Posted on 08/01/2013 9:02:28 AM PDT by MeshugeMikey
Richmond Threatens Eminent Domain To Address Foreclosure Crisis
Richmond city leaders were moving ahead with a plan to head off the foreclosure crisis, a plan that is not without controversy.
The city has offered to buy more than 600 underwater mortgages at below the homes’ current value.
“If they are unwilling to negotiate a sale of the loans, which we want them to do, then we will consider using eminent domain as another option to purchase these loans at fair market value,” said Richmond Mayor Gayle McLaughlin.
Richmond is the first city in the country to take the controversial step of threatening to use eminent domain, the power to take private property for public use. But other cities have also explored the idea.
(Excerpt) Read more at sanfrancisco.cbslocal.com ...
Richmond?
Which Richmond?
Ricmond, VA?
California, in the bay area. Population, 100,000.
A city in CA has already floated this socialist claptrap of an idea.
Libs have no concept of the law of unintended consequences for the housing market.
Not to mention the grossly unconstitutional nature of it.
Oh, wait. Silly me, I was still operating under the mistaken assumption that the US was a Republic with a functioning Constitution. How stupid could I be?
If they do this good luck getting a loan to buy a home in that city. Banks may not say they aren’t making loans, but you can bet underwriting will go on forever.
Richmond, California is broke
anyway.
It narrowly avoided being pushed into federal bankruptcy court (through a major cutback in city services, etc.).
Where it thinks it can get the $$$$ all of a sudden to buy up 600 defaulted deadbeat non-paying loans in its mostly-slum neighborhoods
AND pay all the litigation costs (plus pay for its defense when taxpayer suits are filed)
?????????
This is 95% BS
Legalities aside, there are also huge tax consequences to consider.
A local attorney and real estate broker posting under the name “davecherr” commented on the problem of debt forgiveness.
There is a massive and thus-far unremarked upon problem with this ED scheme: it would result in a MASSIVE INCOME TAX BILL FOR THE HOMEOWNER. Under the tax code, discharge of indebtedness is counted as income. There is a safe harbor for people who lose their primary residence to foreclosure, but it would not apply to these Richmond residents, since they would keep their house with magically reduced debt.
Read more at http://globaleconomicanalysis.blogspot.com/2013/07/tax-nightmare-of-eminent-domain.html#ITujKY26TipCDmUZ.99
They want to buy the loans, not the houses, for "fair market value". We can presume since they will dictate what that is, it will be about a $1 each. They will then seize the property and distribute it out to community organizers to use in building their fiefdoms.
I live across the bay for richmond over in Marin.
Richmond might be our OWN detroit!
I can imagine the legal system Grinding to a Halt behind all this !
No government entity can use the power of Eminent Domain to buy property at “below the homes’ current value.”
The very definition of Eminent Domain requires that the owner be paid “just compensation”, which in turn is defined as:
Just Compensation n 1) in general a fair and reasonable amount of money to be paid for work performed or to make one “whole” after loss due to damages. 2) the full value to be paid for property taken by the government for public purposes guaranteed by Fifth Amendment to the U. S. Constitution, which states: “...nor shall private property be taken for public use without just compensation.” If the amount offered by the governmental agency taking the property is not considered sufficient, the property owner may demand a trial to determine just compensation. Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
http://legal-dictionary.thefreedictionary.com/Just+Compensation
The thing which gets to me is that I ended up in a near total financial catastrophe with a house I’d bought in 89 and had to sell in 94 when the housing and job market both crashed simultaneously, and nobody gave a rat’s ass. In fact prior to that time, nobody had ever lost a dime in real estate in Northern Virginia, so that people losing money at that time at least had an excuse, people under-water today don’t have that excuse yet it seems like the whole world wants to try to help them...
It doesn’t say they are deadbeat.
What it says is that the loans are underwater.
And what the city is proposing is to take these loans from the banks, and pay the banks LESS than what the loans are for, and LESS than what the houses are worth.
So essentially, they are proposing to steal the right to foreclose from the banks, for less money than what the banks may have gotten if they foreclosed and sold the property.
Once the city does this, they will have performing mortgages that will, over time, pay the city back more in principle than the city put in. It could be a money-maker. And it is easy to make money if you can force someone to sell you something for less than it’s value.
What i don’t understand is how they would get away with this, because even in the dreadful Supreme Court Kelo case, the SC still upheld the rule that the government had to pay the full market value for the property.
There is little reason to believe the mortgages would suddenly become performing. Many people there are unemployed. And the banks have been rewriting those loans they think could be transformed Into a paying status. With not so great results a lot of the time. No. Most of the defaulted loa s will stay that way in Richmond Or many if them anyway. But you’re right that the legal costs a d settlement costs will far exceed anything Richmond can pay. This whole crazy scheme has been lobbied by an outfit that wants to do the work fir the city. But the company won’t be paying fir the losses.
There is little reason to believe the mortgages would suddenly become performing. Many people there are unemployed. And the banks have been rewriting those loans they think could be transformed Into a paying status. With not so great results a lot of the time. No. Most of the defaulted loa s will stay that way in Richmond Or many if them anyway. But you’re right that the legal costs a d settlement costs will far exceed anything Richmond can pay. This whole crazy scheme has been lobbied by an outfit that wants to do the work fir the city. But the company won’t be paying fir the losses.
You can see it coming from a mile away, just as has been building with healthcare, the government is making their play to take over all housing, in the interest of “fairness.”
I am a tax preparer. A taxpayer that is insolvent (liabilities > assets) can exclude some or all the cancellation of debt income on their tax return. Very few of the Richmond (CA) homeowners with underwater mortgages that get a 1099-C (cancellation of debt) would have to include this income on their return I’d guess.
Probably not many of these people pay much income tax And sendi g them a bill for the profit from any giveaway writedown program won’t bother them much
If they are t laying their mortgage what makes anyone Imagine they’ll suddenly leap to the opportunity of paying a big IRS bill?
Isn't that special? The mayor wants to define the "fair market value" and compel banks to sell at his chosen price. I've met people who wanted to negotiate like that, but normally they carry guns or at least knives, they travel in packs, and they negotiate late at night in bad neighborhoods.
He is just another low level government hack believing political position is an anointment.
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