WSJ: Seizing Mortgages Could Yield Big Returns (Long Live King John!)

Confounded Interest ^ | 07/25/2012 | Anthony B. Sanders

[whitedog57]

The Wall Street Journal reports that seizing mortgage could yield BIG returns for investors.

“Tapping the power of eminent domain to repair underwater mortgages could generate investor returns of up to 30% and billions of dollars in fees for bankers behind the proposal, according to people with knowledge of the plan.

Despite the controversy, some potential investors in Mortgage Resolution’s plan are stepping forward. “We think the program has legs and a fairly strong legal justification” to seize mortgages with eminent domain, said Tom Capasse, co-head of Waterfall Asset Management, which said it is considering investing in the plan.”

Of course. Use the government’s power of eminent domain to make a bundle for investors sounds great … if you believe in the days of England’s King John before the Magna Carta was imposed upon him at Runnymede.

A reporter from Reuters asked me why I was so hostile to the idea. I said that this could open the floodgates to government taking of private property for “the greater good.” Or the good of powerful parties.

This story reveals the counterpoint to the question “But if fair market value is paid, why would anyone care?” The story points out that mortgages would be sold at a steep discount to municipalities. While this may be the fair market value of the mortgages, but how could investors earn returns of 30%?

This is pure, unadulterated theft from investors. But it may be Constitutional!

It sounds like King John is interpreting the Constitution for eminent domain cases. I can just imagine the Founding Fathers channeling “The Godfather” and saying “Look what they’ve done to our child.”

Where is Robin Hood and his Merry Men to stop the King Johns? Apparently, getting stewed on Robin Hood Cream Ale.

[whitedog57]

This is incredible. 30% return for investors on eminent domain seizures of mortgages from investors. How Venezuela of out government. Meanwhile, our Robin Hood (Obama) steals from the poor and gives to his rich friends.

[556x45]

Isn’t this only a short step from Kelo vs New London? It seems so to me.

[foundedonpurpose]

Corrupt as h311! Their looking to start this in California, with the blessing of some of the local governments. Eminent domain for the betterment of the collective, of course.

[RatSlayer]

It wouldn’t surprise me at all to see eminent domain used inappropriately in this case and not used at all after Katrina where a case could be made that the appropriate thing to do was to seize all those destroyed neighborhoods under eminent domain, thus instantly paying off all the homeowners rather than making them have to wait for months or years for insurance payouts, then sell off the neighborhoods to developers to cover most of the costs. That way, the neighborhoods would have been quickly rebuilt instead of looking like Lebanon for years. The City would have taken a short term hit, but they would have started collecting property taxes on the new homes at a much earlier date and the new homes would almost certainly would be a lot more expensive. So the taxes would be much higher and the City would have quickly recovered it’s short term loss.

We are living in a total BizzaroWorld(tm) where the government always does the worst thing possible.