A California-based mortgage solutions firm has a novel idea to control the number of underwater home loans. The idea is to use the power of eminent domain, where local governments would "condemn" the underwater home loans and force a refinance.
Super controversial concept
Among the powers of the federal, state and local government authorities in the U.S., and certainly one of the single most debatable, 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 this 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.
A lot of people think that eminent domain is an abuse of power and should not be allowed, although it is typically used to put in highway extensions and other things, according to NJ.com. There was one landowner who had 1-acre of land taken with eminent domain by the city of Hoboken. Even though the land was valued at $10 million, they only gave him $2.3 million, and the land was being used to put in a park.
One good way to use it
California-based real estate business Mortgage Resolution Partners, according to Reuters, has a novel concept for using eminent domain. When eminent domain is used, the house is recognized as "condemned." However, MRP wants to use it to condemn the mortgage loans.
One concept that MRP brought up would be to get private investors with a ton of cash to purchase the loans from customers, according to Reuters. Then, the home would be seized from banks meaning less would be paid for the house than it is really worth. Then, MRP would sell the loans to new investors and lower payments to help the mortgage borrower. This would be a good plan considering 22 percent of the home loans in the country are underwater according to CoreLogic estimates and Zillow estimates that number to be higher at 31.4 percent, according to CNN. These customers might really appreciate the help.
Since investors would fund the entire action, no taxpayer cash would be spent; all any government authorities in California would be doing is turn in the paperwork for eminent domain actions.
Still not in place
It is only a proposal at the moment; MRP is pitching the idea to numerous local governments in California. It has been well received in some circles, as California is one of the worst-affected states by drastically lowered real estate values. However, according to the Hesperia Star, the city council of Hesperia, Calif., has already turned it down, in spite of 50 percent of Hesperia homeowners being underwater on their mortgages.
Homeowners are at higher risk for foreclosure when they owe more than a property 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 a lot of people are paying the payments diligently anyway, according to CNN.
Super controversial concept
Among the powers of the federal, state and local government authorities in the U.S., and certainly one of the single most debatable, 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 this 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.
A lot of people think that eminent domain is an abuse of power and should not be allowed, although it is typically used to put in highway extensions and other things, according to NJ.com. There was one landowner who had 1-acre of land taken with eminent domain by the city of Hoboken. Even though the land was valued at $10 million, they only gave him $2.3 million, and the land was being used to put in a park.
One good way to use it
California-based real estate business Mortgage Resolution Partners, according to Reuters, has a novel concept for using eminent domain. When eminent domain is used, the house is recognized as "condemned." However, MRP wants to use it to condemn the mortgage loans.
One concept that MRP brought up would be to get private investors with a ton of cash to purchase the loans from customers, according to Reuters. Then, the home would be seized from banks meaning less would be paid for the house than it is really worth. Then, MRP would sell the loans to new investors and lower payments to help the mortgage borrower. This would be a good plan considering 22 percent of the home loans in the country are underwater according to CoreLogic estimates and Zillow estimates that number to be higher at 31.4 percent, according to CNN. These customers might really appreciate the help.
Since investors would fund the entire action, no taxpayer cash would be spent; all any government authorities in California would be doing is turn in the paperwork for eminent domain actions.
Still not in place
It is only a proposal at the moment; MRP is pitching the idea to numerous local governments in California. It has been well received in some circles, as California is one of the worst-affected states by drastically lowered real estate values. However, according to the Hesperia Star, the city council of Hesperia, Calif., has already turned it down, in spite of 50 percent of Hesperia homeowners being underwater on their mortgages.
Homeowners are at higher risk for foreclosure when they owe more than a property 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 a lot of people are paying the payments diligently anyway, according to CNN.
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