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From an Unlikely Source, a Serious Challenge to Wall Street
Rolling Stone ^ | 20 July 2012 | Matt Taibbi

Posted on 07/22/2012 10:52:50 AM PDT by Lorianne

.... there’s something brewing that looks like it might be a blueprint to effectively take on the financial services industry: a plan to allow local governments to take on the problem of neighborhoods blighted by toxic home loans and foreclosures through the use of eminent domain.

The plan is being put forward by a company called Mortgage Resolution Partners, run by a venture capitalist named Steven Gluckstern. MRP absolutely has a profit motive in the plan, and much is likely to be made of that in the press as this story develops. But I doubt this ends up being entirely about money.

Here’s how it works: MRP helps raise the capital a town or a county would need to essentially “buy” seized home loans from the banks and the bondholders (remember, to use eminent domain to seize property, governments must give the owners “reasonable compensation,” often interpreted as fair current market value).

Once the town or county seizes the loan, it would then be owned by a legal entity set up by the local government – San Bernardino, for instance, has set up a JPA, or Joint Powers Authority, to manage the loans.

(Excerpt) Read more at rollingstone.com ...


TOPICS: Business/Economy; Government; US: California
KEYWORDS:
Once again, they only focus on 'underwater' mortgage holders. I don't like this plan because of that alone, not to mention the perils of eminent domain. I can't see a good outcome from this.

However, I hope someplace like San Bernadino county tries this scheme.

If you can't serve as a good example, you can at least serve as a horrible warning to others.

1 posted on 07/22/2012 10:52:53 AM PDT by Lorianne
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To: Lorianne

I would submit that heroin is less of threat to someone’s well-being than Rolling Stone is.


2 posted on 07/22/2012 10:55:22 AM PDT by the invisib1e hand (If Bill Ayers had a son, he'd look like James Holmes.)
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To: Lorianne
It's constitutional because Kelo was constitutional.
3 posted on 07/22/2012 11:01:16 AM PDT by Publius (Leadershiup starts with getting off the couch.)
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To: Lorianne
So, cities who are broke will seize foreclosed property [Kelo v. New London] and use it for public-private development? What could possibly go wrong?
4 posted on 07/22/2012 11:04:07 AM PDT by MasterGunner01 (11)
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To: Lorianne

This is all about yet another way to stick this mess on to the tax payers and to enrich a few well connected people. Zerohdge has a pretty good write up on this scam:

http://www.zerohedge.com/news/guest-post-eminent-domain-mortgage-heist

The one thing that I’m not sure of is how these cities think that anyone will lend them money for this since they seem to be going bankrupt at an increasing rate. You would have to be stupid beyond belief to invest in municipal bonds in California right now, especially for some harebrained real estate scam.


5 posted on 07/22/2012 11:04:33 AM PDT by trapped_in_LA
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To: Lorianne

Steven Gluckstern is a BIG bundler for Zer0


6 posted on 07/22/2012 11:06:55 AM PDT by Roccus
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To: Lorianne

This is still a rob Peter to pay Paul kind of deal.
You end up with a sore peter and you cant get **** done with a sore peter.


7 posted on 07/22/2012 11:07:39 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: trapped_in_LA
Maybe I'm missing something here. If a home with a $300,000 mortgage is only "worth" $200,000 under some kind of objective appraisal, how does a municipal government gain anything by using eminent domain to take possession of the mortgage? They still have a $300,000 liability on their hands, and -- more importantly -- they own a home that may no longer be a ratable property if the municipality is the owner.

If the intent is to deal with all of these underwater mortgages and deteriorating neighborhoods, they'd be better off leaving everything as-is and just taking possession of the homes through a tax lien.

Again -- I may be overlooking something completely on this ... so feel free to flame away!

8 posted on 07/22/2012 11:08:38 AM PDT by Alberta's Child ("If you touch my junk, I'm gonna have you arrested.")
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To: Lorianne

The thing that really bothers me about all this is that the instruments that created this fiasco are still in place.

Fannie and Freddie need to go.

Frank and Dodd are gone but their treachery lingers on.


9 posted on 07/22/2012 11:11:51 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: Publius

At least Kelo didn’t steal the lenders money - it paid any unpaid loans, then a fair market value - this does not even come close to doing that


10 posted on 07/22/2012 11:12:02 AM PDT by bill1952 (Choice is an illusion created between those with power - and those without)
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To: Alberta's Child

I don’t think they seize the high mortgage - they chuck it.

They, in effect, steal the house from the bank holding the high mortgage and “sell” it back to the homeowner for the lower price, but now they (BOs cronies) own the mortgage.


11 posted on 07/22/2012 11:17:09 AM PDT by FrogMom (There is no such thing as an honest democrat!)
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To: FrogMom

I am frankly SO sick of BO.

Hold the election tomorrow. We can argue about Palin and all the rest after the election, but BO needs to go.

Now.


12 posted on 07/22/2012 11:20:23 AM PDT by Cringing Negativism Network (America doesn't need any new laws. America needs freedom!)
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To: Roccus

Interesting. Do you have a link or something.


13 posted on 07/22/2012 11:28:49 AM PDT by Lorianne (fedgov, taxporkmoney)
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To: FrogMom
If that's the case, then we can all assume that this sort of thing will never happen. There's no way in hell a bank would ever get screwed like this under this country's financial/legal system. I think the exact opposite is actually the case, based on what I've seen in some of the links posted here ... the bank gets paid out at the expense of the local taxpayers.
14 posted on 07/22/2012 11:31:17 AM PDT by Alberta's Child ("If you touch my junk, I'm gonna have you arrested.")
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To: trapped_in_LA

I agree.

But I am still curious to see someplace try this and see the repercussions from this. It’s bound to be a train wreck in ways that we can’t even imagine right now.

For example, the aftermath of the Kelo decision for that particular property is a very good object lesson ... should be brought up more often.

For that reason alone I hope San Bernadino Co. or someother lame-brained entity should go for this.


15 posted on 07/22/2012 11:33:02 AM PDT by Lorianne (fedgov, taxporkmoney)
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To: trapped_in_LA

I agree.

But I am still curious to see someplace try this and see the repercussions from this. It’s bound to be a train wreck in ways that we can’t even imagine right now.

For example, the aftermath of the Kelo decision for that particular property is a very good object lesson ... should be brought up more often.

For that reason alone I hope San Bernadino Co. or someother lame-brained entity should go for this.


16 posted on 07/22/2012 11:33:19 AM PDT by Lorianne (fedgov, taxporkmoney)
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To: Lorianne

http://cesidio.com/Timeline-of-the-Housing-Crisis.php


17 posted on 07/22/2012 11:34:50 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: Lorianne

What this article suggests as solution to the federal government forcing banks to make bad loans under fiscal penalty from the federal government is to have local government Rip the banks off, while the Federal Gov holds a gun to their head.
All this is done of course in the name of the little guy who was duped into taking the loan he couldn’t pay for.

It’s a load of socialist clap trap.


18 posted on 07/22/2012 11:42:24 AM PDT by mylife (The Roar Of The Masses Could Be Farts)
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To: Lorianne

[ Report Abuse | Bookmark ]
Once again, they only focus on ‘underwater’ mortgage holders. I don’t like this plan because of that alone, not to mention the perils of eminent domain. I can’t see a good outcome from this.


I see they also want to ‘cherry-pick’ homeowners who are current in their payments. They don’t want to take a risk with those who don’t/won’t pay.


19 posted on 07/22/2012 11:59:06 AM PDT by The Working Man
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To: Lorianne

What happens to the legitimate financial interests of the banks who held the notes that led to foreclosure?

The banks will simply be robbed, not with guns, but by pandering politicians who will vote for the confiscation?

Now, the fallout: Banks, as ongoing businesses will be hurt, but the real theft will come from the myriad of stockholders and bondholders who own interests in the banks, many of them just average people who thought a bank stock or bond was a good investment for their retirement.

A further fallout will be a marked decline in mortgages approved. No bank will loan money on a home mortgage unless the collateral and credit rating of the borrower is sufficient to make sure that the bank cannot lose during a foreclosure in the future.


20 posted on 07/22/2012 12:09:08 PM PDT by wildbill (You're just jealous because the Voices talk only to me.)
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To: Alberta's Child

The plan is the mortgage holder only gets what the house is worth and loses the difference between the value and the outstanding mortgage amount.


21 posted on 07/22/2012 12:09:39 PM PDT by Ecliptic (.)
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To: Ecliptic

That’s why it won’t happen. For one thing, the U.S. government is basically owned by the banking industry and therefore will never let such a thing take place without making the banks whole. Secondly, any municipality that does this sort of thing will find that its residents will never be able to get a mortgage in the future because of this added risk of loss for other future lenders.


22 posted on 07/22/2012 12:18:50 PM PDT by Alberta's Child ("If you touch my junk, I'm gonna have you arrested.")
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To: wildbill

Exactly.
But sometimes learning the hard way by experience is the only way. I hope San Bernadino Co goes for this.


23 posted on 07/22/2012 12:23:27 PM PDT by Lorianne (fedgov, taxporkmoney)
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To: wildbill
The flip side of this is that there's also the legitimate question of what exactly a bank owns if it holds a "non-performing" $300,000 mortgage (i.e., a foreclosed home) on a property that can only fetch $200,000 on the open market. If a municipality exercises its eminent domain powers and seizes this home from a bank for its fair market value, then there's a possibility -- from a strictly legal standpoint -- that it's not really doing anything wrong.

In some cases where the bank is continuing to pay property taxes on foreclosed homes and maintain them, a municipality that takes homes off the bank's hands may actually be doing the bank a huge favor.

24 posted on 07/22/2012 12:26:44 PM PDT by Alberta's Child ("If you touch my junk, I'm gonna have you arrested.")
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To: Alberta's Child

“Maybe I’m missing something here.....”

The “town” stands to gain considerably under this proposal. More subtly, the people who sit on town councils also stand to gain. That’s what makes this such an ominous proposal. You’re looking at mainly the front end of the “deal” instead of the outcome over time.

Using your example, assume the value of the outstanding mortgage is $300K. The home is worth $200K. There have been no mortgage nor property tax payments made for let’s say 2 years. There are several entities involved with this and one should step into the shoes of each to see the combination of motivations involved. Oh sure, the town could foreclose, but for their $7300 in unpaid property taxes, (and remember they didn’t SPEND that money, they just didn’t receive it like they thot they were gonna) they could acquire an ex meth lab that costs $45K (or more) to remediate and bulldoze and is now an empty lot.

While the mortgageholders (which could include actual lenders who remain holding paper and pension funds who own assembled tranches of bundled morts) are going to be righteously PO’ed, to preserve their interest(s) they are faced with the same type(s) of conundrum that anyone facing litigation MUST, and that is the phenomenal cost and uncertain outcome of same. M-holders are looking at (and this is wildly generalistic) the possibility of owning mort paper that has been sold multiple times, that has been stuffed with grade “D” paper when they bought it as grade “B”; with uncertain titles all clouded up via MERS shenanigans and the non-trivial possibility that they will be bumped off their right(s) to foreclose entirely. You are a pension fund. You own a $100 million bundle of morts that were bundled by Snarfball Bank into some incredible toxic soup of 341 mortgages in Inland Empire, CA, on 341 houses, some have been bulldozed because they turned into meth labs or illegal immigrant hotels or homebrew auto scrapyards. To sue the bank that bundled these together is a daunting prospect. In actual case law, I would say that a bare preponderence of cases have had outcomes in accordance with existing law: In other words, many of these robosigning cases where the notes have been separated from the mortgages (eg; the right to foreclose has been clouded by virtue of what happened to notes, or signatures) judges have not necessarily decided by using the statute of frauds, clearly the applicable law. The outcomes of these cases thus have become quite unpredictable.

The long and short of it is, just like with any other other stenchy situation, the lender ultimately has to make a decision whether to take 38.2% of something and eat their loss, or stay in the game for years, where the statue of limitations is coming up here for most of this mort fraud, and possibly take 17.6% 3 years from now. Or less.

The town converts utter nothingness into property-tax paying property at SOME level, whereas it is receivng NOTHING today.

And of course the investors make $20-$30-$40K on each house they so convert and if they have to flip $20K to the dweebs on the local town council to get the deal done, like most political errr, “incentivization”, that’s possibly the best investment they could ever make.


25 posted on 07/22/2012 12:36:18 PM PDT by Attention Surplus Disorder (This stuff we're going through now, this is nothing compared to the middle ages.)
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To: Lorianne
Compassion for families from this Matt Taibbi?

"So Andrew Breitbart is dead. Here’s what I have to say to that, and I’m sure Breitbart himself would have respected this reaction: Good! [F...] him. I couldn’t be happier that he’s dead." (On the morning following Mr. Breitbart's death. You see.. Breitbart abandoned liberalism and was me-e-e-e-an.)

Andrew Breitbart: Death of a Douche by Matt Taibbi.

I do not know much of his work.. but it seems to me he's just another ideological issue of 1960s Marxist-Alinksy campus radicals -- psycho spoiled brats all.

26 posted on 07/22/2012 1:17:52 PM PDT by WilliamofCarmichael (If modern America's Man on Horseback is out there, Get on the damn horse already!)
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To: Alberta's Child

Doing the bank a favor? What happens when a bank completely writes off an asset from the books?

Your example also presupposes that the value of the property will never rise and the real estate market will forever be depressed.

The reason the banks are holding foreclosed properties is because (a)they anticipate a rise in the market when Obama is gone.

(b)They will eventually sell the property for something when values stabilize.

(c)They can’t afford the total asset loss incurred by government ‘doing them a favor by taking it off their hands.”

(d)If they have substantial part of their assets tied up in foreclosures which are confiscated, they will have to close or go into bankruptcy because their assets will be below the minimums set by regulations.

An argument that the municipality isn’t doing anything wrong “from a strictly legal standpoint” might be true, but it is an argument that is ethically and morally bankrupt.


27 posted on 07/22/2012 1:49:36 PM PDT by wildbill (You're just jealous because the Voices talk only to me.)
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To: Lorianne

Just google “Steven Gluckstern bundler”(no quotes) there are a bunch.


28 posted on 07/22/2012 3:36:35 PM PDT by Roccus
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To: Publius
It's constitutional because Kelo was constitutional.

Which, pursuant to a real Tenth Amendment, it was. It is suicide for California to do this. The State will abuse that power and capital will flee to States more protective of private property. Let them do it so that all can see what abuse of eminent domain looks like.

I say that as a fourth generation Californian sitting in the cross-hairs of the green thugs as the juiciest target (in terms of biodiversity) they have ever seen. I'll bet there are idiots among them that truly believe our property is too important for me to keep. The problem for them is: I created and maintain that biodiversity. Without me the land dies in just a few years. So here we sit, an embarrassment to every academic and government "restoration ecology" program they have ever foisted on a taxpayer unaware of what pathetic results they produce. This is the power of Natural Law Competition, imposing discipline on government without any centralized authority to determine and enforce what a "just level" of eminent domain might be.

I support California's right as a State to fail utterly, just as I support a city's right to declare bankruptcy. This primacy of contracts for public employees, negotiated in secret, and established without recourse, is a terrible feature of law without some mitigating form of discipline. To accept that model is to allow one administration of crooked politicians to enshrine for decades a horrific outcome with the only penalty being thrown out of office to a waiting job. Without failure, they'll keep pooling the scale of enforced uniformity, dragging the whole world down with them.

29 posted on 07/23/2012 7:33:06 AM PDT by Carry_Okie (The Slave Party Switcheroo: Economic crisis! Zero's eligibility Trumped!! Hillary 2012!!!)
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To: Lorianne

Matt Taibbi is truly an idiot of monumental proportions. He’s a raving, foaming-at-the-mouth anti-capitalist (a glaring flaming scorching red Communist). This just goes to show how naive leftists, like Taibbi, enable crony capitalism.

This whole idea is just a way for an Obama donor and bundler to plunder the assets of mortgage investors and get local municipalities to steal them for him.

Steve Gluckstern, the vicious rapacious greedy bastard behind this scheme, makes the fictional character Gordon Gekko look like a lemonade stand operator.


30 posted on 07/23/2012 7:38:55 AM PDT by WashingtonSource
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