Posted on 11/16/2013 11:15:16 AM PST by whitedog57
The eminent domain steamroller is gaining momentum. Irvington NJ now joins Richmond CA in the effort to seize the mortgages of underwater borrowers and reduce their debt.
Other cities are moving forward (or backward) in the eminent domain derby. Newark NY, Pomona and Oakland CA are moving forward. Other cities are considering studies to seize mortgages such are two in Pennsylvania and a cities in Minnesota, according to Robert Hockett, a Cornell University law professor and one of the architects of the strategy. He should be nicknamed “Hockett to ‘em”.
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Who is the “‘em” that Hockett want to sock it to? The owners (investors) in the mortgages in question. That includes Fannie Mae, Freddie Mac, PIMCO, Blackrock, Wells Fargo, the Mortgage Bankers Association, and other investors. The Federal Housing Finance Administration (FHFA) has said that the eminent domain strategy is “a clear threat to the safe and sound operations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks” and that it may take legal action against cities that use it or limit mortgage activity there.”
Well, just to be fair, Congress and Affordable Housing Goals are a threat to the safe and sound operations of the GSEs too.
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Now here is the clinker. On Friday, letters signed by 10 Democratic members of Congress were expected to be sent to Federal Housing Finance Agency, and Shaun Donovan, secretary of housing and urban development, saying that any policies that restrict mortgage lending in areas that use eminent domain would violate anti-discrimination laws.
“We write to express our disappointment that the Federal Housing Finance Agency is actively supporting and threatening legal action against communities which consider exercising their legal rights to use eminent domain to help struggling homeowners,” the letter to Mr. DeMarco said.
Discrimination? Against mortgage investors, perhaps. Investors purchased the mortgage notes with expectation of payments from the borrowers, and the Hockett plan for eminent domain proposes to lower the mortgage balance … and payment due to the lenders.
The American Civil Liberties Union (ACLU) has joined the fray in New Jersey on behalf of Irvington NJ and underwater borrowers saying that “opponents are using threats to keep cities from exercising their legal right to employ eminent domain.”
Perhaps, but this is a very strange interpretation of eminent domain laws. And the moral hazard of letting local governments seize loans from investors and alter them is very, very dangerous. Just as Obamacare is very dangerous for the same reason: the Federal government essentially seized existing healthcare insurance plans in order to replace them with more EXPENSIVE plans with higher deductions.
This points out the importance of the role of Director of the FHFA. The current Obama Administration nominee for Director Mel Watt (D-NC) has no regulatory experience (which would help) and was evasive as to his plans for Fannie Mae and Freddie Mac in his interview with the Wall Street Journal’s Nick Timiraos. In fact, his interview was filled with “I don’t knows” and “I haven’t thought about its.” It was reminiscent of Sgt. Schultz from the TV show “Hogan’s Heroes” with his famous “I know nothing!” routine.
What do we know about Mel Watt? Watt and Barney Frank (D-MA) were instrumental in pushing affordable housing initiatives to those who couldn’t afford to make mortgage payments. Even worse, he denied that Fannie Mae and Freddie Mac were vulnerable to subprime mortgages (aka, affordable housing goals):
“I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Watt said in a banking committee hearing, downplaying the risks inherent in pushing.
And here is a press release regarding Mel Watt: “U.S. Representative Barbara Lee, Congressional Black Caucus Members and Fannie Mae Announce $500,000 Deposit with Community Bank of the Bay to Expand Affordable Housing Opportunities in West Oakland.” This indicates that Mr. Watt is willing to use Fannie Mae as a wealth transfer mechanism.
I think that I can guess that Watt will be in favor of eminent domain for underwater borrowers, reversing DeMarco’s resistance.
Obama’s famous lie “If you like your insurance, you can keep your insurance” should be rewritten for mortgage investors “If you like the mortgage you purchased, you can keep the mortgage you purchased.” And then use eminent domain to seize them.
This is the extreme danger of having politicians having control over your healthcare … or your mortgage.
Congressman Mel “I know nothing!” Watt.
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Thank you cards are to be sent to the supreme court for eminent domain law.
Several financial institutions have already filed suit against Richmond, CA. Several constitutional scholars say that they will win - this is an abuse of the eminent domain clause.
Sounds like he would be the most qualified man to regulate the mortgage industry - the man responsible for screwing it up in the first place! It's the equivalent of putting Captain Hazelwood (Exxon Valdez) in charge of the EPA.
Not sure what this has to do with the ACLU, but I see an ugly scenario - Watt forces the banks to loan to an unqualified minority, who immediately quits paying the payments. The mortgage is seized, the payment altered to ridiculously low amount, and bingo! Low cost housing for Holder's people.
I said it from the begining, The states will buy these forclosed mortagages with tax payer funds and give them to low income section 8 squatters for free. Its there right!
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