General Discussion

Left Coast2020

(2,397 posts) Sun Jul 22, 2012, 12:39 AM Jul 2012

Does anyone think this is a good idea for those underwater in their mortgage?

A Serious Challenge to Wall Street

But 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. I can't speak for how well the program will work, but it's certaily been effective in scaring the hell out of Wall Street. Under the proposal, towns would essentially be seizing and condemning the man-made mess resulting from the housing bubble. Cooked up by a small group of businessmen and ex-venture capitalists, the audacious idea falls under the category of "That’s so crazy, it just might work!" One of the plan’s originators described it to me as a "four-bank pool shot."

http://readersupportednews.org/opinion2/279-82/12539-a-serious-challenge-to-wall-street

Wall Street does not like it, so, therefore, anything that WS hates is fine with me.

10 replies

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Does anyone think this is a good idea for those underwater in their mortgage? (Original Post) Left Coast2020 Jul 2012 OP

Kelo v. New London would allow this bluestateguy Jul 2012 #1

You don't get stuff for free via eminent domain. The property owner does receive compensation. MADem Jul 2012 #2

That's the point: fair value many a good man Jul 2012 #4

The problem is that cities and towns are running deficits. MADem Jul 2012 #5

The home owner could use the leverage an eminent domain threat would provide. L0oniX Jul 2012 #7

I like the idea of helping homeowners. I am concerned that the scheme sounds like a gangland MADem Jul 2012 #9

Not a precedent we ought to want to set. WillowTree Jul 2012 #3

www.democraticunderground.com/10021000114 L0oniX Jul 2012 #6

Sure ProSense Jul 2012 #8

My thought(in this circumstance) is whatever works for the homeowner. Left Coast2020 Jul 2012 #10

bluestateguy

(44,173 posts)

1. Kelo v. New London would allow this

Reply to Left Coast2020 (Original post)

Sun Jul 22, 2012, 01:07 AM

Jul 2012

Could it improve some neighborhoods? Perhaps, but this would set a frightening precedent that would likely be abused.

MADem

(135,425 posts)

2. You don't get stuff for free via eminent domain. The property owner does receive compensation.

Reply to Left Coast2020 (Original post)

Sun Jul 22, 2012, 02:31 AM

Jul 2012

I know, I had a family member have a chunk of his property taken to widen a road. They paid him a pisspoor amount, and he sued and won and got more money. He still lost his property, but at least he got a fairer price for it.

I think it might be more of a threat than a promise, but if it gets the Wall Street cretins to refinance and find ways to help people instead of screwing them, more power.

many a good man

(5,997 posts)

4. That's the point: fair value

Reply to MADem (Reply #2)

Sun Jul 22, 2012, 03:10 PM

Jul 2012

Use eminent domain to take away the house from the bank in return for current market value - NOT the inflated value on the mortgage.

Turnaround and restructure the mortgage and the homeowner stays in the house with much lower monthly payments. They can now spend that money to boost the economy.

It's also a great way to stop the downward spiral of vacant homes destroying everyone else's property values. We need one brave mayor in one city to start this thing and it will snow ball.

MADem

(135,425 posts)

5. The problem is that cities and towns are running deficits.

Reply to many a good man (Reply #4)

Sun Jul 22, 2012, 09:26 PM

Jul 2012

The money availability to buy the houses from the banks is at issue.

If they could find a way to bully the bank into an either/or proposition (either you lower the note OR we take it), maybe that would work. It's a bit heavy handed, though.

I'd love to hear from lawyers on how this could be made to work. I do think that something needs to be done.

L0oniX

(31,493 posts)

7. The home owner could use the leverage an eminent domain threat would provide.

Reply to MADem (Reply #2)

Sun Jul 22, 2012, 09:35 PM

Jul 2012

If the home owner were to notify the city or county that forclosure is eminent so that the city or county could notify the bank that they will declare eminent domain on the property should it go into forclosure, it would provide leverage for the owner to get the bank to refinance the mortgage for the amount that a eminent domain fair market value would bring. Ya think? True that the city or county would need to be able to finance the process but what is the loss they take when there is no profit from the interest the bank makes from the mortgage. Also I don't know that property taxes are the same for a bank holding property as it is for a property owner.

MADem

(135,425 posts)

9. I like the idea of helping homeowners. I am concerned that the scheme sounds like a gangland

Reply to L0oniX (Reply #7)

Sun Jul 22, 2012, 09:47 PM

Jul 2012

shakedown--not that I have much sympathy for the banks, and one could argue that turnabout is fair play, and all...I just don't see where "eminent domain" on an individual basis is justified.

It's not like they are buying the houses to tear them down to build a highway or create a park for the public good.

And I don't see where the money would come from. In order for the town or city to buy the home(s), they need money and most communities are running a deficit and cutting services. Asking the community to buy homes from the bank, in essence, so that (who? The town?) can sell them back to the homeowners at a reduced rate...? What's to stop the homeowner from just bailing out completely at that point in time? It's a buyer's market for housing--even "fair market value" can be seen in some communities as a highball price.

WillowTree

(5,325 posts)

3. Not a precedent we ought to want to set.

Reply to Left Coast2020 (Original post)

Sun Jul 22, 2012, 04:44 AM

Jul 2012

I know some here have themselves that the Rs will never hold the White House again, but they will one day and just let your imagination run with that concept coupled with the a history of the government confiscating private property, regardless of who owns it, for purposes other than what eminent domain has previously been understood to be. Think about that picture for a bit and see how good this idea looks to you.

L0oniX

(31,493 posts)

6. www.democraticunderground.com/10021000114

Reply to Left Coast2020 (Original post)

Sun Jul 22, 2012, 09:28 PM

Jul 2012

Already posted with other links.

ProSense

(116,464 posts)

8. Sure

Reply to Left Coast2020 (Original post)

Sun Jul 22, 2012, 09:35 PM

Jul 2012

"Does anyone think this is a good idea for those underwater in their mortgage?"

...what could go wrong?

Editor's note: Readers interested in learning more about this would do well to read North Carolina congressman Brad Miller's piece on this in American Banker. Miller is not necessarily a proponent of the exact mechanism proposed by MRP, but he is intrigued by the general idea of using eminent domain to address the blighted-loan problem, and seems particularly interested in the strategic possibilities of addressing the problem at the local level. He writes:

<...>

Editors' Note II: There've been some readers who are concerned with the question of MRP's profit margin, and who will end up having to pay for it. I've heard these complaints from different voices, including some belonging to government officials who support the eminent domain idea generally, but would prefer to see it done by a government-run program a la FDR's HOLC.

<...>

The use of eminent domain is obviously an extreme reaction. But the moral argument for its use is clear here. Virtually every community in America was the victim of a broad fraud scheme perpetrated by banks, lenders, ratings agencies (and, yes, even the GSEs like Fannie and Freddie) to artificially inflate the real estate market. The people who bought houses at the peak of the market and are now underwater, they are victims of a crime, the crime being a conspiracy by banks, lenders and ratings agencies to misrepresent the value of home loans (particularly subprime loans) to the bondholders who bought them. The damage from that criminal scheme is not just ruining and bankrupting the homeowners who bought these artificially-inflated properties, it's also destroying neighborhoods and paralyzing the whole economy.

That's concerning, especially given the firm's CEO.

Graham Williams Chief Executive Officer

Williams has provided executive level leadership, direction and insight to four large consumer finance companies. His vast experience in startups spans three companies where he was President or CEO and also the first employee hired.

During his time as Senior Vice President and Director of Residential Lending at Bank of America in the 1990's, Williams recruited and led a team that improved the bank's national mortgage origination ranking to 5th from 100th in four years. He also created the bank's award-winning low-income housing initiative, "Neighborhood Advantage", and developed credit policy, pricing models, capital markets and portfolio management tools. As CEO of a $4 billion federal savings bank during his tenure with ITT Financial Services, Williams has also managed regulated entities.

While serving as Sr. Vice President of Risk Management at GE Capital, Williams provided leadership, direction and insight necessary to anticipate and monitor the risks associated with an evolving global customer base in a $250 billion portfolio of mortgage assets and insurance products. He also led GECC's prudent growth in mortgage originations, driving annual mortgage production from $5 billion to over $20 billion in just 18 months.

Williams earned an MBA in Finance while attending the University of Southern California on a fellowship. At California Polytechnic University, he graduated cum laude in Finance, Insurance and Real Estate.

http://mortgageresolutionpartners.com/the-team

Q&A: Defending an ‘Extreme’ Idea to Fix Housing
http://blogs.wsj.com/developments/2012/07/19/qa-defending-an-%E2%80%98extreme%E2%80%99-idea-to-fix-housing/

Who better to "take on the financial services industry" than a former BoA and GE Capital executive?

Where do I sign up?

Left Coast2020

(2,397 posts)

10. My thought(in this circumstance) is whatever works for the homeowner.

Reply to Left Coast2020 (Original post)

Sun Jul 22, 2012, 10:21 PM

Jul 2012

If the friggin economy depends (somewhat) on the housing market, then I say, go for it. If the homowner can then afford to make upgrades to the property, then it bodes well for others, and the economy as a whole. More painters, landscapers, remodelers, and other contractors would be getting work and further adding to the economy. More paint being bought, nails, lumber, etc. I truly feel for those people in San Bernadino since I used to go through there many times as a kid--on the way to Lake Arrowhead. Don't like the dirty air in San Berdoo, but do have somewhat of an attachment to that town. Something like this needs to happen so local and county governments can start getting back to some kind of normal status of functioning--as a whole. Not that comfortable with eminient domain, but I will keep options open. I hope San Bernadino can solve this problem quickly.

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