Local government wants to use eminent domain to TAKE homes that are underwater BUT are performing loans------ WHAT!!!!
I found the following article but didn’t record the source since I couldn’t believe what I was reading!
FONTANA, Calif. — In a story July 15 about a proposal for cities and counties to use the power of eminent domain to seize mortgages and help homeowners into more manageable payments, The Associated Press reported erroneously that Robert Hockett, a Cornell University law professor, likes that the proposal forces the hand of uncooperative investors. Hockett said that he likes that the proposal forces the hand of some investment bankers who have stifled plans to reduce principal.
Under the proposal, cities and counties would argue that a public purpose is served by condemning the mortgages under eminent domain because the cities and counties face economic blight and a damaged tax base.
Discussion of the idea is taking place in one of the epicenters of the housing crisis, a working-class region east of Los Angeles where housing prices have plummeted. Last week brought another sharp reminder of the crisis when the 210,000-strong city of San Bernardino, struggling after shrunken home prices walloped local tax revenues, announced it would seek bankruptcy protection.
Now – and amid skepticism on many fronts – officials from the surrounding county of San Bernardino and cities of Fontana and Ontario have created a joint powers authority to consider what role local governments could take to stem the crisis. The goal is to keep homeowners saddled by large mortgage payments from losing their homes – which are now valued at a fraction of what they were once worth.
"We just have too much pain and misery in this county to call off a public discussion like this," said David Wert, a county spokesman.
The idea was broached by a group of West Coast financiers who suggest using the power of eminent domain, which lets the government seize private property for public purpose.
In this case, they would condemn troubled mortgages so they could seize them. Then the borrowers would be helped into mortgages with significantly lower monthly payments.
Steven Gluckstern, chairman of the newly formed San Francisco-based Mortgage Resolution Partners, says his main concern is to help the economy, which is being held back by the mortgage crisis.
"This is not a bunch of Wall Street guys sitting around saying, `How do we make money?'" he said. "This was a bunch of Wall Street guys sitting around saying, `How do you solve this problem?'"
Typically, eminent domain has been used to clear property for infrastructure projects like highways, schools and sewage plants. In this case, supporters say, the public purpose is served because communities battered by foreclosures have seen tax rolls decimated and services gutted and have suffered economic blight.
The plan targets homeowners who are current on their mortgage payments but "under water," meaning they owe more on the mortgage than the home is worth. “
OK…..OK – a home underwater but a performing loan is a home underwater on paper only. The homeowner considers their house a home not an investment. If they continue to live in their home and not focus on the paper “loss”, home prices will appreciate again.
I guess desperate people, companies, or governments do desperate things in desperate times. This however is over the top! Government needs to get out of the way and leave the housing industry alone.
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