In a move that could be emulated by other cities, Los Angeles is about to pull its money out of financial institutions it concludes are not contributing to city, state and federal efforts to prevent foreclosures on residential mortgages.
The move is one part of a comprehensive bill approved by the Los Angeles City Council to require the city to invest its money only in financial institutions that invest in local communities. The bill, called the Responsible Banking Initiative, will require banks to report annually on lending activity to small businesses, community development investments, and efforts to help homeowners avoid foreclosure.
The last part of that reporting requirement will require banks to provide detail on their efforts to forestall foreclosure, including the number of mortgages they have permanently modified. A related provision will require banks to either offer a six-month moratorium on mortgage payments to unemployed homeowners or allow them to rent their homes until they are sold. Lenders that fail to comply with the requirements could be barred from doing business with the city.
Los Angeles currently has nearly $30 billion in savings and pension funds invested with various banks and other financial institutions.
The move expands on a proposal originally introduced in February 2009 by City Councilman Richard Alcarón that focused on bank cooperation with foreclosure prevention efforts. Alcarón plans to present the ordinance to officials from other U.S. cities this week.
Other state and local governments have also approved laws tying their deposits and investments to local banks' performance in the past, beginning with a 2007 Philadelphia ordinance requiring banks that handle city deposits to notify the city in advance of any branch closings, but LA's move is more comprehensive and has stiffer penalties than previous efforts.
Written by Sandy Smith
For HULIQ.com
Comment and add to the story without registration, but keep the comments meaningful please. Links are not accepted.
