Posted on 06/25/2012 6:10:27 PM PDT by whitedog57
In his op-ed, Professor Shiller discusses an approach by Professor Robert Hockett from Cornell Law School – using eminent domain powers of government to force principal writedowns for mortgages.
“Professor Hockett argues that a government, whether federal, state or local, can start doing just this right now, using large databases of information about mortgage pools and homeowner credit scores. After a market analysis, it seizes the mortgages. Then it can pay them off at fair value, or a little over that, with money from new investors, issuing new mortgages with smaller balances to the homeowners. Taxpayers are not involved, and no government deficit is incurred. Since homeowners are no longer underwater and have good credit, they are unlikely to default, so the new investors can expect to be repaid.
Unlike HARP 2.0, it is not limited to Fannie Mae and Freddie Mac held or insured mortgages. This can happen to any mortgage investor included banks, pension funds, and hedge funds.
What is the definition of “fair market value” in this context? Fair market value is the highest price somebody would pay for the mortgage, were it in the hands of a willing seller. But, the seller is likely not willing and the government would have to put the loan up for bid rather than selecting an investor. We will have to see how this will work.
As I said at the American Action Forum meeting this week, the housing and mortgage markets have to heal and the government really needs to stop the interventions. Instead, this is a giant step in the opposite direction.
Professor Shiller hopes this municipal government violation of investor rights gains momentum. I hope it dies before any further damage is done.
Do we no longer honor contracts and protect investors? This idea is a disgrace.
(Excerpt) Read more at confoundedinterest.wordpress.com ...
I don’t see how any graft could possibly result from this idea /sarc
Why not just let private investors make deals with homeowners to assume their mortagees and lower their interest (or whatever deal they want)? Essentially, why not let anyone be a “bank”? Then the large banks would have competition and would, in effect, be “broken up” into many smaller banks as they lose market share in the mortgage finance business.
Because the homeowners don't own the homes.
Good point. But they could buy the mortgages off the those who are currently ‘servicing’ the loans.
My point is, who or what is keeping the banks in business monopolies? Let’s open up the field a bit.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.