Calif. city looks to seize loans to ease mortgages (Richmond)

Associated Press ^ | Aug 25, 2013 9:39 AM EDT | Paul Elias

[Olog-hai]

When the mayor of Richmond, Calif., and a gaggle of activists and homeowners showed up at the Wells Fargo Bank headquarters in downtown San Francisco this month, they were on a mission to speak with the bank’s chief executive.

They wanted the bank to drop a lawsuit aimed at stopping Richmond’s first-in-the-nation plan to use the government’s constitutional power of eminent domain to “seize” hundreds of mortgages from Wells Fargo and other financial institutions. …

Wells Fargo, three other banks and even the Federal Housing Finance Agency think otherwise.

The banks have filed two lawsuits alleging that the plan is an illegal abuse of eminent domain, which allows governments to seize private property for public use—like a house in the path of a new highway or a piece of land needed for a new park. …

[Alberta's Child]

Sorry about that ... I should have read your post before posting my own response. You beat me to it!

[Spirochete]

It sounds like they plan on impairing the obligation of contracts, thus violating Art 1 Sec 10 of the US Constitution.

[Alberta's Child]

If the city "seizes" a $400,000 mortgage on a home that's only worth $300,000 they're probably on the hook for the entire $400,000. They'd be better off negotiating directly with the bank to see if they can purchase the property outright for $300,000 (or something between $300,000 and $400,000).

Something to keep in mind here is that the moment a municipal government acquires a property through eminent domain, the property is basically purged from the tax rolls and it is generating $0 in property tax revenue.

[cookcounty]

A couple weeks ago we were notified by our bank that the State of California intended to seize a CD we have for “inactivity,” and would do so if we did not respond to them within 90 days. This is a CD we are holding to pay for grandma’s “final expenses,” with the instructions to the bank that it be renewed at every maturity with the best rate they have. We haven’t done anything else with it for almost 3 years.

Here’s the really crazy parts:

A) we don’t live in California
B) It’s a Missouri bank

The (Democrat) government of California is a blood-sucking insane gang of thugs.

[jeffc]

From the article:

The plan is the brainchild of Cornell University law school professor Robert Hockett and here's how it works:
"The fact of the matter is that underwater loans do default at massive rates," Hockett said. "Underwater loans are a major drag on the economic recovery. We have got to do something."

I guess letting the market work is out of the question, such is the liberal belief that the bigger the government, the better the government.

[Whenifhow]

4:56 Minutes

Richmond, California
Town Wants To Use Eminent Domain To Seize Homes Worth Less Than Mortgage - Wake Up America
http://www.youtube.com/watch?v=nDvEajV2po8

[etcb]

It appears this idea will come down to the question of what is a mortgage. Is it a contract which Article 1, Section 10 prohibits a state from enacting any law impairing the obligation thereof, or is it private property subject to imminent domain under the 5th amendment. Clearly the home is subject to seizure under the 5th as private property, but I think the state and it’s political entities are barred from taking or modifying a mortgage contract by Article 1, Section 10. This is the reason bankruptcy is a federal matter rather than a state or local one. I don’t think the fact that a home is pledged as collateral to guarantee repayment of a mortgage does anything to change the mortgage from a contract to personal property.

[Alberta's Child]

Thanks for the link. After reading up on this, I'm pretty certain it will never happen -- because the Feds will never allow this sort of nonsense when Federal agencies guarantee a very large portion of the nation's mortgages.

And when you consider that the Fed has been buying mortgage securities at the rate of $40 billion per month for some time now, you can be sure that Ben Bernanke is not going to let some dipsh!t mayor of a half-@ssed California town put any of that money at risk by seizing the mortgage and forcing the "bank" to refinance it. LOL.

If I lived in Richmond and I thought this was actually going to happen, I'd use the process to make tons of money. If I owned a home outright and had enough cash lying around, what would keep me from paying a family member $400,000 and then having that family member extend a mortgage on the property for $400,000? The $400,000 would then sit in a bank account. When the municipality "seized" the mortgage they'd have to settle with the mortgage holder (my cousin Vinny, for example) for a certain sum of money. I would then default on the "next" mortgage and walk away from the property with my $400,000 plus whatever I got for the refinanced loan.

Something doesn't make sense here, eh?

[Alberta's Child]

Let's put aside the whole aspect of seizing the mortgage for a moment and think about this:

If a government acquires a property legitimately through an eminent domain proceeding, is it legally obligated to pay off any mortgages on the property even if the mortgage exceeds the value of the property?

[etcb]

I certainly agree that if they seize the home they would have to pay off the mortgage regardless of the amount. However my reading of the article indicates that they are contemplating seizure of the mortgage, not the home.