Skip to comments.Will Trapped Loans Snap Richmond's Home Scheme?
Posted on 09/20/2013 9:43:07 AM PDT by WayneLusvardi
The City of Richmonds move to seize the loans of over-mortgaged homes can continue, U.S. District Court Judge Charles Breyer ruled this week.
According to the San Francisco Chronicle, the reason was because he felt the case, brought by Wells Fargo and Deutsche Bank on behalf of holders of loans on over-mortgaged homes, was not ripe for determination since Richmond had not exercised eminent domain and might never do so.
Despite an initial win in federal court, will Richmond first have to prove that loans on over-mortgaged homes in its city are trapped to meet the blight criteria of California redevelopment law? A recent study by the Wall Street Journal indicates that Richmond would have to prove loans on over-mortgaged properties are trapped before they can justify there is public necessity to take the loans.
A trapped loan is where a government secondary mortgage market lender such as Fannie Mae or Freddie Mac wont buy up sub-prime mortgages from primary lenders or other secondary lenders. Therefore, homeowners with over-mortgaged homes cannot refinance by taking advantage of HARP or other mortgage payment programs. Their high-interest rate loans are trapped without any ability to refinance.
(Excerpt) Read more at calwatchdog.com ...
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