Posted on 07/05/2012 10:57:24 AM PDT by listenhillary
A handful of local officials in California who say the housing bust is a public blight on their cities may invoke their eminent-domain powers to restructure mortgages as a way to help some borrowers who owe more than their homes are worth.
Investors holding the current mortgages predict the move will backfire by driving up borrowing costs and further depress property values. "I don't see how you could find it anything other than appalling," said Scott Simon, a managing director at Pacific Investment Management Co., or Pimco, a unit of Allianz SE.
Eminent domain allows a government to forcibly acquire property that is then reused in a way considered good for the public-new housing, roads, shopping centers and the like. Owners of the properties are entitled to compensation, which is usually determined by a court.
Read more: http://www.foxnews.com/politics/2012/07/05/california-cities-consider-seizing-mortgages/#ixzz1zlvtvCqT
(Excerpt) Read more at foxnews.com ...
Atlas shrugs.
What's not to like?
What’s not being said in this article is that bank-owned properties are becoming a blight in many areas as the banks refuse to mow the lawns, keep the homeless out of them, and etc. with all of the costs associated with those problems being picked up by the cities.
The banks are holding on to the homes they seize for reasons they won’t explain and they’re creating some very difficult neighborhoods for the cities to manage at city expense.
I would not normally approve of this kind of thing, but it makes far more sense to keep people in a home than to evict them just to let the home go to rot and ruin and to become a blight.
Feds Pick Firms for Wholesale Home Sell
http://www.freerepublic.com/focus/f-news/2903122/posts
we’ll find out the names AFTER it’s all over.
(they have to pass it to see what’s in it)
PIMPCO being a large holder of Mort. Backed Securities on the hunch that Ben Bernanke would monetize them in a QE. One set of racketeers turning upon another in the last days of the NEW World Order, in prep for the next world order.
What’s not being said in this article is that bank-owned properties are becoming a blight in many areas as the banks refuse to mow the lawns, keep the homeless out of them, and etc. with all of the costs associated with those problems being picked up by the cities.
The banks are holding on to the homes they seize for reasons they won’t explain and they’re creating some very difficult neighborhoods for the cities to manage at city expense.
I would not normally approve of this kind of thing, but it makes far more sense to keep people in a home than to evict them just to let the home go to rot and ruin and to become a blight.
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Megan...it may be useful to keep folks in homes...but this is not the way to do it. This will reek havoc on the real estate markets, damage retirement and pension funds that invest in the mortgages, and abrogate about 250 years of secured creditors rights/laws.
This is definitely the outcome of a communist utopia. Seizure of property in the name of a poor class that they themselves created.
Creating victims is their only way to justify injustice.
They can impose a fine, just like most homeowners associations.
before everyone gets nuts over the concept consider this:
the banks (or trusts with banks as servicing agents) are doing nothing to either sell at market value or mediate in good faith.
everything is in limbo as banks look desperatly for ways to screw the public.
these are properties that are not moving at all. The notes are worthless (if they even exist and IF they are properly documented) . This at the very least will force the hand of the banks to poop or get off the pot.
in california pot is probably what the bankers are smoking.
Cities can red tag dilapidated buildings or cite the Banks as owners of neglected properties as they do to any other property owners. Seizing mortgages is ridiculous.
Cities hauling out the Big Hammer. They want to use the threat of an eminent domain seizure under Kelo to force the banks to negotiate “cram downs” with these mortgage holders.
And thanks to David Souter there is nothing in a legal sense to stop them.
If Bank’s don’t capitulate they’ll seize the homes and cut them off at the knees.
No wonder the Hammer and Sickle became their symbol.
not so. In many jurisdictions forclosed properties either have exemptions during forclosure or even immunity (for a time) after title transfers to the bank.
cities are powerless.
How many of you, when first scanning the headlines, thought that this actually read:
"California Cities Consider Seizing Hostages"?
I understand. They are making the banks eat their peas.
Now - What bank in their right mind will ever make a new housing loan in California?
This is more of governments making up laws out of thin air in order to apply "social justice" to suit their desires and needs. What is
This is a recipe for financial chaos that can never be straightened out.
What is eminent domain? Depends on the day of the week and what California city we are in.
Read that top paragraph again. It is saying that the cities will use taxpayer monies (which they don't have) to pay the difference between the market value of a home and the mortgage amount, and then getting new investors to hold the now theoretically accurately valued mortgages.
This is no different than the city coming in and writing your mortgage holder a check buying down your principle to current market value. What could possibly be wrong with that?
In my experience, it's the homes in the process of foreclosure -- before the bank fully takes over -- that are blighted. But that's just me.
I don't see how this action helps homeowners. Looks like a land grab to me.
Unfortunately thanks to Kelo v. New London, yes, it does.
What a flustercuck we are in now.
FMCDH(BITS)
Soooooo...we should just let people live in properties for free?
I thought they had a big push last year to force the banks to properly maintain the properties in their portfolios.
Eminent domain allows a government to forcibly acquire property.
Wonder if Roberts voted for that one to?.
The municipalities, about 45 minutes east of Los Angeles, would acquire underwater mortgages from investors and cut the loan principal to match the current property value. Then, they would resell the reduced mortgages to new investors.
This is more of governments making up laws out of thin air in order to apply “social justice” to suit their desires and needs. What is
This is a recipe for financial chaos that can never be straightened out.
What is eminent domain? Depends on the day of the week and what California city we are in.
Read that top paragraph again. It is saying that the cities will use taxpayer monies (which they don’t have) to pay the difference between the market value of a home and the mortgage amount, and then getting new investors to hold the now theoretically accurately valued mortgages.
This is no different than the city coming in and writing your mortgage holder a check buying down your principle to current market value. What could possibly be wrong with that?
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They (California democrats) have already driven the price of gas (environmental regulation) and rent (rent control) to higher levels than anywhere else in the country. Why not add the cost of home ownership and financing to the list?
Possibly a bank with the brains not to lend more for a house than the house figures to ever sell for five years down the road...
If this comes to pass, contracts and contract law mean nothing. The contracts mean what the current rulers of the state of California say they mean.
FMCDH(BITS)
Sort of.
It seems there are no good guys in this situation except the homeowners who bought to live in a home and pay the mortgage.
They got stung by government interference that falsely inflated home prices and seduced them into a loan they couldn't afford.
Economic ignorance that filppers and speculators cannot plead.
The banks not at fault, got out of the residential mortgage business because the Feds legislated it unsound economically, but the cities and over compensated public unions went along for the rise in property tax revenue and government jobs, on the false rise in value.
Now, everybody who went in for big profits, wants their money back first, and is unwilling to invest anything more of their own. Any manipulation of the law, records and perception is ok, as long as it favors the protected looter of the day over economic and social order.
They got what they asked for.
Yep, note my tagline.
Yep, note my tagline.
It may make sense to keep the homes occupied from the cities' point of view, but please don't call the people in the mortgage homes "owners." They are renters, renting from the bank.
I think eminent domain is a bad way to go about this, even if it is legally convenient. When eminent domain is used, the owner of the property is supposed to be justly compensated. Who is getting compensated here--the bank, by getting a "fair" reduced value for the mortgage? Who's the owner the city will be dealing with, and how will the fair value be set?
Note also, that if this becomes widespread, it introduces a different problem--mortgages will be forcibly marked to market rather than marked to fantasy, and many mortgage owners will find themselves underwater.
For 12 years you have been asking “Who is John Galt?”.
Just what good do you think is happening now with homes foreclosed, allowed to decay, be vandalized, stripped of appliances, stripped of wiring, stripped of liveability?
It's becoming a death spiral in places. What solution do you have? Add to the homeless population, let the neighbors decay, let local economies circle the bowl?
The appropriate action is for the neighborhoods and cities to sue the banks and demand they keep the properties in “Showable” condition.
Many cities have done so.
I’m siding with the cities here because the banks are not taking care of their properties and the cities, which are already broke, get stuck with the bills for mowing lawns and treating mosquito infested pools.
If the banks would turn around and sell the homes instead of keeping them vacant for years this would not be an issue.
To me all I see here is the banks trying to pass on their expenses to local governments. If this action spurs the banks to sell these homes instead of keeping them vacant then the laws will have done the right thing.
And if no one can get a mortgage in California then that’s not a bad thing, either. Prices will have to drop to where people can pay cash for the homes instead of paying ridiculously inflated prices that can only be sustained by an utterly artifical credit market.
You assume the bankrupt ready cities will maintain the houses using funds they don’t have to place appearance above solvency.
When they all sit down to negotiate the sales price to the cities, we will learn what is what. To take the properties they have to pay for the property. Absent tax liens, that is a lot of bucks.
You say that like it's a bad thing.
For county governments THERE IS NO DOWN SIDE.
They trade taxes on a small percentage of assessed value for those taxes AND the mortgage payment.
County tax and mortgage receipts go up by roughly 1,000% per parcel.
The control over ownership is improved, not only can they tax auction off your house, they now have the ability to foreclose as well.
There's no downside for the home owners, the new mortgage bill is much lower than the old bank mortgage.
As to the pensioners? They were going to be cheated or taxed out of their retirements anyway...
Well, not one of the cities and the county listed are in decent financial shape. Even if they had a redevelopment agency with funds, the crooked governor, Jerry Brown, seized all redevelopment funds last year. Now, even the “well off” cities are scrounging for funds due to Brown’s theft.
So, just where would these governments come up with the money to purchase any homes under eminent domain? Is George Soros going to give them the millions of dollars?
At least one city, Fontana, is a dung heap anyway. I doubt anyone could tell the difference between foreclosed properties and un-foreclosed properties.
Now, who would buy the mortgage after such a scam, I don't know.
“You assume the bankrupt ready cities will maintain the houses using funds they don’t have to place appearance above solvency.”
Not at all. I assume that the people living in the homes will take care of them. In any case, they’ll do a sight better than the banks are doing.
Again, if all this does is to spur the banks to stop holding on to foreclosed homes then it’s a good idea. Why they’re doing this in the first place mystifies me.
“In my experience, it’s the homes in the process of foreclosure”
Well, here In Monterey County, where there are some pricey homes being foreclosed upon, the problem is getting the banks to take possession of the delinquent properties. We have friends who saw their $850,000 home go down by 50% so they bailed. After almost two years of living in the home without making a single payment for anything, they had to “threaten” the bank with just walking away and leaving the keys on the kitchen table to motivate the bank to actually foreclose. From my perspective, the banks are the bad guys. Now that thanks to all their greedy schemes to make money the “old fashioned way,” which is to steal it from honest people, the banks are now left with the pile of crap they created. Now, the banks really don’t want to foreclose because in so doing, they have to show the “asset” on their books at its current value. I just sit here wondering if I will ever see anyone frogwalked out of a bank or brokerage house and off to jail. More than likely though, they are all out at the Hamptons having a great summer on the working man’s money!
“This is no different than the city coming in and writing your mortgage holder a check buying down your principle to current market value. What could possibly be wrong with that?”
Everything!!!!
Anything that lets the deadbeat curent non paying occupant remain in the house is wrong!
“What’s not being said in this article is that bank-owned properties are becoming a blight in many areas as the banks refuse to mow the lawns, keep the homeless out of them, and etc. with all of the costs associated with those problems being picked up by the cities.”
Very true. Plus they are not paying homeowner’s association dues in effect transferring these costs to the property owners who are paying the common expenses. Even worse they, and developers, have gotten states to limit the the number of months of past due homeowner’s association fees that can be collected when a foreclosed property is sold, sometimes as little as 2 months, no matter how many months the property is in arrears. Of course those same politicians force past due taxes to be paid in full.
“What’s not being said in this article is that bank-owned properties are becoming a blight in many areas as the banks refuse to mow the lawns, keep the homeless out of them, and etc. with all of the costs associated with those problems being picked up by the cities.”
Very true. Plus they are not paying homeowner’s association dues in effect transferring these costs to the property owners who are paying the common expenses. Even worse they, and developers, have gotten states to limit the the number of months of past due homeowner’s association fees that can be collected when a foreclosed property is sold, sometimes as little as 2 months, no matter how many months the property is in arrears. Of course those same politicians force past due taxes to be paid in full.
You are completely right. Thanks for pointing that out. I realized it after I let the piece digest in my little brain.
But what the city is doing is pure theft. The lenders gave real money. Guy borrows $500k and spends it on the property. City takes the property, gives the lender $250k along with a FU very much. That loss of $250K is real. Everyone can do without money except the government(s).
Eminent domain is now like the commerce clause. It means what a socialist bureaucrat says it means on the day he says it. IOW, carte blanche to steal.
Uh, I was being sarcastic. And technically I was wrong. The city is a thief of a sort. It is stealing the difference between the current market value and what the lender is owed, from the lender, then flushing it.
With all the points being made in this thread, it is still useful to remember that the borrower *asked for the loan*. And spent the loan on the property. If you borrow money and spend it stupidly or carelessly or ignorantly, the lender is still out the money and you still owe it.
But I'm not a lawyer, so who knows.
I think the only thing really stopping this is that the city probably doesn't have the cash to buy up many properties, and given Stockton's bankruptcy, I doubt there are many investors willing to lend any city in California any money right now.
But in California, a mortgage lender can’t get a deficiency judgment— California is a ‘no recourse’ state after foreclosure. In the case of a condemnation, though, I’m not sure how the law would apply. I would assume that the courts would hold that the lender got possession of the market value of the property, so the lender would still have no recourse against the borrower for the difference. I wonder if the IRS would consider it a ‘gift’ or capital gain, however?
This will backfire in spectacular fashion.
Who in the hell would invest in mortgage paper that can be seized by a municipality?
Since refusal to lend in a specific location can be construed to be redlining, the mortgage companies will exit the entire state.
Hmm, that might not stop the city. *If* the city can line up investors before taking the properties, then the city could get payment from them at the same time it has to pay the mortgage holders. Flip the property.
I have to wonder who would want the properties, even at so called market value. Who is going to guarantee them repayment from these already defaulted homeowners? I'm guessing that many of these homeowners couldn't meet the payments required to finance the market value. So the notion of keeping these people in the houses goes up in smoke. Investors with any brains wouldn't buy the properties unless they believed they could either collect the mortgage payments from the residents, or boot them out and sell or develop the property for a profit. All of which sounds rather unlikely.
If the city is broke, it can't take the property without paying market value. And likely become the mortgage holder aka landlord. I suppose another route could be to take available properties for unpaid property taxes.
It must be galling for California socialists not to have money to throw at this.
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