California Municipalities Considering Eminent Domain of Mortgages (Sacramento, Berkeley: real estate, foreclosures)

[NewToCA]

California municipal governments are considering using eminent domain to seize underwater mortgages held by private investment trusts. These mortgages would be seized at significantly discounted amounts, and then the homeowner would be provided a new mortgage that would be less than their current outstanding balance.


A plan to use eminent domain to seize underwater mortgages has raised hopes of homeowner bailouts in cities stricken by the housing crisis...The plan calls for homeowners to refinance for more than the governments paid for the mortgages. Investors would take a share of the higher refinance amounts.

Experts debate legality of plan to apply eminent domain to mortgages - Real Estate - The Sacramento Bee

[18Montclair]

I can see why this would be an attractive idea.

Banks have been given hundreds of billions of taxpayer dollars and in return they have essentially thrown millions of people out of their homes without so much as batting an eye. Now to say that people put this upon themselves is really only half true because banks were actively pushing and approving predatory ARM loans on people they KNEW DARN WELL were not in a financial position to keep up with bloated payments once they 'adjusted'.


And that doesnt address the credit default swap fiasco.

The more I think about it the more I support it, if for no other reason comeuppamce. lol

[Bulldogdad]

(In my best Colonel Jessup voice)

You people do realize this is one group of investors trying the **** another group of investors out of their best mortgage investments using the power of government to seize property that isn't even in foreclosure yet. How bout they buy the properties when they hit the foreclourse market like everyone else.

They are also trying to **** the small investor who can make money off those foreclosures.

Oh and about the little guy? uh yeah this plan is only looking at mortgages that are current but underwater.

Bad idea. Let this frigging thing alone and let it shake out.

[u225615]

As mentioned, this plan is for homeowners current on their mortgage but underwater. In other words people doing the right thing by not abandoning their homes, short selling and the like. Unfortunately, they have no chance of relief b/c they dont qualify for HARP, HARP 2.0, HAMP, etc. May not be the best idea but seems better than doing nothing.

[NewToCA]

I dunno, kind of seems like legalized theft to me.

The institutions holding the loans that are current would be forced to give the loans to government at a discount.

Why should they do so?

These investors assumed the risk and the loans are performing so far.

Why should they be "punished" in this process?

[Rakin]

I see a lot of lawsuits and Millions of $$ being spent. Taxpayer of CA $$.

The sticking point, legal experts say, will be when it comes to paying the "just compensation" required under the U.S. and California constitutions. "My guess is the courts will uphold the constitutionality of this, but it will be messy," said Steven J. Eagle, an expert in government takings at the George Mason University School of Law in Arlington, Va.

[futbol]

^^^ Winner.

Can't just seize property. The mortgage companies must be justly compensated.

The City of Honolulu did something like this with some beach front property years ago. They condemned the land, making it worth much less, then seized it and paid the owner as if it were a dump, then turned it into a park. Owner won that case in the US Supreme Court because he was not justly compensated.

[DMenscha]

Looks like another clear cut case of government figuring out a solution to a problem that is just about solved by the private markets.

[malamute]

Why not just slash property and other taxes so these home-buyers have more of their income that could be used to pay off their mortgages?

[Phil306]

Of course, the People's Republik of Kalifornia strikes again. The cities which propose this, Berkeley being the first of course, should be hung and fired. This is NOT what "Eminent Domain" was meant to be. Of course, the limp wristed liberals will twist it to what they want.