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California cities eye plan to seize mortgages
Associated Press ^ | July 16, 2012 | AMY TAXIN and CHRISTINA REXRODE

Posted on 07/16/2012 5:45:07 AM PDT by magellan

In the foreclosure-battered inland stretches of California, local government officials desperate for change are weighing a controversial but inventive way to fix troubled mortgages: Condemn them.

Typically, eminent domain has been used to clear property for infrastructure projects like highways, schools and sewage plants. But supporters say that giving help to struggling borrowers is also a legitimate use of eminent domain, because it's in the public interest.

Under the proposal, a city or county would sign on as a client of Mortgage Resolution Partners, then condemn certain mortgages. The mortgages are typically owned by private investors like hedge funds and pension funds.

Mortgage Resolution Partners will focus on mortgages where the borrowers are current on their payments but are "under water," meaning their mortgage costs more than the home is worth. After being condemned and seized, the mortgages would be rewritten based on the homes' current values. The borrowers would get to stay, but with cheaper monthly payments. The city or county would resell the loans to other private investors, so it could pay back the investors who funded the seizure and pay a flat fee to Mortgage Resolution Partners.

Rick Rayl, an eminent domain lawyer in Irvine, Calif., who is not connected to the company, isn't so sure.

"The lenders are going to be livid," he said. He thinks the plan could have unintended consequences, like discouraging banks and other lenders from making new mortgage loans in an area.

(Excerpt) Read more at hosted.ap.org ...


TOPICS: Business/Economy; Crime/Corruption; Government
KEYWORDS: eminentdomain; foreclosure; mortgage
I know there is another posting covering another article about this. But this is broader article describing the plan.

This reads like something out of Atlas Shrugged.

This would not even warrant consideration if not for Kelo v. City of New London, and Justice Anthony Kennedy's decision with the majority.

Of course, their is a corporatist intermediary, Mortgage Resolution Partners, who will get a cut.

I honestly hope they try to do this, because this seems beyond the Kelo decision, which was based on property tax revenues. It seems this could open up another legal battle which could offer the chance to limit the impact of Kelo.

1 posted on 07/16/2012 5:45:10 AM PDT by magellan
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To: magellan

Government Ponzi Scheme.


2 posted on 07/16/2012 5:49:52 AM PDT by BuffaloJack (Repeal Obamacare, the CITIZENSHIP TAX)
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To: magellan
"...because it's in the public interest." Those 6 words should be grounds for automatic dismissal from any government position.
3 posted on 07/16/2012 5:52:16 AM PDT by Casie
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To: magellan

robbing one set of investors to raise cash to pay off a second set of investors is a job best left to the pros

Maybe these Cali municipal govts can get Jon Corzine or Bernie Madoff to advise them, or perhaps “Mortgage Resolution Partners” already has its own Ponzi pros on staff


4 posted on 07/16/2012 5:52:41 AM PDT by silverleaf (Every human spent about half an hour as a single cell)
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To: BuffaloJack

Just another scheme for Government to get its snout into controlling all aspects of the market.


5 posted on 07/16/2012 5:56:15 AM PDT by Pikachu_Dad (Impeach Sen Quinn)
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6 posted on 07/16/2012 5:56:38 AM PDT by deoetdoctrinae (Gun free zones are playgrounds for felons.)
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To: magellan

The banks would be crazy not to redline every city that passes such a law. Property values would decline to the price of a quart of milk.


7 posted on 07/16/2012 5:57:55 AM PDT by chuckee
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To: magellan
He thinks the plan could have unintended consequences, like discouraging banks and other lenders from making new mortgage loans in an area.

ya think?

No worries, the feds will just order them to do it.

how do I get some of that free money from Obama's stash?

8 posted on 07/16/2012 6:02:26 AM PDT by jtal (Runnin' a World in Need with White Folks' Greed - since 1492)
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To: magellan

This is nothing more than HARP 2.

The only problem is that SOMEONE has to suffer the loss. In HARP 2, it is the taxpayer. In this scheme, it will be the lenders. The lenders will be paid “fair market value” per the eminent domain condemnation - which we all know will not be fair market value.

The result will be that credit will become tighter in any market where the risk of falling housing rices is real. Who wants to invest in an instrument that is likely to be taken by eminent domain at a below market price?

Idiots - just plain dumb.

imo


9 posted on 07/16/2012 6:02:41 AM PDT by Principled (It's not enthusiasm for Romney, it's grim determination to remove Hussein)
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To: chuckee

The lenders would essentially red-line California, and move their lending operations out of California. This would force California to start its own state-wide lending operations, with no capital to support the lending operations. Given its political bent, they would make loans to everyone, regardless of ability to pay. Thus, within 5 years, a new wave of defaults would further bankrupt California.


10 posted on 07/16/2012 6:04:29 AM PDT by rstrahan
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To: magellan

Someone in a California city hall will figure out that this plan will result in a major drop in assessed valuations and thus in property taxes. So it will fail to be enacted. They may be corrupt but they’re not stupid.


11 posted on 07/16/2012 6:05:28 AM PDT by Notary Sojac (Ut veniant omnes)
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To: magellan
So let me see if I've got this right...

Mortgage Resolution Partners will focus on mortgages where the borrowers are current on their payments...

...After being condemned and seized...

...The city or county would resell the loans to other private investors, so it could pay back the investors who funded the seizure...

So it sounds like if you're a lender in that area, you're screwed. Also, try re-selling any of those properties later, with a "condemned" bogie in the record. Heck, try selling any property in the area run by such an out of control and intrusive government.

12 posted on 07/16/2012 6:05:50 AM PDT by ThunderSleeps (Stop obama now! Stop the hussein - insane agenda!)
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To: silverleaf

Can’t even manage their own affairs yet they come up with a grand scheme to bail out homeowners.


13 posted on 07/16/2012 6:06:29 AM PDT by paul51 (11 September 2001 - Never forget)
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To: chuckee
I agree but are the banks even really loaning money now? Every loan I've heard about lately is through Fannie Mae.

If these homeowners are current on their payments, what's the problem? So their property is worth less than it was when they bought it. So is some stock I purchased last year. Big deal.

14 posted on 07/16/2012 6:06:37 AM PDT by lwd
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To: jtal

From the same Obama who’ll pay your utility bill...


15 posted on 07/16/2012 6:13:44 AM PDT by Eric in the Ozarks
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To: magellan

In my mind this is just another step and possibly a logical one if you look at it from a skewed perspective. The minute we the citizenry gave the Government, “any Government, local, state, Fed or School district”, the right and ability to charge PROPERTY TAXES of any kind, we gave them the property. They can and will take, steal or appropriate your personal property if they can come up with a good rationalization.


16 posted on 07/16/2012 6:14:25 AM PDT by The Working Man
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To: magellan
because it's in the public interest

That phrase or clause, could be used to justify any action by government, without regard to consequences. When the consequences arrive, then, another "public interest" set of actions would be enacted to deal with those government created problems, and so, it would be total control by government, of anything that, could be justified as "in the public interest". The CRA was in the public interest, and the consequences of it was, the collapse of the housing market, and now, the collapse, which caused many to have underwater mortgages, is being "fixed" via another "public interest" government project. It's a vicious cycle, and the sheep aren't smart enough to notice a dangerous pattern of destruction to the economy, and a destruction of wealth, and a destruction of their livelihood.

Somebody ought to think of a way to render certain government entities from issuing edicts which are "not in the public interest", such as what those California cities are proposing to do. "In the public interest" should not be a one-way street.
17 posted on 07/16/2012 6:14:54 AM PDT by adorno
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To: Notary Sojac

“They may be corrupt but they’re not stupid.”

As Earl Stanley Gardner’s most famous fictional lawyer, Perry Mason”, said: “You have assumed a fact not in evidence.”


18 posted on 07/16/2012 6:15:41 AM PDT by MasterGunner01 (11)
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To: rstrahan
The lenders would essentially red-line California, and move their lending operations out of California. This would force California to start its own state-wide lending operations, with no capital to support the lending operations. Given its political bent, they would make loans to everyone, regardless of ability to pay. Thus, within 5 years, a new wave of defaults would further bankrupt California.

Cogent, to the point, brutally true

19 posted on 07/16/2012 6:29:25 AM PDT by HangnJudge
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To: magellan

Some might argue that lenders in those cities passing such laws can compensate for the lending disadvantage by affixing higher interest rates in such cities to overcome the prospect of the city condemning the mortgage in the public interest. But then again no sooner would the mortgage issue that the city would reduce the interest rate “in the public interest” as being outside the range of interest rates compared to cities without such an inane law. I guess we can put that argument in the circular reasoning file.


20 posted on 07/16/2012 6:31:43 AM PDT by chuckee
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To: magellan
I am curious. Does anyone know what happens to property subject to a mortgage in a legitimate eminent domain situation?

First, the Fifth Amendment does not state "fair market value", it states "just compensation". Just compensation is subjective.

Assume a major road is being built, and it causes the city to condemn some houses under eminent domain for right of way.

What would happen if the city declares just compensation to be some value, say, current market value, and the owner of the property is underwater on their mortgage?

Since the mortgage owner owns title to the property, I assume the eminent domain discussions are solely with the mortgage holder, and the mortgage signee is released from any obligation.

I am curious if there is any case law on this.

21 posted on 07/16/2012 6:39:29 AM PDT by magellan
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To: magellan

Unbelievable....now cities are proposing property theft.


22 posted on 07/16/2012 6:42:33 AM PDT by Girlene (Chief AHat Roberts - should resign in disgrace.)
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To: magellan
I would think the mortgage holder would still hold a valid contract, and debt thereof, with the persons that signed it.

Thus, the mortgage holder would get all the funds for the ceased property, and those who signed the contract would still owe any balance due on the original contract.

If you have a car repossessed and the value is less than the owed contract, you will still owe the the full balance, even though you no longer own the car.

I think similar rules would apply in this case.

23 posted on 07/16/2012 6:52:49 AM PDT by Beagle8U (Free Republic -- One stop shopping ....... It's the Conservative Super WalMart for news .)
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To: magellan

Hugo Chavez would approve.


24 posted on 07/16/2012 6:59:04 AM PDT by HereInTheHeartland ("The writing is on the wall - Unions are screwed. reformist2 10:04 PM #27")
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To: magellan

Except even under Kelo the government must pay fair market price for any asset it takes, including a mortgage.


25 posted on 07/16/2012 7:12:19 AM PDT by CodeToad (History says our end is near.)
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To: magellan

I’ll bet, even with the falling home values and Prop 13 in place, that the property taxes on those structures are staying up there.


26 posted on 07/16/2012 7:34:24 AM PDT by Uncle Chip
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To: magellan
When I was a kid we'd hear stories of Communist going into countries and 'nationalizing' the industry ... ( that's short for stealing factories and companies from the people who created them)...

Guess this is a variation of that corruption...

Way to go Californian - you're becoming the 'Detroit' of States.

27 posted on 07/16/2012 7:45:21 AM PDT by GOPJ (Innocent people dying was the objective of Fast and Furious......... Ann Coulter)
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To: magellan; All
Mortgage Resolution Partners will focus on mortgages where the borrowers are current on their payments but are "under water," meaning their mortgage costs more than the home is worth. After being condemned and seized, the mortgages would be rewritten based on the homes' current values. The borrowers would get to stay, but with cheaper monthly payments.

Uh... these people DO NOT need any help. They are current on their mortgages.

Don't distort the market! It was a risk; if they want to recover on their "investment" just stay in the home longer. Get over your self-entitlement and accept responsibility for the decisions and gamble you took.

This get rich quick scheme of house swapping every few years needs to stop.

Let's be honest, that's what will happen. These people will turn around and sell out as soon as equity starts to build which will be far faster than it otherwise would've if gov't didn't try to change the rules and steal money from the lenders or taxpayers.

This scheme can start a new bubble while undermining basic freedoms.

28 posted on 07/16/2012 1:21:34 PM PDT by newzjunkey (It'll be Romney or Obama. There's no 'do over' for the gop primary.)
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To: newzjunkey
"Let's be honest, that's what will happen. These people will turn around and sell out as soon as equity starts to build which will be far faster than it otherwise would've if gov't didn't try to change the rules and steal money from the lenders or taxpayers."

Great point. And this will make it easier for those who are current but underwater on their mortgages to get into a position to sell their houses and move the heck out of California.

29 posted on 07/17/2012 7:00:00 AM PDT by magellan
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