperate with families facing foreclosure, and call on the City to remove investments with those banks.

Alarcon, it turns out, is no stranger to divestiture initiatives and has been a leader in combating foreclosures in Los Angeles. Over 10 years ago, in July of 1998, Councilmember Alarcón introduced a motion to have the City of Los Angeles divest all funds from Swiss banks in support of the efforts of the Holocaust victims and their heirs who sought restitution from the Swiss government and banks for money and assets confiscated during WWII. As a result, negotiations involving the banks and the World Jewish Congress ultimately resulted in a settlement of $1.25 billion the following month.

On the foreclosure front, just last Tuesday (January 27), Alarcón introduced a motion instructing the Los Angeles Housing Department, the City’s Community Redevelopment Agency, and other applicable agencies to develop a foreclosure prevention strategy, and to identify $1.5 million in funds to implement the program.

“Banks and financial institutes need to know that if they are not willing to work with homeowners who come to them in good faith to renegotiate their loans, we have no interest in doing business with those banks,” says Alarcón.

In Alarcón’s Council District Seven there are over 1,000 properties facing foreclosure within one month or are currently in foreclosure. And, according  to RealtyTrac, more than 2.3 million American homeowners faced foreclosure proceedings last year, an 81 percent increase from 2007. Nationwide, more than 860,000 properties were actually repossessed by lenders, more than double the 2007 level.

I tip my hat to Councilmember Alarcón for thinking outside the box and applying pressure where it’s most needed.

Ralph R. Roberts, GRI, CRS Award-Winning REALTOR® and Author Loan Modification For Dummies (avail. Summer 2009)