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Seizing 'Underwater' Homes Using The Power of Eminent Domain

Posted by on Jul. 31, 2013 at 1:32 PM
  • 7 Replies


The nationwide housing recovery has not hit the City of El Monte. Some home loan modifications and federal help have scarcely pulled neighborhoods out of financial crisis...with an estimated one thousand homeowners on the brink of foreclosure. And now frustrated city leaders may take an unprecedented step to save homeowners saddled with these underwater mortgages.

The strategy... Seizing those homes using the power of eminent domain. Then city would first condemn home, take it, and then offer to sell it back to the bank for what the city considers "fair market value." The bank's shareholders and investors would essentially absorb any losses. Wall Street groups including a group called SIFMA strongly oppose the tactic and are meeting with city leaders.

But opponents warn eminent domain could do more harm in the end...because banks would become afraid to invest or lend more to these depressed communities.

Critics also say the move is unfair to investors...as many of these loans are bought by 401k and pension plans.

SIFMA released this statement : 

Tim Cameron, Managing Director, Head of SIFMA AMG: 

"We strongly oppose the use of eminent domain to seize mortgage loans, and believe it is a serious mistake to pursue a plan that would harm investors, constrict credit for borrowers and depress housing prices just as the housing recovery is gaining steam. 

"Asset managers have a fiduciary duty to protect their clients, who are the investors—the teachers, firefighters, policemen and other middle-class American savers—who put their money into 401(k)s, pension plans, IRAs and other savings vehicles that invest in mortgage-backed securities. The eminent domain proposal targets MBS and tears mortgage contracts apart, creating a loss for investors and significantly undermining the trust and confidence investors and savers have traditionally had in America's."

San Bernardino County and two of its cities rejected this option to avoid a costly legal battle. The El Monte City Council will vote on whether to employ this strategy tomorrow.   Two dozen other local state governments are also considering it including Seattle, Newark, and North Las Vegas.

 


Thank God......it's Friday!!!

by on Jul. 31, 2013 at 1:32 PM
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Replies (1-7):
survivorinohio
by René on Jul. 31, 2013 at 1:38 PM

I have thought about this as I look at the housing market in my area.  Unless somebody takes a loss nothing will get better.  WHo should take it. I dont know.

The inflation of housing caused by the bubble and subsequent break has hurt everyone to be sure.  I understand what the city in question is doing.  It could be very good for the community but bad for banks and investors.

Friday
by HRH of MJ on Jul. 31, 2013 at 1:48 PM


Quoting survivorinohio:

I have thought about this as I look at the housing market in my area.  Unless somebody takes a loss nothing will get better.  WHo should take it. I dont know.

The inflation of housing caused by the bubble and subsequent break has hurt everyone to be sure.  I understand what the city in question is doing.  It could be very good for the community but bad for banks and investors.

I saw it on the news this morning and thought it was an interesting idea, worth discussing.

I admit I don't know enough about the situation to form an educated opinion but am interested to see what others think.

 


Thank God......it's Friday!!!

romalove
by Roma on Jul. 31, 2013 at 1:54 PM

Interesting.

What happens to the homeowner in this scenario?  Are they on the street?

Banks should be willing to restructure mortgage loans for those on the brink of foreclosure, keeping their investment without governmental intervention.  A homeowner in the house taking care of the property keeps the value of that property as high as possible for the homeowner and the bank as well, should the bank eventually have to take the house back.

survivorinohio
by René on Jul. 31, 2013 at 2:30 PM

From what I see here the homeowners are on the street a long time before anything happens to the property.


Quoting romalove:

Interesting.

What happens to the homeowner in this scenario?  Are they on the street?

Banks should be willing to restructure mortgage loans for those on the brink of foreclosure, keeping their investment without governmental intervention.  A homeowner in the house taking care of the property keeps the value of that property as high as possible for the homeowner and the bank as well, should the bank eventually have to take the house back.


How far you go in life depends on your being: tender with the young, compassionate with the aged, sympathetic with the striving and tolerant of both the weak and strong.  Because someday in life you would have been one or all of these.  GeorgeWashingtonCarver


yourspecialkid
by Platinum Member on Jul. 31, 2013 at 2:36 PM

 Underwater typically means not worth the amount owed on it.  This article says nothing about these homes being in the foreclosure process.

A lot of people, including myself own homes that are underwater and they are current on the mortgage.  A home being underwater doesn't mean it is in danger of foreclosure. 

I think this is an absolute ridiculous notion that will defraud homeowners.  If the city suggested such a thing to me they could talk to my lawyer.

 

yourspecialkid
by Platinum Member on Jul. 31, 2013 at 2:41 PM

 

Quoting romalove:

Interesting.

What happens to the homeowner in this scenario?  Are they on the street?

Banks should be willing to restructure mortgage loans for those on the brink of foreclosure, keeping their investment without governmental intervention.  A homeowner in the house taking care of the property keeps the value of that property as high as possible for the homeowner and the bank as well, should the bank eventually have to take the house back.

 I think it is crazy that more restructuring hasn't happened.  This would have been really helpful to military families.  They are defaulting at a 50% higher rate than conventionals.  They are moving because they have too.  I know a lot that have lost a home after a change of station..they couldn't sell/rent for anough and can't afford to pay for 2 homes.

Friday
by HRH of MJ on Jul. 31, 2013 at 5:04 PM


Quoting yourspecialkid:

 Underwater typically means not worth the amount owed on it.  This article says nothing about these homes being in the foreclosure process.

A lot of people, including myself own homes that are underwater and they are current on the mortgage.  A home being underwater doesn't mean it is in danger of foreclosure. 

I think this is an absolute ridiculous notion that will defraud homeowners.  If the city suggested such a thing to me they could talk to my lawyer.

 

The story I saw on the news this morning said they were 'on the brink' of forclosure.

The rep from the city, made it sound like it would help the homeowners keep their homes but IDK if that's the case.

 


Thank God......it's Friday!!!

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