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So you are saying they should refuse to pay their bills and get foreclosed on first?
This argument is so ing 6 months ago too.
Um, yes it is? Being current on your loan does not mean you're not in foreclosure danger.
So you are saying they should refuse to pay their bills and get foreclosed on first?
This argument is so ing 6 months ago too.
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?
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?
Last edited by Th'Pusher; 07-06-2012 at 05:21 PM.
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.
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?
The more I read about this idea the more I think its actually really brilliant.
Manny, it's no surprise that Fuzzybrain and Bou are agreeing with this but you disappoint me.
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?
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.
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.
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?
Some good info here.
Regarding scaring off the banks:
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.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."
Some of the legalities around eminent domain:
http://online.wsj.com/article/SB1000...392791018.htmlSeveral 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.
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.
This feels like the ends defining the means to me. No bueno.
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.
You still think they paid back TARP?
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.
So then they should not make payments for 6 months and then get the benefit. Makes sense to me.....
They passed a federal homeowners relief bill a few months ago. This was hashed out then.
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.
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 su ious."
"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 ing 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.
screw the banks but I think this should be voluntary by the mortgage holder.
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 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 en led, "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 en y 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 ish purgatory.”
http://www.rollingstone.com/politics...720?print=true
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 cir stances 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.
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