San Francisco is about to join several other cities in an effort to prevent foreclosures and stabilize neighborhoods that include distressed properties or homeowners who are otherwise at risk.

The city's Board of Supervisors unanimously approved a resolution earlier this week that would encourage the lenders who own distressed properties to sell them to nonprofits and community development financial institutions rather than to hedge funds, Wall Street speculators, or private equity firms.

San Francisco Supervisor John Avalos, the resolution's sponsor, said Newark, New Jersey, and Richmond, California, have already passed similar resolutions, and that he is encouraging other cities to get involved.

"Homeowners in San Francisco’s working class and communities of color who are struggling to hold on may get help from this program," said Amy Schur, campaign director for the Alliance of Californians for Community Empowerment (ACCE), who helped Avalos draft the resolution. "This project has the potential to get very delinquent mortgages into the hands of nonprofits who can offer modifications with principal reductions that can save many homes from foreclosure and prevent the displacement of many families that in some cases have lived here for decades."

In addition to raising private capital to purchase pools of distressed mortgages at fair market value, the participating nonprofits and CDFIs hope to use funds California received from the government's Troubled Asset Relief program immediately after the housing crisis.

"Our banks got a bailout of $800 million, but they didn't make it any easier to prevent foreclosures or modify loans," Avalos said. "Instead, they've made a lot of profit. That hasn't helped a lot of middle class people who are working just to maintain their existence."

Foreclosure numbers have been steadily declining nationwide for the last two to three years. CoreLogic's January 2015 National Foreclosure Report indicated that California's foreclosure inventory rate was 0.5 percent, meaning that only 0.5 percent of homes in California were in some state of foreclosure – approximately one-third of the national average of 1.4 percent for the month.

Due to California's population, however, a foreclosure rate of 0.5 percent still computes to a large number of homes compared to other states. California ranked fourth among states for 12-month sum of foreclosures with nearly 30,000 in CoreLogic's latest report. And while foreclosure numbers overall are down in San Francisco since 2011, some areas of the city still include a great number of foreclosed, REO, distressed, or at-risk homes. A report issued by the San Francisco Controller's Office in February titled "Assisting Homeowners with Troubled Mortgages" identified the southern and southeastern sections of San Francisco as having been disproportionately impacted by foreclosures.

According to that report, there are approximately 174,000 homes with a mortgage in San Francisco, and about 121,700 of those are owner-occupied. The report identified 3,002 of those owner-occupied mortgages as at-risk of foreclosure, many of them in low-income neighborhoods.

When Wall Street or hedge fund investors buy these properties, the subsequent strategy is all about what will make them the most money, Schur said. Often they raise rent to a level where the renter cannot afford it, forcing them to leave. Sometimes after being purchased by an investor or speculator, properties sit vacant until the owner is ready to flip them.

"We're offering an alternative to large and national banks and Wall Street speculators that are buying up these distressed properties in our neighborhoods," Schur said. "We're saying that there is an alternative. Let's get the properties into the hands of nonprofits and CDFIs whose mission is to help families and stabilize neighborhoods."

Avalos said not only is the new resolution intended to encourage banks and other lenders to sell distressed loans to nonprofits and CDFIs, but there is also an effort to encourage the Federal Housing Administration under HUD to sell FHA-backed loans to nonprofits and CDFIs as opposed to investors.

Still, Avalos said, more action is needed for this strategy to work as it is intended to – simply passing the resolution is not enough. He said the participating cities are combining their efforts to put pressure on the banks to sell distressed loans to organizations who are concerned with keeping people in their homes and stabilizing neighborhoods rather than making profits.

"It's going to allow for many households, especially working class, to be able to stay in their homes and have more stable futures economically," Avalos said.