In Case You Missed This... 'No Wonder Eminent Domain Mortgage Seizures Scare Wall Street'

[WillyT]

No Wonder Eminent Domain Mortgage Seizures Scare Wall Street
Rep. Brad Miller (NC) - American Banker
JUL 11, 2012 7:00am ET

<snip>

There is a great disturbance in the force.

Wall Street's political operatives — the American Bankers Association, American Securitization Forum, the Securities Industry and Financial Markets Association, and the Financial Services Roundtable — wrote a panicked letter to the Supervisors of San Bernardino County in California to express "strong objection" to a proposal by a startup mortgage company. The letter conveys the unmistakable threat that Wall Street will sic its lawyers on the county and will "likely be reluctant to provide future funding to borrowers in these areas."

The proposal is that the county use eminent domain to buy underwater mortgages, almost half the mortgages in the county. The mortgage company, working with the county, would then negotiate new mortgages with the homeowners that they could afford. If the proposal worked as planned, the county would get relief from the foreclosure crisis, the mortgage company would make a profit, and the idea would spread to other counties and towns.

A legal challenge by Wall Street might be expensive to fight, but the arguments are pretty flimsy.

Eminent domain is commonly used to buy land for projects like roads and schools. Existing law allows the use of eminent domain to buy any kind of property, however, including even intangible property like trade secrets. There is no apparent reason that eminent domain could not be used to purchase mortgages.

The Constitution requires only that the county pay fair market value and that there be a public purpose. Deciding a fair price would not be hard. There are frequent auctions of mortgages with a sufficient number of informed, sophisticated buyers. The auctions are an almost perfect pricing mechanism. There would be comparable sales to determine almost any mortgage's fair market value.

Showing a public purpose would not be hard either. A public purpose can be cleaning up contaminated land, renewing a "blighted" neighborhood, or even stimulating economic growth by replacing residential neighborhoods with commercial development.

Wall Street argues...

<snip>

More: http://www.americanbanker.com/bankthink/eminent-domain-mortgage-seizures-terrify-wall-street-1050811-1.html?zkPrintable=true

[WCGreen]

1. this is what they should hav been doing all along instead of tossing

Trillions of dollars into that black whole that is the bankers domain...

[avebury]

35. Agreed 100%. nt

[russspeakeasy]

2. I have no idea if it's legal, but I like it.

[JDPriestly]

14. Under the Community Redevelopment Act, California cities have been buying distressed

and neglected properties for many years.

[superpatriotman]

3. Ooh! They won't lend anymore!

Then how will they stay in business? Call their BS and proceed. I like this idea.

[sabrina 1]

9. Are they lending now? Isn't that the problem? They have trillions hidden away in offshore hiding

places don't they? So now the people decide to take matters into their own hands and predictably they are throwing a hissy fit.

[byeya]

36. Their $Trillions are dead money. They won't invest. It's a capital strike aimed at President Obama

to elect the Romster and further turn the USA into a 3rd world economy where the very richest benefit
and are protected by the militarized police forces and a bought judiciary.

[freshwest]

41. Fine! They can stop investing in all their evil stuff here and we'll do it by ourselves!

They really never had any power, except what we gave them. And not a shot fired, just enlightening the public to the reality on the ground. I feel hopeful about this.

[sabrina 1]

42. I'm not sure they are hoarding this money to make one candidate or the other look bad.

They've been doing it for a long time. They do not view themselves as citizens of any the countries in which they were born, and will change citizenship in an instant in order to accumulate more. This is way beyond some kind of political protest by the 1%.

I doubt it matters to them who is in the WH, so long as Congress can be controlled. And it appears they've been pretty successful at controlling governments all over the world to facilitate their hoarding of money and their power. We were not paying attention. I hope it's not too late to do something about it at this point.

[dixiegrrrrl]

4. Very informative piece and important topic.

The fact Wall Street is having a fit over it says it is a good idea.

[Democrats_win]

5. Justifiable communism!

If there is one truth in the universe today, it's that the assets that the rich stole from us, needs to be stolen back!

[JDPriestly]

16. People forget that the fact that we are a sovereign nation.

Historically, that concept derives from the idea that a sovereign, an actual king or ruler owned the land that comprised his kingdom. And those who lived on that land owed their privilege of living their to the king.

We replaced the king with our Constitution and the representative form of government we call democracy. But ultimately all of the land in the US belongs to the government. A lot of people will reject that idea when they first hear it, but it is essential to the idea of a nation that the land, the real property in the nation, is all ultimately under the control of the government. Call it communism. Call it nationalism. Call it whatever you want, but we own our properties subject to eminent domain and the right of the government to impose restrictions and at some levels taxes on it.

The banks will argue against this, and maybe they will win in the end, but I think they will have a tough time. Maybe this will push them to deal more fairly with homeowners and not just shove the entire loss on the hapless buyers of these overpriced properties.

[xtraxritical]

23. Where would the taxpayer's fit into this scheme?

Will the taxpayer be indemnifying this private lender? I'm quite fed up with that.

[JDPriestly]

27. Under eminent domain, the government "takes" a property.

Usually the government offers the owner (here the mortgage holder, the owner of the mortgage) what the government thinks is a reasonable price for the property and then the owner sues the government for the fair market price which is proved up in court.

I haven't heard of a government exercising eminent domain on a mortgage, but then governments must exercise that right on properties that are mortgaged from time to time because most properties are mortgaged.

Let's say that your school district wants to add on to the local high school. They may take under eminent domain a property next to the school where they could build the addition. I don't know to what extent the size of an existing mortgage would affect the calculation regarding the value of the property. So, I can't answer your question, but maybe this information will help you find the answer.

[DJ13]

6. The auctions are an almost perfect pricing mechanism.

Almost.

I suspect theres a great many of these auctions that end up being used to transfer a foreclosed property from the main bank to a small subsidiary at far below market valuation, which is one big reason why this scares the mortgage industry.

It would not just expose their financial shady dealings to keep their banks afloat, it would lead to far below true valuations for the properties they still hold.

[nykym]

7. So if the theaten to sue

take back any financial incentives that were given the bank,
Deny questionable local tax write offs.
Enforce building codes.
make their life difficult too.

[cherokeeprogressive]

8. And the rich get richer...

You cheerleaders for this should do some research into who the founding fathers of Mortgage Resolution are. One is probably the richest developer in CA.

If this isn't about lining the pockets of rich people, why did they approach the county with this idea and force the county to keep the very existence of this idea a secret by forcing them to sign a confidentiality agreement?

[sabrina 1]

10. We know who the corporation is. What makes you think that this is the only Corp that can do this?

The local authorities can do it themselves and if it spreads, as it appears to be doing, across the country, there were will be plenty of other people willing to get involved.

And what is your solution? What is the Banks' solution btw?

There is also the possibility of challenging the Banks' ownership of these properties considering the fraud that went on and which is happening already. If they cannot prove they own the properties in court, then the Local Municipalities can simply claim them OR the homeowners themselves.

I love that there is some action in the works and the fact that the Banks are so upset over it, makes it even more appealing.

[2pooped2pop]

17. yes, I think the homeowner is still

getting screwed in the ass here. First off, sheriffs sale auction is about 30% of the homes market value. So what is happening? Do the people get 30% of their homes worth, then the bank will still sue them for the rest. Then if they are good, the city will resell it too them? Probably not at 30% of it's value I'll bet.

I guess I need better understanding coz I am not reading that this is real good for the homeowner.

[sabrina 1]

29. You are misunderstanding it I think. You need to read Matt Taibbi's article on it at Rolling Stone.

The opposite of what you fear is what is intended. People whose homes are under water will be able to have their payments reduced to reflect the true value of their homes, encouraging them not to walk away as many are doing are doing now, for one thing. And it may be possible that rather than have private Corps doing this, local authorities in some instances, maybe be able to do it themselves. That would be the ideal solution. However, so long as the people get what is promised, I see no problem with whoever is willing to put up the money to make it happen, making some money themselves, so long as it is straigh-forward and honestly made.

[99th_Monkey]

22. Which is the fly in the ointment here

which is why I posted below suggestion of the municipality
working (NOT with a for profit outfit, but) with a not-for-profit
Community Development Corp. who uses the Community Land
Trust model developed and now used in Burlington VT and
many other cities on a smaller scale than VT.

The CLT provides a form of community ownership in perpetuity,
or part ownership, enough to keep the housing affordable
forever; while allowing the home-owner 90% of the rights and
benefits of full ownership.

plz see my post #21 below.

[sabrina 1]

30. Excellent idea, at least people are beginning to think for themselves and beginning to recover from

the shock of the disaster that struck them as a result of all the corruption.

I hope this will develop and move forward and the threats from the Banks and their puppets in Government should simply be ignored imho, so far they have done nothing but add to the disaster and then profit from it at our expense. They deserve zero respect and absolutely no appeasing. Make THEM an offer they can't refuse, they are in no position to be laying down any more laws. That has been the problem in the first place.

[99th_Monkey]

32. +100 nt

[Blanks]

11. I remember that supreme court ruling.

Quite a few people were up in arms, but this is an example of how it could be used to improve communities.

It was the liberal justices that ruled something to the effect of: if you're improving the community you can use eminent domain.

It seems like they took some low income property to create commercial property. Which was a departure from the usual use of eminent domain.

[JDPriestly]

15. Yes. This is about countywide blight. The idea could very well work.

[Blanks]

12. Link

http://en.m.wikipedia.org/wiki/Kelo_v._City_of_New_London

[Zalatix]

13. I've got a song for those bankers thinking about leaving areas where their houses get taken

[sabrina 1]

31. Lol, maybe we should have a huge concert in their honor to deliver the message, musically?

They need to just get out of the way at this point, and be grateful they bought enough influence in our government that they are not all behind bars by now, but we the people have a mess to clean up, and they are part of that mess. The nerve of them to try to stop any solution to the disaster they caused.

Perfect song, btw.

[hatrack]

18. After Kelo vs. New London, Wall Street can't argue for a narrow definition of eminent domain

After all, if private property can be condemned for the private gain of others, on the assumption that the net economic gain and benefits to the community at large will outweigh overriding the wishes of individual property owners involved . . .

[AtheistCrusader]

19. They never even built that strip mall on the Kelo site.

It's a wasteland now.

[Blanks]

20. A wasteland or a vacant lot?

Not really the same thing.

[AtheistCrusader]

26. The last pic I saw was just overgrown crap.

They bulldozed the buildings and just left it as a temporary dump.

[Blanks]

37. If they bulldozed down a blighted building

It is an improvement. A developer can build more easily on a property if it doesn't have an existing structure. Sometimes a historical society will bring a project to a complete halt.

Even a property that has construction waste on it will grow over naturally and be more aesthetically pleasing than a slum.

If we tore down every vacant house in the country; the real estate market would rebound more quickly.

I'd like to see more 'lots of just overgrown crap'. I would prefer a developer tear that down than a pristine forest (which I see too often).

[AtheistCrusader]

38. They were only 'blighted' and vacant, in this case because the government eminent domain'ed them out

.

Those homes were previously occupied, hence the fight all the way to the supreme court. They didn't follow through with the construction plans that justified the eminent domain battle. Therein lies the irony.

[99th_Monkey]

21. I used to work for a not-for-profit Community Development Corp.

and part of activities included building affordable housing for poor people.

This was for 10 years, during the 90's, and became aware of the Eminent Domain laws
on the books, and could easily imagine this being used as described in this article, to
address blighted neighborhood issues to seize, rehab and resell distressed housing, to
make it a) an asset to the municipality (rather than a sore thumb) and b) to provide
much needed affordable housing to lower-income people.

This is a HUGE opening, well actually a tiny opening that could spread like wildfire, once
people, and local politicians "get it" and jump on the band wagon. This could indeed
become a literal "bottom up" peaceful financial revolution, to throw the Banksters off
our collective back, and reboot local economies, and renew neighborhood housing
stock, and give real relief to lower income people who need stable housing.

This proposal however, should (maybe it does?) include use of the Community Land Trust
model, to hold these houses in trust, dedicated forever to remain relatively affordable.
This model was developed and is now widely used in Burlington VT. Google is your
friend (if you're not familiar with CLTs).

[sabrina 1]

28. Interesting information in your post, thank you.

This could indeed become a literal "bottom up" peaceful financial revolution,

I think it's been suggested before by more than one source, but rejected immediately by Congress. The beauty of the way this appears to be going is no one needs Congress to get it done.

This proposal however, should (maybe it does?) include use of the Community Land Trust
model, to hold these houses in trust, dedicated forever to remain relatively affordable.
This model was developed and is now widely used in Burlington VT. Google is your
friend (if you're not familiar with CLTs).

'A government of, by and for the people'. So far throughout this disaster, the Government has not lifted a finger for the people. Now the people are being given an opportunity to do it themselves, and Wall Street is freaking out since they can't run to Congress to 'protect' them this time. So now they resort to lame threats.

I agree, this could be, if it's done right, the people's way to take back control of their business without Congress interfering on behalf of the corrupt, criminal enterprises that got us here. It does seem like a 'revolutionary' idea.

I like your other suggestions also, btw. Thinking ahead is important as the vultures are always there, ready to pounce.

[DhhD]

24. Some brand new homes never lived in were bulldozed in California several years ago.

Could these homes have been saved by the county in the way you describe? Seems like they were owned by a lending institute that could not get the price and loan that they wanted. Seems like people were living in tents in the community because they had been foreclosed on. This was only a few years ago.

[Egalitarian Thug]

25. K&R. Very interesting, n/t

[freshwest]

33. Looks like a *form* of nationalization will occur from the ground up to save the ground from ruin.

How delicious. After the corporate court ruled for the seizure of private property from individuals for big corporations in league with a municipal 'fathers,' now it goes the other way. Sure they thought that Kelso was great as long as it benefited big money.

[sabrina 1]

34. Yes, that's one of the things I like about it. It's like taking one of their weapons (Kelo) and

using it without their permission and it looks like they're not too happy about it.

[Blanks]

39. Cleveland has been tearing down houses for a while.

I didnt see anyone mention this above, but I believe it is along the same lines.

http://m.cbsnews.com/storysynopsis.rbml?pageType=60minutes&catid=57344513&feed_id=32

[alfredo]

40. KNR