Damn! USSA is even closer than I though...

[CosmicCowboy]

Fucking unbelievable. The homeowner buys a house for $500,000 and agrees to pay the entity that loaned him the $500,000 to buy the house X amount of money a month for Y amount of years. The real estate market goes to shit and his $500,000 house is now worth $350,000, but his note is exactly the same as it always was...X amount a month. Now the homeowner decides that it's not in his best interest to keep paying on the $500,000 loan. He calls the county and the county SEIZES THE MORTGAGE from the borrower and then restructures the loan to the same homeowner for $350,000 the gives it back to the original lender giving the lender a $150,000 haircut...and this only applies to PRIVATE lenders...Fannie and Freddy loans get a pass


http://www.latimes.com/business/la-fi-homes-seize-20120706,0,7268655.story

San Bernardino County weighs eminent domain to fight foreclosures

The county, along with Ontario and Fontana, wants to use eminent domain to seize underwater mortgages from investors and restructure them to help borrowers keep the homes.

By Alejandro Lazo, Los Angeles Times
July 6, 2012, 5:00 a.m.
A plan by San Bernardino County to seize mortgages and restructure them for underwater homeowners using eminent domain is perhaps the most aggressive example of how local governments are seeking new ways to combat foreclosure.

The cities of Ontario and Fontana are partnering with the county to create a Homeownership Protection Program that would use private funds to acquire underwater mortgages from investors. The county and the two cities have created a joint authority to explore and possibly enact the plan, and the first public meeting of that authority will be held next week.

David Wert, a spokesman for the county, said the program is worth exploring because it could offer a solution to one of the region's most entrenched problems: the vast number of loans that are stuck underwater, with more money owed than the property is worth. If the program were to go countywide, it could benefit 20,000 to 30,000 homeowners, he said.

"The only thing we are doing at this point is conducting a conversation," Wert said. "But the reason the county is interested in talking about this is because this is a proposal that could — if everything checks out — address the problem on a fairly large scale."

Although still in its initial stages, the aggressive proposal has attracted controversy. A number of banking, financial and business groups oppose it, contending that seizing mortgages would raise constitutional issues and could increase lending costs in those cities.

The California Mortgage Bankers Assn., the American Bankers Assn. and the American Securitziation Forum, along with several other financial groups, sent a letter of opposition to the county and the two cities.

"We believe that the contemplated use of eminent domain raises very serious legal and constitutional issues," the letter read. "It would also be immensely destructive to U.S. mortgage markets by undermining the sanctity of the contractual relationship between a borrower and creditor, and similarly undermining existing securitization transactions."

Dustin Hobbs, a spokesman for the California Mortgage Bankers Assn., said the program also could hurt the local housing market.

"It could be devastating," Hobbs said. "If investors are unsure as to the disposition of mortgages in San Bernardino County and in Fontana and Ontario, it could really curtail lending in the area, and if not curtail, certainly increase costs for new loans."

San Bernardino County's plan is the latest of several measures by local governments to fight foreclosures and the problems often associated with resulting neglect: crime and blight.

Chicago passed an ordinance last year that requires banks and other financial institutions to maintain vacant properties that have been foreclosed upon.

Oakland has instituted a blight program that would require banks to register, inspect and maintain homes that are in foreclosure. Cleveland has been using a land bank program to tear down foreclosed homes.

Legal experts said the San Bernardino County proposal was one of the first initiatives to try to strike at the problem before a home is in the foreclosure process.

At this point in the planning, only homeowners who are current on their mortgage payments would be allowed to participate in the program, which would target mortgages that have been securitized and sold to private investors. That would exclude loans owned or backed by mortgage titans Fannie Mae and Freddie Mac. The acquired loans would be restructured, lowering the amount owed, with the intent of helping the owner keep the home.

The plan was first proposed to the county by a San Francisco firm named Mortgage Resolution Partners. The firm has employed investment banks Evercore Partners and Westwood Capital to raise money for the initiative from private investors.

Kurt Eggert, a professor of law at Chapman University, said a sticking point could be whether the investors are able to make a profit on the transactions. He said he liked that the plan, unlike efforts elsewhere, was an attempt to get ahead of the problem.

"The alternatives too often are just cities cleaning up afterward, and getting stuck with the mess, and getting stuck with the foreclosures and the abandoned buildings," he said. "It is good to see cities trying to do something proactive."

Cornell Law Professor Robert C. Hockett advised Mortgage Resolution Partners on the design of the proposal. The initiative should pass muster in courts because they have had a long tradition of upholding cities' eminent domain powers as long as the valuation methods used to acquire properties are sound, Hockett said.

It particularly makes sense to use eminent domain to seize underwater mortgages that have been securitized, he said, because often those mortgages can't be sold at market value for legal reasons. Often, those loans must be sold at face value — a higher price — because of the contracts governing them, he said.

"The fact they can't be marketed is the reason we are using eminent domain," Hockett said. "This is actually a pro-market solution."

[email protected]

[boutons_deux]

fuck the non-bank, private, unregulated lenders who overwhelmingly fueled the sub-prime bubble.

[CosmicCowboy]

Fuck you commies.

[Sportcamper]

Uhhm Mr. Cowboy Sir…This plan was presented by John McCain during the Republican debates….

http://t2.gstatic.com/images?q=tbn:ANd9GcQEwA_ZymGk7ev9AVbiXowYm-4yCTTXAX-7ybZMrGfqXVP16E7aozbRkvWV

[CosmicCowboy]

fuck the non-bank, private, unregulated lenders who overwhelmingly fueled the sub-prime bubble.

That's a fucking lie. Fannie and Freddie were right the with their heads in the trough.

[Sportcamper]

Also I am pretty sure that you can almost buy the whole town of San Burdu for ½ a million…:lol

[boutons_deux]

F&F did play catch up, but private lenders, Countrywide, etc, etc were WAY OUT FRONT in the lending, and then selling the toxic shit to F&F

[Sportcamper]

Obama on mortgage bail out...(Looking for a MCCain link)

http://www.youtube.com/watch?v=qcDgtlbnIaI

[CosmicCowboy]

There is no fucking way this is constitutional under the takings clause.

[mavs>spurs]

government seizure of private property. nice.

[CosmicCowboy]

government seizure of private property. nice.

What is even scarier are the ones in here that agree with it.

[boutons_deux]

government seizes property by the Ms in foreclosures in support of lenders.

[CosmicCowboy]

government seizes property by the Ms in foreclosures in support of lenders.

:lmao

God damn you are one fucked up whacko.

[MannyIsGod]

Nothing fucked up about not wanting to bow down to the banks.

[CosmicCowboy]

Wait till they start whining when the evil bankers won't fund mortgages in counties that steal from them.

[MannyIsGod]

Yeah - let me know when that happens. Empty threats are empty.

[MannyIsGod]

If the financial crisis taught me anything, its that mortgage lenders really do analyze risk before giving out those loans. They're probably all running scared to get out of the market as we type.

[FuzzyLumpkins]

:lol

Of course CC is concerned about the bank. Where were the commie calls when the government intervened to give them all that capital so they could remain solvent?

When government helps business consortiums that is cool. When they help a consumer it's communism.

Got it.

[CosmicCowboy]

The evil bankers didn't make those people go out and find a house they wanted to buy at a price they agreed to pay. The people then asked those evil bankers to loan them the money to buy the house and agreed to pay X amount of money for Y years in exchange for the loan. They were happy to pay X amount of money a month three years ago and can still afford to pay X amount of money every month now. It's not like the evil bankers tried to raise their monthly payment. They just decided they made a bad investment and want their government to steal from the evil bankers to make their investment better.

[CosmicCowboy]

:lol

Of course CC is concerned about the bank. Where were the commie calls when the government intervened to give them all that capital so they could remain solvent?

When government helps business consortiums that is cool. When they help a consumer it's communism.

Got it.

They also paid the loans back. Bad analogy.

[mavs>spurs]

yeah i'm against the banks privately funding terrorist groups and globalist organizations, but to get all pissy about them loaning money to you on terms that YOU agree to is crazy talk. some of you guys really are liberty hating psychopaths, this forum is a scary representation of what america on a larger scale has become.

[MannyIsGod]

The evil bankers didn't make those people go out and find a house they wanted to buy at a price they agreed to pay. The people then asked those evil bankers to loan them the money to buy the house and agreed to pay X amount of money for Y years in exchange for the loan. They were happy to pay X amount of money a month three years ago and can still afford to pay X amount of money every month now. It's not like the evil bankers tried to raise their monthly payment. They just decided they made a bad investment and want their government to steal from the evil bankers to make their investment better.

The evil bankers have certainly made many fraudulent mistakes that have been documented. Not sure who you're going to fool acting as though they're being fleeced while remaining innocent but you're more than welcome to try.

[CosmicCowboy]

If the financial crisis taught me anything, its that mortgage lenders really do analyze risk before giving out those loans. They're probably all running scared to get out of the market as we type.

I have just gone through a refi on my house and it was excruciating. The underwriter at Fannie even refused the appraisal on my house and cut it by $35,000 even though we had good comps and my property had very valuable additions (well, barn, riding arena, etc.) that the comps didn't.

[MannyIsGod]

Good to see the locked the barn long after the horse left.

[FuzzyLumpkins]

They also paid the loans back. Bad analogy.

:lol

Some did. Most didn't. Last I checked it was still $120b in the hole with guys like JP Morgan still owing billions.

http://www.forbes.com/sites/halahtouryalai/2012/04/25/dont-be-fooled-theres-no-profit-in-bank-bailouts-tarp-watchdog/


For one thing, there are plenty of folks in Washington included the President and Treasury Department who say the bailouts have actually resulted in a profit for the government. Sounds too good to be true doesn’t it? Romero says that’s because it is. “It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion (including $14 billion written off or otherwise lost),” the report notes.

That particular report goes on to talk about how they have made billions in profit in their own right. Also note that this is Forbes; we wouldn't want you going red scare on the media outlet as well.

Banks sure deserve our support. Your confirmation bias is disturbing.

[mavs>spurs]

the government wouldnt need to step in and save people and there would have never been any bubble to begin with if people could just stop being retarded for 10 seconds and think for themselves. you're not buying a house as a fucking investment to make money retards, you're buying a home to live in. therefore you should never pay more than the houses intrinsic value, or what it is worth to you. if you love the house so much that it was worth 500,000 to buy it, then it shouldn't matter what anyone else thinks it's worth and you're unaffected by any depreciation in value because you enjoy the home. you had to have it and were willing to pay 500,000 to buy it. if people wouldn't buy houses at prices beyond what the property is worth to them, then there wouldn't be any housing bubbles. stop thinking that the price is going to stick there long enough for you to live in it for a few years then turn around and make a profit. houses aren't investment opportunities unless you're a professional and really know what the fuck you're doing.

[CosmicCowboy]

The evil bankers have certainly made many fraudulent mistakes that have been documented. Not sure who you're going to fool acting as though they're being fleeced while remaining innocent but you're more than welcome to try.

WTF? Manny, I never thought I would see you agreeing with outright theft.

What if I had borrowed money from an evil banker last year and invested in GM stock before it took a shit. Damn, I made a bad investment. My stocks worth half what I paid for it. Is it fair to tell the banker...hey, I made a shitty investment that is now worth half what I paid for it so that what I am going to pay you...half of what I borrowed.

[MannyIsGod]

Its not even close to outright theft. Its protection of the community because of a situation that the banks created initially. They're already taking a loss here, and foreclosure benefits no one.

[CosmicCowboy]

:lol

Some did. Most didn't. Last I checked it was still $120b in the hole with guys like JP Morgan still owing billions.

http://www.forbes.com/sites/halahtouryalai/2012/04/25/dont-be-fooled-theres-no-profit-in-bank-bailouts-tarp-watchdog/



That particular report goes on to talk about how they have made billions in profit in their own right. Also note that this is Forbes; we wouldn't want you going red scare on the media outlet as well.

Banks sure deserve our support. Your confirmation bias is disturbing.

A contract is a contract. The government has no right to interfere in a private contract just because the homeowner made a bad investment.

[boutons_deux]

They also paid the loans back. Bad analogy.

big banks, yes, so they could escape restrictions on salaries.

no so with non-big banks

Small Banks Struggling Under TARP Rules

There's a significant amount of money that's outstanding, I mean, if we look at how much AIG owes and GM and Ally Financial, which used to be GMAC, as well as there are 434 banks and credit unions still in TARP.

Romero says about $118 billion is still on TARP's balance sheet. The Treasury Department says those numbers are outdated, and it's only about $100 billion. Tim Massad, assistant secretary for financial stability, says about $15 billion is owed by banks.

A lot of them are smaller banks. And those banks, you know, do have a harder time repaying. That's because they don't have the same access to the capital markets and many of them also have had problems with their real estate investments.

http://www.npr.org/2012/04/25/151386999/small-banks-struggling-under-tarp-rules

[CosmicCowboy]

Its not even close to outright theft. Its protection of the community because of a situation that the banks created initially. They're already taking a loss here, and foreclosure benefits no one.

Wow.

The banks created it...:rolleyes

They went out there and MADE those poor people buy those houses.

And they can still afford to pay for them, they just don't want them anymore because they aren't the good investment they thought it was when they bought it.

[MannyIsGod]

A contract is a contract. The government has no right to interfere in a private contract just because the homeowner made a bad investment.

You're simplifying it to something its not. Its more than that. Foreclosure has detrimental affects to the entire community and the government absolutely has a responsibility to step in and mitigate those effects when they've reached a level that they currently are.

[MannyIsGod]

Wow.

The banks created it...:rolleyes

They went out there and MADE those poor people buy those houses.

And they can still afford to pay for them, they just don't want them anymore because they aren't the good investment they thought it was when they bought it.

The banks were partners in the loans. They didn't care about the risk because they were getting paid up front. The people made bad decisions but so did the bank. The difference? The banks new what they were doing on a systematic level.

Are you going to deny this? Cause if so we can just stop talking about it then. I'm tired of the same tired debate.

[CosmicCowboy]

You're simplifying it to something its not. Its more than that. Foreclosure has detrimental affects to the entire community and the government absolutely has a responsibility to step in and mitigate those effects when they've reached a level that they currently are.

Fine. Then let the government figure out how to make those poor pitiful homeowners whole again instead of stealing from the lenders.

[mavs>spurs]

the banks do a lot of crooked things but government seizure of private property is so fundamentally wrong and a slippery slope that i don't even want to go near. some of you people are really really far gone tbh what's wrong with some of you that you can't understand the principle of the matter? it's all about the principle.

[MannyIsGod]

Fine. Then let the government figure out how to make those poor pitiful homeowners whole again instead of stealing from the lenders.

Its not stealing. They're doing what they can to prevent foreclosure. Look, if you want to disagree with the idea of using eminent domain in this manner then go right ahead but really you can spare me the hyperbole because thats not what it is at all. The government isn't keeping the property.

[CosmicCowboy]

The banks were partners in the loans. They didn't care about the risk because they were getting paid up front. The people made bad decisions but so did the bank. The difference? The banks new what they were doing on a systematic level.

Are you going to deny this? Cause if so we can just stop talking about it then. I'm tired of the same tired debate.

You are so oversimplifying it. The banks that originated the loans don't own the loans anymore. Bond funds, pension funds, etc. own the loans. You aren't punishing evil bankers, you are punishing ordinary investors who made seemingly safe investments and are stealing their savings.

Remember...they aren't helping the homeowners because they can't afford to make the payments they agreed to make...They are helping them because they didn't make the profit on the investment they thought they would.

[FuzzyLumpkins]

Fine. Then let the government figure out how to make those poor pitiful homeowners whole again instead of stealing from the lenders.

:cry

Poor lenders.

[MannyIsGod]

:lol You think this about saving a profit for people in danger of forclosure?

lmao

[mavs>spurs]

Its not stealing. They're doing what they can to prevent foreclosure. Look, if you want to disagree with the idea of using eminent domain in this manner then go right ahead but really you can spare me the hyperbole because thats not what it is at all. The government isn't keeping the property.

the government essentially seized 150,000 from the creditor and gave it back to the debtor. they didn't seize the actual property, they seized part of the loan amount.

[MannyIsGod]

LOL profits.


The county, along with Ontario and Fontana, wants to use eminent domain to seize underwater mortgages from investors and restructure them to help borrowers keep the homes.

Its about avoiding foreclosure. Its not theft. Its not about making a profit for homeowners. Seriously, give me a break.

[MannyIsGod]

the government essentially seized 150,000 from the creditor and gave it back to the debtor. they didn't seize the actual property, they seized part of the loan amount.

The creditor never had that money and given the recent history of foreclosures to even TRY to say they did is laughable.

[FuzzyLumpkins]

A contract is a contract. The government has no right to interfere in a private contract just because the homeowner made a bad investment.

Umm yeah they do. They write the contract laws in the first place. Being able to lend cash is very clearly not a right but a privilege.

And they didn't pay it back. You going to acknowledge that?

[CosmicCowboy]

Stealing from these investors savings and pensions to subsidize deadbeat homeowners is so fundamentally and morally wrong I can't believe you can't see that.

[MannyIsGod]

You may want to read how it works and then explain to me how the investor getting the valuation of the loan is theft.

[CosmicCowboy]

:lol You think this about saving a profit for people in danger of forclosure?

lmao

Manny, read the article. This isn't for helping people who are in danger of foreclosure. To qualify for the program you have to be current on your loan...so by definition they aren't in danger of foreclosure. These are the deadbeats that can afford to make the payments but are walking away from their bad investments.

[mavs>spurs]

The creditor never had that money and given the recent history of foreclosures to even TRY to say they did is laughable.

we operate under a fractional banking system, as does the rest of the world. loaning money that they don't actually have all of at any given point in time is how the monetary system works. you don't like it? well then we have to change it.

the banks aren't doing anything that isn't designed by the government. the problem with giving those mortgages a haircut is that they have already been repackaged and sold to investors who like CC said, invested in them and have their savings and retirement there. it's wrong.

[FuzzyLumpkins]

Stealing from these investors savings and pensions to subsidize deadbeat homeowners is so fundamentally and morally wrong I can't believe you can't see that.

Nope he isn't going to acknowledge it.

It's interesting that he doesn't rail about the $100b that they owe (re:steal) us. Let's not help the consumer but let's just give the lenders an even bigger windfall.

[MannyIsGod]

If this is theft then every eminent domain usage in the past is theft.

[Wild Cobra]

CC...

Are you really trying to reason with libtards?

[MannyIsGod]

Manny, read the article. This isn't for helping people who are in danger of foreclosure. To qualify for the program you have to be current on your loan...so by definition they aren't in danger of foreclosure. These are the deadbeats that can afford to make the payments but are walking away from their bad investments.

Um, yes it is? Being current on your loan does not mean you're not in foreclosure danger.

[FuzzyLumpkins]

Manny, read the article. This isn't for helping people who are in danger of foreclosure. To qualify for the program you have to be current on your loan...so by definition they aren't in danger of foreclosure. These are the deadbeats that can afford to make the payments but are walking away from their bad investments.

So you are saying they should refuse to pay their bills and get foreclosed on first?

This argument is so fucking 6 months ago too.

[MannyIsGod]

we operate under a fractional banking system, as does the rest of the world. loaning money that they don't actually have all of at any given point in time is how the monetary system works. you don't like it? well then we have to change it.

the banks aren't doing anything that isn't designed by the government. the problem with giving those mortgages a haircut is that they have already been repackaged and sold to investors who like CC said, invested in them and have their savings and retirement there. it's wrong.

Do I really need to explain to someone about to graduate with a degree in finance that mortgages in severe danger of foreclosure are not going to pay out the face value of the loan?

[Th'Pusher]

You are so oversimplifying it. The banks that originated the loans don't own the loans anymore. Bond funds, pension funds, etc. own the loans. You aren't punishing evil bankers, you are punishing ordinary investors who made seemingly safe investments and are stealing their savings.

Remember...they aren't helping the homeowners because they can't afford to make the payments they agreed to make...They are helping them because they didn't make the profit on the investment they thought they would.

These were sold as seeming safe investments (i.e. AAA rated MBS), but the 'evil bankers' knew they were toxic assets and sold them anyway. Why are they free of any culpability?

[MannyIsGod]

Do you guys realize how eminent domain works? The valuation of a loan is not the face value because if it was then this wouldn't work. The city has to make a valid case that the loan is only worth what they are going to pay for it.

[CosmicCowboy]

So you are saying they should refuse to pay their bills and get foreclosed on first?

This argument is so fucking 6 months ago too.

No, I'm saying they should live in their houses and keep making the payments.

So lets say they do give the investors a haircut now since the house is worth less than they paid for it.

When they sell the house in ten years for $200,000 more than they paid for it should the investor that got shafted now get the profit then?

[MannyIsGod]

The more I read about this idea the more I think its actually really brilliant.

[CosmicCowboy]

Manny, it's no surprise that Fuzzybrain and Boushit are agreeing with this but you disappoint me.

[mavs>spurs]

Do I really need to explain to someone about to graduate with a degree in finance that mortgages in severe danger of foreclosure are not going to pay out the face value of the loan?

i see what you're saying, but it's the principle that i disagree with. i am against too much government authority and them having the ability to just seize assets. this whole mess should have never been allowed to happen in the first place, and now guess who gets to pay for it? the average citizen who's savings are getting looted.

you can't say that these are loans in which the face value would have never been recovered anyway, because didn't the article say that this only applied to people who were currently up to date on their mortgages? what makes you think they wouldn't keep paying if they've come this far?

[MannyIsGod]

Manny, it's no surprise that Fuzzybrain and Boushit are agreeing with this but you disappoint me.

I'm sorry?

It makes clear logical sense to me because of the way eminent domain works and because of the destructive nature foreclosures have.

[MannyIsGod]

i see what you're saying, but it's the principle that i disagree with. i am against too much government authority and them having the ability to just seize assets. this whole mess should have never been allowed to happen in the first place, and now guess who gets to pay for it? the average citizen who's savings are getting looted.

This isn't really an expansion of authority. Eminent domain has been a long running government power and I even have less of a problem with it here since its not seizing actual property but loans.

[mavs>spurs]

if this were for people who were currently behind on payments, i could understand revaluing the loans. in that case one could argue that nothing is really being taken, because the mortgage holder would have never recovered it all anyway once the person defaulted. but the article specifically stated that these were people who were up to date on their mortgages, did it not?

[MannyIsGod]

Some good info here.

Regarding scaring off the banks:



A letter sent last week to city leaders from 18 trade associations, led by the Securities Industry and Financial Markets Association, warned that such a move "could actually serve to further depress housing values" by making banks less willing to lend. The plan's backers are unfazed. "The exact opposite is true. There's no private market right now," said Mr. Gluckstern of Mortgage Resolution Partners. "Until you clear out this problem [of underwater loans], private lending will not come back."

On first glance I believe that. No one is buying those loans right now. The people stuck with them are the ones screwed by buying the MBS in the first place.

Some of the legalities around eminent domain:


Several states have authorized the taking of other intangible property, such as insurance policies, shares of stock or rights of way, according to Robert Hockett, a Cornell University professor of law and adviser to Mortgage Resolution Partners.

In 1984, the U.S. Supreme Court upheld the state of Hawaii's use of eminent domain to transfer residential tracts of land to renters to break up a landownership oligopoly and stabilize home prices. In 2005, the court affirmed the right of a Connecticut town to use eminent domain to transfer non-blighted homes to a private developer to spur redevelopment. That spurred several states to pass laws restricting such powers.

http://online.wsj.com/article/SB10001424052702303933404577505013392791018.html

[MannyIsGod]

if this were for people who were currently behind on payments, i could understand revaluing the loans. in that case one could argue that nothing is really being taken, because the mortgage holder would have never recovered it all anyway once the person defaulted. but the article specifically stated that these were people who were up to date on their mortgages, did it not?

Yes. But in danger of foreclosure none the less. You can make the same argument here. In fact YOU HAVE TO. If it is argued that the lender can expect to see the full value of the loan then that is what the city would have to pay in order to seize the loan with eminent domain powers. That's a huge factor here, IMO.

It would be interesting to see if the cities gave the initial investors an option to match the loan being given by the new group of investors. That would obviously give them more money but then they would also carry forth the risk. I like that idea, however.

[TeyshaBlue]

This feels like the ends defining the means to me. No bueno.

[CosmicCowboy]

Yes. But in danger of foreclosure none the less. You can make the same argument here. In fact YOU HAVE TO. If it is argued that the lender can expect to see the full value of the loan then that is what the city would have to pay in order to seize the loan with eminent domain powers. That's a huge factor here, IMO.

It would be interesting to see if the cities gave the initial investors an option to match the loan being given by the new group of investors. That would obviously give them more money but then they would also carry forth the risk. I like that idea, however.

Manny, these people aren't in danger of not being ABLE to make the mortgage payments they AGREED to make. Let them make their house payments and stay in the houses. It's like the stock market. Just because a stock is down today you don't have to sell it... if you buy and hold the odds are the price will eventually come back up and you will make money. If they stay in the houses the price will eventually come back.

[FuzzyLumpkins]

Manny, it's no surprise that Fuzzybrain and Boushit are agreeing with this but you disappoint me.

You still think they paid back TARP?

[FuzzyLumpkins]

This feels like the ends defining the means to me. No bueno.

Now this is actually an interesting point. I agree --for the most part-- that utilitarian ethics from the individual are bad. It's an excuse for hedonism quite frankly.

OTOH, I am not quite so certain that is the case when you are talking about making decisions about the collective or collective decision making. Or at the very least that it is not absolute. Ignoring future outcomes and only considering the present is no bueno as well.

[FuzzyLumpkins]

if this were for people who were currently behind on payments, i could understand revaluing the loans. in that case one could argue that nothing is really being taken, because the mortgage holder would have never recovered it all anyway once the person defaulted. but the article specifically stated that these were people who were up to date on their mortgages, did it not?

So then they should not make payments for 6 months and then get the benefit. Makes sense to me..... :rolleyes

They passed a federal homeowners relief bill a few months ago. This was hashed out then.

[MannyIsGod]

Manny, these people aren't in danger of not being ABLE to make the mortgage payments they AGREED to make.

Not sure why you keep making this argument. Being current does not mean you're not in danger of foreclosure by any stretch of the imagination.

[Th'Pusher]

The reality is that if someone is that far underwater on their mortgage, they'll just walk away from it which is to the detriment of all. If they're willing to accept the legal consequences of walking away, I consider that a smart way to minimize loss. They do it in commercial real estate all the time and quite frankly I don't see much difference in that and CC's take on Romney's alleged tax avoidance - "If he [Romney] is legally minimizing his taxes I consider that to be smart, not suspicious."

[boutons_deux]

"they'll just walk away from it which is to the detriment of all. If they're willing to accept the legal consequences of walking away, I consider that a smart way to minimize loss"

EXACTLY the calculation the fucking MORTGAGE BANKERS ASSOCIATION made when they walked away from their underwater mortgage. Nobody said THAT was immoral or bad for society, etc, etc, nor did MBA get hounded by collection agency gestapo for years nor have their credit destroyed. It was just a Corporate-American doing business.

[angrydude]

screw the banks but I think this should be voluntary by the mortgage holder.

[boutons_deux]

From an Unlikely Source, a Serious Challenge to Wall Street

Something very interesting is happening.

There’s been so much corruption on Wall Street in recent years, and the federal government has appeared to be so deeply complicit in many of the problems, that many people have experienced something very like despair over the question of what to do about it all.

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."

Here’s how the New York Times described it in an article from earlier this week entitled, "California County Weighs Drastic Plan to Aid Homeowners":

Desperate for a way out of a housing collapse that has crippled the region, officials in San Bernardino County … are exploring a drastic option — using eminent domain to buy up mortgages for homes that are underwater.

Then, the idea goes, the county could cut the mortgages to the current value of the homes and resell the mortgages to a private investment firm, which would allow homeowners to lower their monthly payments and hang onto their property.

I’ve been following this story for months now – I was tipped off that this was coming earlier this past spring – and in the time since I’ve become more convinced the idea might actually work, thanks mainly to the extremely lucky accident that the plan doesn’t require the permission of anyone up in the political Olympus.

Cities and towns won’t need to ask for an act of a bank-subsidized congress to do this, and they won’t need a federal judge to sign off on any settlement. They can just do it. In the Death Star of America’s financial oligarchy, the ability of local governments to use eminent domain to seize toxic debt might be the one structural flaw big enough for the rebel alliance to exploit.

The plan only makes sense in the context of America’s overall economic paralysis. Right now the economy is stuck in a standstill, largely because of the housing bubble. Five or six or ten years ago, when Wall Street was cranking out trillions of dollars of cheap home loans so that they could later be chopped up, pooled, and sold to unsuspecting investors in the form of high-grade securitized bonds, millions of ordinary people jumped on the housing comet, buying big houses for big money.

The problem is, if you bought a house for $300,000 then, it might be worth $200,000 now. When you’re $100,000 in debt, you’re not rushing out to buy washing machines, new cars, new DVD players. As Paul Krugman put it in his column today:

There’s no mystery about the reasons the economic recovery has been so weak. Housing is still depressed in the aftermath of a huge bubble, and consumer demand is being held back by the high levels of household debt that are the legacy of that bubble.

Then there’s the other problem. Even if you manage to keep making your payments on your house, your neighbor might not. Whoever used to live next door has left after a foreclosure: there are squatters building a meth lab in the basement now. Two more houses are being boarded up down the street. So now the value of your house is getting lower and lower every day. No matter how fast you make your payments, your debt situation is still going to be moving in the wrong direction.

Instead of letting everyone be slowly ground into dust under the weight of all of that debt, the idea behind the use of eminent domain is to pull the Band-Aid off all at once.

The plan is being put forward by a company called Mortgage Resolution Partners, run by a venture capitalist named Steven Gluckstern. MRP absolutely has a profit motive in the plan, and much is likely to be made of that in the press as this story develops. But I doubt this ends up being entirely about money.

“What happened is, a bunch of us got together and asked ourselves what a fix of the housing/foreclosure problem would look like,” Gluckstern. “Then we asked, is there a way to fix it and make money, too. I mean, we're businessmen. Obviously, if there wasn’t a financial motive for anybody, it wouldn’t happen.”

Here’s how it works: MRP helps raise the capital a town or a county would need to essentially “buy” seized home loans from the banks and the bondholders (remember, to use eminent domain to seize property, governments must give the owners “reasonable compensation,” often interpreted as fair current market value).

Once the town or county seizes the loan, it would then be owned by a legal entity set up by the local government – San Bernardino, for instance, has set up a JPA, or Joint Powers Authority, to manage the loans.

At that point, the JPA is simply the new owner of the loan. It would then approach the homeowner with a choice. If, for some crazy reason, the homeowner likes the current situation, he can simply keep making his same inflated payments to the JPA. Not that this is likely, but the idea here is that nobody would force homeowners to do anything.

On the other hand, the town can also offer to help the homeowner find new financing. In conjunction with companies like MRP (and the copycat firms like it that would inevitably spring up), the counties and towns would arrange for private lenders to enter the picture, and help homeowners essentially buy back his own house, only at a current market price. Just like that, the homeowner is no longer underwater and threatened with foreclosure.

In order to make MRP work, Gluckstern and his partners needed to find local officials with enough stones to try the audacious plan. With so many regions in such desperate straits thanks to the housing mess, that turned out to be not as hard as perhaps might have been expected.

First in line was San Bernardino County in California, not coincidentally located at ground zero of a subprime bubble blown to gigantic proportions by Southern Californian mortgage giants like Countrywide and Long Beach. San Bernardino is more or less a poster child for the mortgage crisis; more than half of its homeowners are underwater on their homes, unemployment is past 12%, and the city of San Bernardino recently had to file for bankruptcy.

It’s not surprising, then, that local officials like Acquanetta Warren, mayor of the city of Fontana, were receptive to the eminent-domain plan.

“Sooner or later,” Warren told the New York Times, “all these people who are upside down on their homes are just going to leave the keys out on the door and say forget it. This was supposed to be the promised land, and now we have people waiting in some kind of hellish purgatory.”

http://www.rollingstone.com/politics/blogs/taibblog/from-an-unlikely-source-a-serious-challenge-to-wall-street-20120720?print=true

[mercos]

Seems like a pretty sound strategy. Kelo v. City of New London established that cities can use eminent domain to obtain properties and sell it to private developers to increase municipal revenues. Its not really a stretch to do the same thing in order to help housing market in a municipality. The circumstances around this situation must also be taken into account. The housing mess is the banks fault. They caused it by lowering lending standards in order to fuel the mortgage backed securities market. If they have to take a hit in order to correct the market, so be it.

[boutons_deux]

"Kelo v. City of New London"

yep, and the right wing SCOTUS JINOs ruled that one in favor of property developers.

Now that Kelo might be used against the SCOTUS' own 1% banksters? :lol

[mercos]

Turnabout is fair play.

[Th'Pusher]

http://www.rollingstone.com/politics/blogs/taibblog/from-an-unlikely-source-a-serious-challenge-to-wall-street-20120720

[Borat Sagyidev]

Fantastic plan.

Some of you conservative sheep need to listen to Ron Paul every now and then, not become an idealist libertarian per say but a lot of things he says are true.

The national housing market is largely driven by banking policies, often chosen illegally as with LIBOR or to inflating the market with low qualification standards.

Every time the federal reserve print out more money, they steal from everyone with dollars. This often done to the benefit of banks more so than anything else, as they receive these funds directly via a variety of means.

California housing prices are INSANE because of this superficial inflation. It was made that way with intent, skirting laws where irregardless of the well being of the American people.

Eminent domain has been used to spur economic development. This can be directly attributed in this case. Residents are not buying goods if they are in catastrophic debt.

[boutons_deux]

FHFA Threatens to Kneecap Use of Eminent Domain to Condemn Mortgages



http://www.nakedcapitalism.com/2012/08/fhfa-threatens-to-kneecap-use-of-eminent-domain-to-condemn-mortgages.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capi talism%29&utm_content=Google+Reader

[Winehole23]

Two landmark developments on Aug. 16 give momentum to the growing interest of cities and counties in addressing the mortgage crisis using eminent domain:


The Washington State Supreme Court held in Bain v. MERS, et al. (http://www.courts.wa.gov/opinions/index.cfm?fa=opinions.showOpinion&filename=862061MAJ), that an electronic database called Mortgage Electronic Registration Systems (MERS) is not a "beneficiary" entitled to foreclose under a deed of trust; and
San Bernardino County, Calif., passed a resolution (http://www.nationalmortgagenews.com/dailybriefing/san-bernardino-eminent-domain-plans-1031849-1.html) to consider plans to use eminent domain to address the glut of underwater borrowers by purchasing and refinancing their loans.

MERS is the electronic smokescreen that allowed banks to build their securitization Ponzi scheme without worrying about details like ownership and chain of title. According to property law attorney Neil Garfield (http://livinglies.wordpress.com/2012/08/20/should-bankers-go-to-jail/), properties were sold to multiple investors or conveyed to empty trusts, subprime securities were endorsed as triple A, and banks earned up to 40 times what they could earn on a paying loan, using credit default swaps in which they bet the loan would go into default. As the dust settles from collapse of the scheme, homeowners are left with underwater mortgages with no legitimate owners to negotiate with. The solution now being considered is for municipalities to simply take ownership of the mortgages through eminent domain. This would allow them to clear title and start fresh, along with some other lucrative dividends.
http://www.huffingtonpost.com/ellen-brown/gamechange-bain-vs-mers_b_1820591.html

[Winehole23]

it would seem that, in cases where MERS fouled the chain of title, there may be no valid holder of the note and hence, no enforceable contract.

[Winehole23]

in other word, foreclosure fraud and faulty chain of title threaten property rights, not courts and municipalities.

cross posted at:

http://www.spurstalk.com/forums/showpost.php?p=6085624&postcount=237
http://www.spurstalk.com/forums/showpost.php?p=6090004&postcount=23

[Wild Cobra Kai]

If this is theft then every eminent domain usage in the past is theft.

[Winehole23]

No reply, CC?

[boutons_deux]

Washington Supreme Court Issues MERS Smackdown

While MERS has served to illustrate the utter recklessness of the securitization industry, in that its promoters apparently believed that they could implement it nationwide and simply force state law to comply. But as the banks have found out, the law is not always so obliging.

Today, Washington State, which is a non-judical foreclosure state, gave MERS a serious setback. Its finding in Bain v. Metropolitan Mortgage, that MERS may not foreclose in Washington, is not as bad as it sounds, since MERS instructed in servicers to stop foreclosing in its name in 2011. But the reasoning of the ruling is far more damaging. And the court has opened up new grounds for litigation against MERS in Washington, in determining that it false claim to be a beneficiary under a deed of trust is a deception under the state’s Consumer Protection Act (whether that can be proven to have led to injury is a separate matter).

The case came before the Washington Supreme court because it was asked by a Federal district court to address three certifying questions:

Is MERS is a lawful beneficiary with the power to appoint trustees within the deed of trust act if it does not hold the promissory notes secured by the deeds of trust? If no, then:

What is the legal effect of Mortgage Electronic Registration Systems, Inc., acting as an unlawful beneficiary under the terms of Washington’s Deed of Trust Act? and

Can consumers claim violations of the state’s Consumer Protection Act based on MERS having incorrectly claimed it was a beneficiary of a deed of trust?

The answer to the overriding question was indeed “no”. The court’s immediate objection was straightforward. MERS claims not merely to be an electronic registry of deeds, but also to be a beneficiary of the deed of trust. However, as the court points out:

Traditionally, the “beneficiary” of a deed of trust is the lender who has loaned money to the homeowner (or other real property owner). The deed of trust protects the lender by giving the lender the power to nominate a trustee and giving that trustee the power to sell the home if the homeowner’s debt is not paid. Lenders, of course, have long been free to sell that secured debt, typically by selling the promissory note signed by the homeowner. Our deed of trust act, chapter 61.24 RCW, recognizes that the beneficiary of a deed of trust at any one time might not be the original lender. The act gives subsequent holders of the debt the benefit of the act by defining “beneficiary” broadly as “the holder of the instrument or document evidencing the obligations secured by the deed of trust.”

These days, that “instrument or document evidencing the obligations secured by the deed of trust” is a promissory note, a borrower IOU. But MERS executives have said consistently in depositions that MERS has nothing to do with the borrower notes. So under Washington law, it can’t be the beneficiary of the deed of trust and hence can’t foreclose.

The court also rejected the idea that MERS could act as an agent of the lender/noteholder:
But Moss also observed that “[w]e have repeatedly held that a prerequisite of an agency is control of the agent by the principal.” Id. at 402 (emphasis added) (citing McCarty v. King County Med. Serv. Corp., 26 Wn.2d 660, 175 P.2d 653 (1946)). While we have no reason to doubt that the lenders and their assigns control MERS, agency requires a specific principal that is accountable for the acts of its agent. If MERS is an agent, its principals in the two cases before us remain unidentified.12 MERS attempts to sidestep this portion of traditional agency law by pointing to the language in the deeds of trust that describe MERS as “acting solely as a nominee for Lender and Lender’s successors and assigns.” Doc. 131-2, at 2 (Bain deed of trust); Doc. 9-1, at 3 (Selkowitz deed of trust.); e.g., Resp. Br. of MERS at 30 (Bain). But MERS offers no authority for the implicit proposition that the lender’s nomination of MERS as a nominee rises to an agency relationship with successor noteholders.13 MERS fails to identify the entities that control and are accountable for its actions. It has not established that it is an agent for a lawful principal.

As an aside, the funniest bit of MERS’s argument was a dressed up “deadbeat borrower” pleading:

MERS argues, strenuously, that as a matter of public policy it should be allowed to act as the beneficiary of a deed of trust because “the Legislature certainly did not intend for home loans in the State of Washington to become unsecured, or to allow defaulting home loan borrowers to avoid non-judicial foreclosure, through manipulation of the defined terms in the [deed of trust] Act.”

The court was not moved and basically said it was the banks’ fault if they got themselves in the position of not being able to foreclose:

One difficulty is that it is not the plaintiffs that manipulated the terms of the act: it was whoever drafted the forms used in these cases.

But the ruling goes further and picks at the foundations of the MERS system, and not just its role in foreclosures. Most state hew to the view of the 1867 Supreme Court decision, Carpenter v. Longan, that the mortgage cannot be separated from the note, that the mortgage is a “mere accessory” of the note and has to travel with it. The Washington Supreme court focuses on the fact that MERS inserts a new party:

As MERS itself acknowledges, its system changes “a traditional three party deed of trust [into] a four party deed of trust, wherein MERS would act as the contractually agreed upon beneficiary for the lender and its successors and assigns.” MERS Resp. Br. at 20 (Bain). As recently as 2004, learned commentators William Stoebuck and John Weaver could confidently write that “[a] general axiom of mortgage law is that obligation and mortgage cannot be split, meaning that the person who can foreclose the mortgage must be the one to whom the obligation is due.”

The court later states that it is not clear whether MERS split the note and the mortgage; if MERS really is the agent for the noteholder, it is likely no separation occurred.

The court also took a dim view of the diffused responsibilities within the MERS system:

While not before us, we note that this is the nub of this and similar litigation and has caused great concern about possible errors in foreclosures, misrepresentation, and fraud. Under the MERS system, questions of authority and accountability arise, and determining who has authority to negotiate loan modifications and who is accountable for misrepresentation and fraud becomes extraordinarily difficult. The MERS system may be inconsistent with our second objective when interpreting the deed of trust act: that “the process should provide an adequate opportunity for interested parties to prevent wrongful foreclosure.”

The Supreme Court effectively punted on the second question, which was what would be the legal effect of MERS being an unlawful beneficiary under the state’s Deed of Trust Act: “…resolution of the question before us depends on what actually occurred with the loans before us and that evidence is not in the record.”

On the final matter, of whether MERS being an unlawful beneficiary would give rise to claims under the state’s consumer protection laws, the court said it could, depending on the facts of the case:

…we answer the question with a qualified “yes,” depending on whether the homeowner can produce evidence on each element required to prove a CPA claim. The fact that MERS claims to be a beneficiary, when under a plain reading of the statute it was not, presumptively meets the deception element of a CPA action.

The Seattle Times amusingly quoted the MERS attorney complaining that the court respected the law:

Douglas Davies, the local attorney who represented MERS, said the court imposed “the literal language of a dated statute,” reaching a decision that didn’t benefit either borrowers or lenders.

“The Supreme Court has created a chaotic situation and essentially left it to a taxed legislature to come up with a solution,” Davies said in an e-mail late Thursday. “The only certainty that will come from this decision is a plethora of lawsuits that will overburden an already burden[ed] judicial system.”

Funny, the state attorney general apparently didn’t think so, since he wrote a brief supporting the borrower.

Perhaps most interesting is that MERS has taken to settling cases where it gets wind the court might rule against it, deliberately skewing the record to create the impression that its procedures and legal structure enjoy more acceptance from courts than they actually do. Given its recent conservatism, I wonder what led them to hazard a high profile loss. It might be that Washington’s deed of trust is distinctive enough that they thought they could take the chance, in that they could take the position that its implications for other states are very limited. We’ll see soon enough if that assumption is valid.

http://www.nakedcapitalism.com/2012/08/washington-supreme-court-issues-mers-smackdown.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capi talism%29&utm_content=Google+Reader#m6o3O2K32q5C0fRF.99

BAIN! :lol