A California-based mortgage services firm has a novel concept to curb the amount of underwater home loans. The idea is to use the power of eminent domain, whereby local governments would "condemn" the underwater mortgages and drive a refinance.
Is it safe to use eminent domain?
Among the powers of the federal, state and local governments in the U.S., and certainly one of the single most controversial, is the power of "eminent domain." Eminent domain is the right of a government to seize land from its owner for the "public good," as not doing so would be considered detrimental to public welfare. Home or land owners whose property is thus seized must be compensated for the loss of their property.
Eminent domain seizures are usually for things like highway extensions and so forth. For instance, according to NJ.com, the city of Hoboken recently used eminent domain to appropriate a 1-acre parcel of land from a landowner for use as a park, offering the owner $2.3 million regardless of the land being valued at $10 million. It is highly controversial, as many civil libertarians consider it among the worst abuses of government power.
Try it like this
A property is known as "condemned" when eminent domain is used, but Mortgage Resolution Partners, a California-based real estate business, wants to condemn the loans associated with the property. This is the idea MRP has brought up, according to Reuters.
According to Zillow, about 31.4 percent of the houses in the country are underwater, and CoreLogic estimates that number to be at 22 percent. No matter how you look at it, there are a lot of people who owe more cash on their home than it is worth. MRP thinks that private investors should put cash in to pay off the loan for homeowners and then have the properties seized at fair industry price paid to the bank. That would be lower than the purchase price. MRP's job would be to sell the loans to new investors which would lower the mortgage borrower's payment.
Since investors would fund the entire action, no taxpayer cash would be spent; all any governments in California would be doing is turn in the paperwork for eminent domain actions.
Still not in place
Even though the bill has been well-received in some areas, it has already been turned down by the Hesperia city council, according to the Hesperia Star. This is despite the belief that 50 percent of homeowners in the city have underwater mortgages. Since California has been hurt a lot by the decreased home values, many people in California are really looking forward to the plan. MRP has talked to a ton of local governments about it already. Remember, it is just a proposal at this time.
Homeowners are at higher risk for foreclosure when they owe more than a house is worth in a loan, which is called negative equity. The same Zillow survey from before found that 90 percent of underwater homeowners are current on their payments as of right now, which shows many people are paying the payments diligently anyway, according to CNN.
Is it safe to use eminent domain?
Among the powers of the federal, state and local governments in the U.S., and certainly one of the single most controversial, is the power of "eminent domain." Eminent domain is the right of a government to seize land from its owner for the "public good," as not doing so would be considered detrimental to public welfare. Home or land owners whose property is thus seized must be compensated for the loss of their property.
Eminent domain seizures are usually for things like highway extensions and so forth. For instance, according to NJ.com, the city of Hoboken recently used eminent domain to appropriate a 1-acre parcel of land from a landowner for use as a park, offering the owner $2.3 million regardless of the land being valued at $10 million. It is highly controversial, as many civil libertarians consider it among the worst abuses of government power.
Try it like this
A property is known as "condemned" when eminent domain is used, but Mortgage Resolution Partners, a California-based real estate business, wants to condemn the loans associated with the property. This is the idea MRP has brought up, according to Reuters.
According to Zillow, about 31.4 percent of the houses in the country are underwater, and CoreLogic estimates that number to be at 22 percent. No matter how you look at it, there are a lot of people who owe more cash on their home than it is worth. MRP thinks that private investors should put cash in to pay off the loan for homeowners and then have the properties seized at fair industry price paid to the bank. That would be lower than the purchase price. MRP's job would be to sell the loans to new investors which would lower the mortgage borrower's payment.
Since investors would fund the entire action, no taxpayer cash would be spent; all any governments in California would be doing is turn in the paperwork for eminent domain actions.
Still not in place
Even though the bill has been well-received in some areas, it has already been turned down by the Hesperia city council, according to the Hesperia Star. This is despite the belief that 50 percent of homeowners in the city have underwater mortgages. Since California has been hurt a lot by the decreased home values, many people in California are really looking forward to the plan. MRP has talked to a ton of local governments about it already. Remember, it is just a proposal at this time.
Homeowners are at higher risk for foreclosure when they owe more than a house is worth in a loan, which is called negative equity. The same Zillow survey from before found that 90 percent of underwater homeowners are current on their payments as of right now, which shows many people are paying the payments diligently anyway, according to CNN.
No comments:
Post a Comment