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California Cities Consider Seizing Mortgages
Fox News ^ | July 5, 2012 | WSJ/NICK TIMIRAOS

Posted on 07/05/2012 10:57:24 AM PDT by listenhillary

A handful of local officials in California who say the housing bust is a public blight on their cities may invoke their eminent-domain powers to restructure mortgages as a way to help some borrowers who owe more than their homes are worth.

Investors holding the current mortgages predict the move will backfire by driving up borrowing costs and further depress property values. "I don't see how you could find it anything other than appalling," said Scott Simon, a managing director at Pacific Investment Management Co., or Pimco, a unit of Allianz SE.

Eminent domain allows a government to forcibly acquire property that is then reused in a way considered good for the public-new housing, roads, shopping centers and the like. Owners of the properties are entitled to compensation, which is usually determined by a court.

Read more: http://www.foxnews.com/politics/2012/07/05/california-cities-consider-seizing-mortgages/#ixzz1zlvtvCqT

(Excerpt) Read more at foxnews.com ...


TOPICS: Constitution/Conservatism; Crime/Corruption; Extended News; Government
KEYWORDS: cities; kalifornia; mortgages
Navigation: use the links below to view more comments.
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1 posted on 07/05/2012 10:57:30 AM PDT by listenhillary
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To: listenhillary

Atlas shrugs.


2 posted on 07/05/2012 10:58:41 AM PDT by listenhillary (Courts, law enforcement, roads and national defense should be the extent of government)
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To: listenhillary
Interesting. The county collects property tax and a mortgage.

What's not to like?

3 posted on 07/05/2012 11:02:45 AM PDT by null and void (Day 1261 of our ObamaVacation from reality - Heroes aren't made Frank, they're cornered...)
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To: listenhillary
They are merely observing Plank #1 of Karl Marx's Communist Manifesto, "Abolition of private property rights."
4 posted on 07/05/2012 11:07:09 AM PDT by E. Pluribus Unum (Government is the religion of the sociopath.)
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To: listenhillary

What’s not being said in this article is that bank-owned properties are becoming a blight in many areas as the banks refuse to mow the lawns, keep the homeless out of them, and etc. with all of the costs associated with those problems being picked up by the cities.
The banks are holding on to the homes they seize for reasons they won’t explain and they’re creating some very difficult neighborhoods for the cities to manage at city expense.
I would not normally approve of this kind of thing, but it makes far more sense to keep people in a home than to evict them just to let the home go to rot and ruin and to become a blight.


5 posted on 07/05/2012 11:10:15 AM PDT by MeganC (January 20, 2013: The End of an Error)
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To: listenhillary

Feds Pick Firms for Wholesale Home Sell
http://www.freerepublic.com/focus/f-news/2903122/posts

we’ll find out the names AFTER it’s all over.

(they have to pass it to see what’s in it)


6 posted on 07/05/2012 11:15:57 AM PDT by TurboZamboni (Looting the future to bribe the present)
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To: listenhillary

PIMPCO being a large holder of Mort. Backed Securities on the hunch that Ben Bernanke would monetize them in a QE. One set of racketeers turning upon another in the last days of the NEW World Order, in prep for the next world order.


7 posted on 07/05/2012 11:16:55 AM PDT by junta ("Peace is a racket", testimony from crime boss Barrack Hussein Obama.)
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To: MeganC

What’s not being said in this article is that bank-owned properties are becoming a blight in many areas as the banks refuse to mow the lawns, keep the homeless out of them, and etc. with all of the costs associated with those problems being picked up by the cities.
The banks are holding on to the homes they seize for reasons they won’t explain and they’re creating some very difficult neighborhoods for the cities to manage at city expense.
I would not normally approve of this kind of thing, but it makes far more sense to keep people in a home than to evict them just to let the home go to rot and ruin and to become a blight.
__________________

Megan...it may be useful to keep folks in homes...but this is not the way to do it. This will reek havoc on the real estate markets, damage retirement and pension funds that invest in the mortgages, and abrogate about 250 years of secured creditors rights/laws.


8 posted on 07/05/2012 11:18:23 AM PDT by Tulane
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To: listenhillary

This is definitely the outcome of a communist utopia. Seizure of property in the name of a poor class that they themselves created.

Creating victims is their only way to justify injustice.


9 posted on 07/05/2012 11:20:09 AM PDT by formosa (Formosa)
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To: MeganC
It still does not justify the city for its use of eminent-domain powers for property grab.

They can impose a fine, just like most homeowners associations.

10 posted on 07/05/2012 11:22:48 AM PDT by Sir Napsalot (Pravda + Useful Idiots = CCCP; JournOList + Useful Idiots = DopeyChangey!)
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To: listenhillary

before everyone gets nuts over the concept consider this:

the banks (or trusts with banks as servicing agents) are doing nothing to either sell at market value or mediate in good faith.

everything is in limbo as banks look desperatly for ways to screw the public.

these are properties that are not moving at all. The notes are worthless (if they even exist and IF they are properly documented) . This at the very least will force the hand of the banks to poop or get off the pot.

in california pot is probably what the bankers are smoking.


11 posted on 07/05/2012 11:24:18 AM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: MeganC

Cities can red tag dilapidated buildings or cite the Banks as owners of neglected properties as they do to any other property owners. Seizing mortgages is ridiculous.


12 posted on 07/05/2012 11:26:16 AM PDT by freedomrings69
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To: listenhillary

Cities hauling out the Big Hammer. They want to use the threat of an eminent domain seizure under Kelo to force the banks to negotiate “cram downs” with these mortgage holders.
And thanks to David Souter there is nothing in a legal sense to stop them.

If Bank’s don’t capitulate they’ll seize the homes and cut them off at the knees.

No wonder the Hammer and Sickle became their symbol.


13 posted on 07/05/2012 11:31:05 AM PDT by Buckeye McFrog
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To: freedomrings69

not so. In many jurisdictions forclosed properties either have exemptions during forclosure or even immunity (for a time) after title transfers to the bank.

cities are powerless.


14 posted on 07/05/2012 11:31:10 AM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: listenhillary
Come on, now, everyone be honest....

How many of you, when first scanning the headlines, thought that this actually read:

"California Cities Consider Seizing Hostages"?

15 posted on 07/05/2012 11:33:45 AM PDT by BlueLancer ("No friend ever served me, and no enemy ever wronged me, whom I have not repaid in full" (Sulla))
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To: MeganC

I understand. They are making the banks eat their peas.

Now - What bank in their right mind will ever make a new housing loan in California?


16 posted on 07/05/2012 11:34:40 AM PDT by listenhillary (Courts, law enforcement, roads and national defense should be the extent of government)
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To: Tulane; MeganC
The municipalities, about 45 minutes east of Los Angeles, would acquire underwater mortgages from investors and cut the loan principal to match the current property value. Then, they would resell the reduced mortgages to new investors.

This is more of governments making up laws out of thin air in order to apply "social justice" to suit their desires and needs. What is

This is a recipe for financial chaos that can never be straightened out.

What is eminent domain? Depends on the day of the week and what California city we are in.

Read that top paragraph again. It is saying that the cities will use taxpayer monies (which they don't have) to pay the difference between the market value of a home and the mortgage amount, and then getting new investors to hold the now theoretically accurately valued mortgages.

This is no different than the city coming in and writing your mortgage holder a check buying down your principle to current market value. What could possibly be wrong with that?

17 posted on 07/05/2012 11:40:30 AM PDT by ChildOfThe60s (If you can remember the 60s....you weren't really there)
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To: listenhillary
I'm seeing a lot of empty homes in the central valley of CA, but the bank-owned homes are in pretty good shape. I've seen the banks clean them up, even put new roofs on them then sell them.

In my experience, it's the homes in the process of foreclosure -- before the bank fully takes over -- that are blighted. But that's just me.

I don't see how this action helps homeowners. Looks like a land grab to me.

18 posted on 07/05/2012 11:42:20 AM PDT by GVnana
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To: Sir Napsalot
It still does not justify the city for its use of eminent-domain powers for property grab.

Unfortunately thanks to Kelo v. New London, yes, it does.

19 posted on 07/05/2012 11:42:51 AM PDT by kevkrom (Those in a rush to trample the Constitution seem to forget that it is the source of their authority.)
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To: listenhillary
Thank you USSC for your Kelo decision.

What a flustercuck we are in now.

FMCDH(BITS)

20 posted on 07/05/2012 11:43:34 AM PDT by nothingnew (I fear for my Republic due to marxist influence in our government. Open eyes/see)
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To: MeganC
I would not normally approve of this kind of thing, but it makes far more sense to keep people in a home than to evict them just to let the home go to rot and ruin and to become a blight.

Soooooo...we should just let people live in properties for free?

21 posted on 07/05/2012 11:47:16 AM PDT by Osage Orange (8675309)
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To: listenhillary

I thought they had a big push last year to force the banks to properly maintain the properties in their portfolios.


22 posted on 07/05/2012 11:48:17 AM PDT by Cementjungle
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To: listenhillary

Eminent domain allows a government to forcibly acquire property.
Wonder if Roberts voted for that one to?.


23 posted on 07/05/2012 11:48:24 AM PDT by Vaduz
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To: ChildOfThe60s

The municipalities, about 45 minutes east of Los Angeles, would acquire underwater mortgages from investors and cut the loan principal to match the current property value. Then, they would resell the reduced mortgages to new investors.
This is more of governments making up laws out of thin air in order to apply “social justice” to suit their desires and needs. What is

This is a recipe for financial chaos that can never be straightened out.

What is eminent domain? Depends on the day of the week and what California city we are in.

Read that top paragraph again. It is saying that the cities will use taxpayer monies (which they don’t have) to pay the difference between the market value of a home and the mortgage amount, and then getting new investors to hold the now theoretically accurately valued mortgages.

This is no different than the city coming in and writing your mortgage holder a check buying down your principle to current market value. What could possibly be wrong with that?
____________________

They (California democrats) have already driven the price of gas (environmental regulation) and rent (rent control) to higher levels than anywhere else in the country. Why not add the cost of home ownership and financing to the list?


24 posted on 07/05/2012 11:49:19 AM PDT by Tulane
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To: listenhillary
Now - What bank in their right mind will ever make a new housing loan in California?

Possibly a bank with the brains not to lend more for a house than the house figures to ever sell for five years down the road...

25 posted on 07/05/2012 11:52:56 AM PDT by varmintman
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To: varmintman

If this comes to pass, contracts and contract law mean nothing. The contracts mean what the current rulers of the state of California say they mean.


26 posted on 07/05/2012 11:56:42 AM PDT by listenhillary (Courts, law enforcement, roads and national defense should be the extent of government)
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To: kevkrom
Ha Ha Ha...see #20

FMCDH(BITS)

27 posted on 07/05/2012 11:58:11 AM PDT by nothingnew (I fear for my Republic due to marxist influence in our government. Open eyes/see)
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To: listenhillary
Atlas shrugs.

Sort of.

It seems there are no good guys in this situation except the homeowners who bought to live in a home and pay the mortgage.

They got stung by government interference that falsely inflated home prices and seduced them into a loan they couldn't afford.

Economic ignorance that filppers and speculators cannot plead.

The banks not at fault, got out of the residential mortgage business because the Feds legislated it unsound economically, but the cities and over compensated public unions went along for the rise in property tax revenue and government jobs, on the false rise in value.

Now, everybody who went in for big profits, wants their money back first, and is unwilling to invest anything more of their own. Any manipulation of the law, records and perception is ok, as long as it favors the protected looter of the day over economic and social order.

They got what they asked for.

28 posted on 07/05/2012 12:04:00 PM PDT by Navy Patriot (Join the Democrats, it's not Fascism when WE do it, and the Constitution and law mean what WE say.)
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To: Tulane
What is eminent domain? Depends on the day of the week and what California city we are in.

Yep, note my tagline.

29 posted on 07/05/2012 12:09:21 PM PDT by Navy Patriot (Join the Democrats, it's not Fascism when WE do it, and the Constitution and law mean what WE say.)
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To: listenhillary
If this comes to pass, contracts and contract law mean nothing. The contracts mean what the current rulers of the state of California say they mean.

Yep, note my tagline.

30 posted on 07/05/2012 12:11:33 PM PDT by Navy Patriot (Join the Democrats, it's not Fascism when WE do it, and the Constitution and law mean what WE say.)
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To: MeganC
I would not normally approve of this kind of thing, but it makes far more sense to keep people in a home than to evict them just to let the home go to rot and ruin and to become a blight.

It may make sense to keep the homes occupied from the cities' point of view, but please don't call the people in the mortgage homes "owners." They are renters, renting from the bank.

I think eminent domain is a bad way to go about this, even if it is legally convenient. When eminent domain is used, the owner of the property is supposed to be justly compensated. Who is getting compensated here--the bank, by getting a "fair" reduced value for the mortgage? Who's the owner the city will be dealing with, and how will the fair value be set?

Note also, that if this becomes widespread, it introduces a different problem--mortgages will be forcibly marked to market rather than marked to fantasy, and many mortgage owners will find themselves underwater.

31 posted on 07/05/2012 12:49:58 PM PDT by Pearls Before Swine
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To: listenhillary

For 12 years you have been asking “Who is John Galt?”.


32 posted on 07/05/2012 1:02:04 PM PDT by Vendome (Don't take life so seriously, you won't live thnrough it anyway)
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To: Tulane
This may come as a shock to you but retirement and pension funds were already been hit hard by the mortgage meltdown.

Just what good do you think is happening now with homes foreclosed, allowed to decay, be vandalized, stripped of appliances, stripped of wiring, stripped of liveability?

It's becoming a death spiral in places. What solution do you have? Add to the homeless population, let the neighbors decay, let local economies circle the bowl?

33 posted on 07/05/2012 1:02:15 PM PDT by newzjunkey
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To: MeganC

The appropriate action is for the neighborhoods and cities to sue the banks and demand they keep the properties in “Showable” condition.

Many cities have done so.


34 posted on 07/05/2012 1:04:35 PM PDT by Vendome (Don't take life so seriously, you won't live thnrough it anyway)
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To: All

I’m siding with the cities here because the banks are not taking care of their properties and the cities, which are already broke, get stuck with the bills for mowing lawns and treating mosquito infested pools.

If the banks would turn around and sell the homes instead of keeping them vacant for years this would not be an issue.

To me all I see here is the banks trying to pass on their expenses to local governments. If this action spurs the banks to sell these homes instead of keeping them vacant then the laws will have done the right thing.

And if no one can get a mortgage in California then that’s not a bad thing, either. Prices will have to drop to where people can pay cash for the homes instead of paying ridiculously inflated prices that can only be sustained by an utterly artifical credit market.


35 posted on 07/05/2012 1:04:55 PM PDT by MeganC (January 20, 2013: The End of an Error)
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To: MeganC

You assume the bankrupt ready cities will maintain the houses using funds they don’t have to place appearance above solvency.

When they all sit down to negotiate the sales price to the cities, we will learn what is what. To take the properties they have to pay for the property. Absent tax liens, that is a lot of bucks.


36 posted on 07/05/2012 1:12:59 PM PDT by bert ((K.E. N.P. N.C. +12 ..... Present failure and impending death yield irrational action))
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To: Tulane; MeganC
Megan...it may be useful to keep folks in homes...but this is not the way to do it. This will reek havoc on the real estate markets, damage retirement and pension funds that invest in the mortgages, and abrogate about 250 years of secured creditors rights/laws.

You say that like it's a bad thing.

For county governments THERE IS NO DOWN SIDE.

They trade taxes on a small percentage of assessed value for those taxes AND the mortgage payment.

County tax and mortgage receipts go up by roughly 1,000% per parcel.

The control over ownership is improved, not only can they tax auction off your house, they now have the ability to foreclose as well.

There's no downside for the home owners, the new mortgage bill is much lower than the old bank mortgage.

As to the pensioners? They were going to be cheated or taxed out of their retirements anyway...

37 posted on 07/05/2012 1:18:35 PM PDT by null and void (Day 1261 of our ObamaVacation from reality - Heroes aren't made Frank, they're cornered...)
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To: listenhillary

Well, not one of the cities and the county listed are in decent financial shape. Even if they had a redevelopment agency with funds, the crooked governor, Jerry Brown, seized all redevelopment funds last year. Now, even the “well off” cities are scrounging for funds due to Brown’s theft.

So, just where would these governments come up with the money to purchase any homes under eminent domain? Is George Soros going to give them the millions of dollars?

At least one city, Fontana, is a dung heap anyway. I doubt anyone could tell the difference between foreclosed properties and un-foreclosed properties.


38 posted on 07/05/2012 2:02:08 PM PDT by CdMGuy
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To: ChildOfThe60s
They don't have to pay the mortgage amount: under the takings clause of the 5th Amendment, they only have to pay the current market value to the bank or mortgage holder, and then re-issue the mortgage at the current value.

Now, who would buy the mortgage after such a scam, I don't know.

39 posted on 07/05/2012 2:08:50 PM PDT by pierrem15 (Claudius: "Let all the poisons that lurk in the mud hatch out.")
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To: bert

“You assume the bankrupt ready cities will maintain the houses using funds they don’t have to place appearance above solvency.”

Not at all. I assume that the people living in the homes will take care of them. In any case, they’ll do a sight better than the banks are doing.

Again, if all this does is to spur the banks to stop holding on to foreclosed homes then it’s a good idea. Why they’re doing this in the first place mystifies me.


40 posted on 07/05/2012 2:16:26 PM PDT by MeganC (January 20, 2013: The End of an Error)
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To: GVnana

“In my experience, it’s the homes in the process of foreclosure”

Well, here In Monterey County, where there are some pricey homes being foreclosed upon, the problem is getting the banks to take possession of the delinquent properties. We have friends who saw their $850,000 home go down by 50% so they bailed. After almost two years of living in the home without making a single payment for anything, they had to “threaten” the bank with just walking away and leaving the keys on the kitchen table to motivate the bank to actually foreclose. From my perspective, the banks are the bad guys. Now that thanks to all their greedy schemes to make money the “old fashioned way,” which is to steal it from honest people, the banks are now left with the pile of crap they created. Now, the banks really don’t want to foreclose because in so doing, they have to show the “asset” on their books at its current value. I just sit here wondering if I will ever see anyone frogwalked out of a bank or brokerage house and off to jail. More than likely though, they are all out at the Hamptons having a great summer on the working man’s money!


41 posted on 07/05/2012 4:39:11 PM PDT by vette6387
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To: ChildOfThe60s

“This is no different than the city coming in and writing your mortgage holder a check buying down your principle to current market value. What could possibly be wrong with that?”

Everything!!!!

Anything that lets the deadbeat curent non paying occupant remain in the house is wrong!


42 posted on 07/05/2012 4:55:03 PM PDT by dalereed
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To: MeganC

“What’s not being said in this article is that bank-owned properties are becoming a blight in many areas as the banks refuse to mow the lawns, keep the homeless out of them, and etc. with all of the costs associated with those problems being picked up by the cities.”

Very true. Plus they are not paying homeowner’s association dues in effect transferring these costs to the property owners who are paying the common expenses. Even worse they, and developers, have gotten states to limit the the number of months of past due homeowner’s association fees that can be collected when a foreclosed property is sold, sometimes as little as 2 months, no matter how many months the property is in arrears. Of course those same politicians force past due taxes to be paid in full.


43 posted on 07/05/2012 5:33:27 PM PDT by Soul of the South
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To: MeganC

“What’s not being said in this article is that bank-owned properties are becoming a blight in many areas as the banks refuse to mow the lawns, keep the homeless out of them, and etc. with all of the costs associated with those problems being picked up by the cities.”

Very true. Plus they are not paying homeowner’s association dues in effect transferring these costs to the property owners who are paying the common expenses. Even worse they, and developers, have gotten states to limit the the number of months of past due homeowner’s association fees that can be collected when a foreclosed property is sold, sometimes as little as 2 months, no matter how many months the property is in arrears. Of course those same politicians force past due taxes to be paid in full.


44 posted on 07/05/2012 5:33:27 PM PDT by Soul of the South
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To: pierrem15
They don't have to pay the mortgage amount: under the takings clause of the 5th Amendment, they only have to pay the current market value to the bank or mortgage holder, and then re-issue the mortgage at the current value.

You are completely right. Thanks for pointing that out. I realized it after I let the piece digest in my little brain.

But what the city is doing is pure theft. The lenders gave real money. Guy borrows $500k and spends it on the property. City takes the property, gives the lender $250k along with a FU very much. That loss of $250K is real. Everyone can do without money except the government(s).

Eminent domain is now like the commerce clause. It means what a socialist bureaucrat says it means on the day he says it. IOW, carte blanche to steal.

45 posted on 07/05/2012 5:40:18 PM PDT by ChildOfThe60s (If you can remember the 60s....you weren't really there)
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To: dalereed

Uh, I was being sarcastic. And technically I was wrong. The city is a thief of a sort. It is stealing the difference between the current market value and what the lender is owed, from the lender, then flushing it.

With all the points being made in this thread, it is still useful to remember that the borrower *asked for the loan*. And spent the loan on the property. If you borrow money and spend it stupidly or carelessly or ignorantly, the lender is still out the money and you still owe it.


46 posted on 07/05/2012 5:51:22 PM PDT by ChildOfThe60s (If you can remember the 60s....you weren't really there)
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To: ChildOfThe60s
I agree-- if the city takes the property, the lender moves from an unrealized loss of $250K to a realized loss of $250K. Given the current disposition of the courts to always cede more ground to our Lords and Masters, err, I mean our 'elected' officials, I doubt any bank would make much headway in trying to force the city to make up the loss.

But I'm not a lawyer, so who knows.

I think the only thing really stopping this is that the city probably doesn't have the cash to buy up many properties, and given Stockton's bankruptcy, I doubt there are many investors willing to lend any city in California any money right now.

47 posted on 07/05/2012 6:09:07 PM PDT by pierrem15 (Claudius: "Let all the poisons that lurk in the mud hatch out.")
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To: ChildOfThe60s

But in California, a mortgage lender can’t get a deficiency judgment— California is a ‘no recourse’ state after foreclosure. In the case of a condemnation, though, I’m not sure how the law would apply. I would assume that the courts would hold that the lender got possession of the market value of the property, so the lender would still have no recourse against the borrower for the difference. I wonder if the IRS would consider it a ‘gift’ or capital gain, however?


48 posted on 07/05/2012 6:14:06 PM PDT by pierrem15 (Claudius: "Let all the poisons that lurk in the mud hatch out.")
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To: listenhillary

This will backfire in spectacular fashion.

Who in the hell would invest in mortgage paper that can be seized by a municipality?

Since refusal to lend in a specific location can be construed to be redlining, the mortgage companies will exit the entire state.


49 posted on 07/05/2012 6:26:40 PM PDT by Rebelbase (The most transparent administration ever is clear as mud.)
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To: pierrem15
I think the only thing really stopping this is that the city probably doesn't have the cash to buy up many properties,

Hmm, that might not stop the city. *If* the city can line up investors before taking the properties, then the city could get payment from them at the same time it has to pay the mortgage holders. Flip the property.

I have to wonder who would want the properties, even at so called market value. Who is going to guarantee them repayment from these already defaulted homeowners? I'm guessing that many of these homeowners couldn't meet the payments required to finance the market value. So the notion of keeping these people in the houses goes up in smoke. Investors with any brains wouldn't buy the properties unless they believed they could either collect the mortgage payments from the residents, or boot them out and sell or develop the property for a profit. All of which sounds rather unlikely.

If the city is broke, it can't take the property without paying market value. And likely become the mortgage holder aka landlord. I suppose another route could be to take available properties for unpaid property taxes.

It must be galling for California socialists not to have money to throw at this.

50 posted on 07/05/2012 6:40:31 PM PDT by ChildOfThe60s (If you can remember the 60s....you weren't really there)
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