Seizing Mortgages Through Eminent-Domain Power.

By
Real Estate Agent with Atlanta Communities Real Estate Brokerage GREC #208281
http://actvra.in/DyJ

Eminate-domain power is being considered by some California cities as a way to turn around the housing market.  The Wall Street Journal writes about it today.

At first glance, it might sound really good.  It reduces the principle down to current home values and allows  upside homeowners to get right side up again.  That is deemed to be a public good which is being argued as a legitimate use of eminent-domain power.

But look whose idea this was.

"The eminent-domain gambit is the brainchild of San Francisco-based venture-capital firm Mortgage Resolution Partners, which has hired investment banks Evercore Partners and Westwood Capital to raise funds from private investors. The company's chief executive, Graham Williams, is a mortgage-industry veteran who helped pioneer lending programs for low-income borrowers at Bank of America Corp. BAC -1.91%in the early 1990s. Its chairman, Steven Gluckstern, is an entrepreneur who once owned the New York Islanders hockey franchise. Evercore's founder and co-chairman, Roger Altman, served in the Clinton administration and is raising funds for President Barack Obama's re-election effort."

Isn't that nice.  Let's just use the power of government to set up some sweet deals for the politically connected.

They aren't going after the mortgages that are in default or where the borrower has a hardship.  These are going to be mortgages where borrowers will be required to be current on their payments.  So it's a really sweet deal for the investors because they get to make loans to borrowers who have proven to be good risks.

I guess it's a good deal for everyone except for the investors of the original mortgage.  Today they have a mortgage that is current, at an interest rate that probably is higher than current rates.  Then out of no where, the government swoops in and pays them maybe 50 cents on the dollar.  They are forced to take a big hit right now but then don't have the opportunity to get in on the new mortgage, unless they are connected to the right people.  To me, that just doesn't sound like America.  That sounds like a banana republic.

Here is a typical scenario that they envision:

"For a home with an existing $300,000 mortgage that now has a market value of $150,000, Mortgage Resolution Partners might argue the loan is worth only $120,000. If a judge agreed, the program's private financiers would fund the city's seizure of the loan, paying the current loan investors that reduced amount. Then, they could offer to help the homeowner refinance into a new $145,000 30-year mortgage backed by the Federal Housing Administration, which has a program allowing borrowers to have as little as 2.25% in equity. That would leave $25,000 in profit, minus the origination costs, to be divided between the city, Mortgage Resolution Partners and its investors."

Between this and the recent ruling on the Affordable Health Act, is there no limit to what the government can do?  Do we still have property rights?  Do we still have a free market?  Independence Day?  Yippee!!!

Posted by
About the Author:  Tim Maitski has been a full time Realtor since 1999. He has sold several hundreds of homes in areas around metro Atlanta.  Tim started with RE/MAX Greater Atlanta and is now with Atlanta Communities Real Estate Brokerage.

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Re-Bloggged 6 times:

Re-Blogged By Re-Blogged At
  1. David Farrell 07/07/2012 12:32 AM
  2. Daryl B. DeShaw 07/07/2012 06:35 AM
  3. Dara Tancredi 07/07/2012 09:35 AM
  4. Wendy Remley 07/07/2012 09:38 AM
  5. Shanna Day Mega Team Leader (AZ & UT) 07/07/2012 12:15 PM
  6. Paula Hathaway, REALTOR, Sr. LBA, 07/08/2012 07:17 AM
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Topic:
ActiveRain Community
Groups:
Atlanta ActiveRain Meetup
Tags:
mortgage
eminent domain

Comments 138 New Comment

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Rainmaker
692,759
Juli Vosmik
Scottsdale/Cave Creek, AZ real estate 480-710-0739
Dominion Real Estate Partners, LLC, Scottsdale, AZ

Okay, I don't normally respond to political posts, but one thing that almost ALL commenters have missed is the need for someone to STEP UP FOR THE HOMEOWNERS.  HARP and HAMP and all the other "governement mandated" programs haven't worked.  Why should this one?  It sounds like there are some capitalists willing to force the issue and take on some of the risk.  Maybe each of us 100 plus commentators should take the time it took to write our comments to write to all of our congress people and senators and get the word out that the average American homeowner is hurting and needs SOME relief.  Maybe that would be a better use of our time than blasting the blogger or the possible outcome of a horrible situation.

July 17, 2012 09:10 PM
Rainmaker
446,986
Tim Maitski
The Agent Who Uses "Watermelon Tough" Sign Posts
Atlanta Communities Real Estate Brokerage
Juli #136. I guess you believe it's the role of government to provide relief to the average American homeowner. I believe that it comes down to individuals helping each other out. Government is just the force that some try to use to force others to do what they deem to be the right thing. How about this? Go out and find some like minded people to chip in their own money so that you can raise enough money to give relief to some of these homeowners. It would empower you and give you a sense of fulfillment. It would set a great example and maybe others would follow. It would all be done freely and without any force. Individuals could freely decide whether their hard earned money should be used in this way or that maybe they should use their charity on other more worthy causes. The free market would allocate the resources instead of some politicians.
July 18, 2012 05:15 AM
Rainmaker
268,098
John DL Arendsen
Real Estate Broker, Mfg Home Dealer, General Contr
TAG Real Estate Sales & Investments & ON THE LEVEL GC

Tim, if only that were the case it would truly be GOVERNMENT FOR THE PEOPLE AND BY THE PEOPLE. Wouldn't that be great and shoudn't that be the case instead of having socialism driven down our throats?

July 18, 2012 05:31 AM
Rainer
3,753
Susie Hafer
Susie Hafer, CRS, GRI, SFR
Cobalt Realty Group

There is an upcoming seminar on eminent domain issues in Irvine, CA on June 6, 2013 that can help you and your clients.

 

Here's the link: http://www.scribd.com/doc/141625197/CRS-Educational-and-Networking-Luncheon-in-Irvine-June-6-2013

May 17, 2013 08:39 AM
Rainmaker
268,098
John DL Arendsen
Real Estate Broker, Mfg Home Dealer, General Contr
TAG Real Estate Sales & Investments & ON THE LEVEL GC

Thanks Susie, as a matter of fact I'll be in Newport that day visiting family. I'll put that on my calandar.

May 17, 2013 09:36 AM
Anonymous
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Rainmaker
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Tim Maitski

The Agent Who Uses "Watermelon Tough" Sign Posts
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