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Guest Post: The Eminent Domain Mortgage Heist

Tyler Durden's picture





 

Submitted by John Aziz of Azizonomics

The Eminent Domain Mortgage Heist

Matt Taibbi:

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.

I approach the issue and constitutionality of eminent domain — government seizing of property in exchange for whatever the government defines as just compensation — very suspiciously. While I am altogether hostile to the idea of government being able to declare that what is yours is not yours, it has recently become a device for government to transfer private property from one private owner to another.

In Kelo v. City of New London (2005), the use of eminent domain to transfer land from one private owner to another private owner to further economic development was deemed to be constitutional. In a 5–4 decision, the Court held that the general benefits a community enjoyed from economic growth qualified private redevelopment plans as a permissible public use under the Takings Clause of the Fifth Amendment.

While seizing land with compensation to build a highway for public use is one thing, seizing property for the private profit of others is quite another. Yet many like Taibbi are heralding the potential of seizing underwater mortgages. I will consider any initiative to reduce total debt and deleveraging costs, as I believe that excessive total debt is the largest cause of today’s depression. But given the history, I have every right to be cautious and even suspicious.

Taibbi:

The plan is being put forward by a company called Mortgage Resolution Partners, run by a venture capitalist named Steven Gluckstern.

 

Here’s how it works: Mortgage Resolution Partners 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 [i.e. the taxpayer!] 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.

First — why municipalities? Why not states? The answer is that while all states other than Vermont have some form of balanced budget amendment, and cannot so easily take on debt, municipalities can freely take on debt. How much? Well, it’s almost certain to be open to legal challenges by current mortgage-holders, and courts may end up forcing municipalities to pay far more than municipalities initially stipulate. But at whatever values the mortgages are seized at, there is no doubt that the taxpayer will end up holding a lot of new debt.

The biggest problem though, is surely the danger of corruption. How many municipalities will end up using these opaque procedures to enrich well-connected insiders? How many will buy junk at inflated prices, or seize and sell to a well-connected insider at far below value? Who polices such transactions? Where is the transparency? How do we make sure that this is not just an excuse for bad lenders to offload junk to the taxpayer at inflated prices and cream a profit when they were set to reap a loss?

Matt Taibbi admits:

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.”

And you can restructure all you like, but many underwater homeowners with a serious income shortfall will still not be able to pay their mortgages. Who carries the can? If the mortgage has been  sold on then the loss will be on the new owner. In reality this is far more likely to be the taxpayer. Simply, the taxpayer may well end up carrying the can for a whole lot of bust mortgages.

What Taibbi — who usually has a very good sense of moral hazard — and MRP effectively seem to be considering is not only the continuation and expansion of Kelo, but also potentially the transfer of liability from bust irresponsible lenders to the taxpayer. While this is sure to enrich the bureaucracy and well-connected insiders — and admittedly, while it may help some underwater homeowners — it seems incredibly risky for the taxpayer.

While debt-forgiveness is one way out of the debt trap, we should be careful and recognise that many so-called debt-forgiveness schemes may instead be dressed-up scams and frauds that end up enriching special interests while putting the taxpayer deeper into a hole.

 


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Sun, 07/22/2012 - 09:30 | Link to Comment buzzsaw99
buzzsaw99's picture

The big banks have been stealing from municipalities for decades. Let the looting of the banks by municipalities begin and let some other corrupt people have their chance too.

Sun, 07/22/2012 - 10:10 | Link to Comment Bobbyrib
Bobbyrib's picture

Read the article, there are downsides to this plan.

Sun, 07/22/2012 - 10:19 | Link to Comment Ray1968
Ray1968's picture

How do we make sure that this is not just an excuse for bad lenders to offload junk to the taxpayer at inflated prices and cream a profit when they were set to reap a loss?

 

And there you have it... crooks bailing out crooks, again. That's all anyone needs to know about this plan. PERIOD.

Sun, 07/22/2012 - 10:25 | Link to Comment BigDeuceLittleToilet
BigDeuceLittleToilet's picture

Bullish.

Sun, 07/22/2012 - 10:33 | Link to Comment Jumbotron
Jumbotron's picture

Bullshitish

Sun, 07/22/2012 - 11:03 | Link to Comment The Big Ching-aso
The Big Ching-aso's picture

 

 

Munderwater mortgages.   

Sun, 07/22/2012 - 11:37 | Link to Comment francis_sawyer
francis_sawyer's picture

 "MAY instead be"?... (you're too kind)

Sun, 07/22/2012 - 11:08 | Link to Comment Thomas
Thomas's picture

I'm still not sure who is taking what from whom. Are they commandeering the mortgages from lenders, paying some arbitrary price, and then reselling them for (a) a loss, meaning it's municipality subsidized, or (b) at a profit, meaning it's just pure theft? Do I have that right? This is a total clusterfuck. This is fascism. 

It turns out one of my colleagues in the law school at Cornell has been supporting this idea. I was going to send a cross campus email to find out what is in the local water supply (and start buying bottled water.) 

BTW-John: I communicate over at Twitter under my real name and we are mutually followed (initials dbc). I simply stay with my semi-anonymous screen name at zero hedge so that I can suggest that we euthanize bankers and used phrases like clusterfuck without worrying about embarrassing my employer. (I personally am not easily embarrassed.)

Sun, 07/22/2012 - 11:22 | Link to Comment Aziz
Aziz's picture

Both (a) and (b) are possible — and both are potentially extremely corruptible. Municipalities can choose who to screw and who to benefit as fits their own agendas. Another possibility is that the municipality just hold on, adding another potential dimension of insanity wherein municipalities end up holding a load of toxic mortgages and owing a lot of debt, and perhaps if housing takes a turn for the worse spiralling into complete insolvency.

Clusterfuck.

P.S. is Hockett the Cornell professor you're talking about? He is working for the people promoting the idea. I was tipped off about this a few days ago by someone who sent me this interview:

http://www.youtube.com/watch?v=AhiXVLTHdUs&feature=youtu.be 

I didn't fully start to think through the consequences until yesterday when I saw Taibbi's article.

Sun, 07/22/2012 - 11:42 | Link to Comment Thomas
Thomas's picture

Yes. It is Hockett. I don't doubt that mortgages are possible targets of eminent domain, but I very much doubt that the other requirements for eminent domain are fulfilled. I simply cannot wrap my brain around this idea, and I don't think I am stupid. 

As an aside, based on timing I think you can make the case that OConnor resigned from the court over the Connecticutt case.

Sun, 07/22/2012 - 11:50 | Link to Comment Aziz
Aziz's picture

Yeah. You can't sanely square this with the "public use" requirement under the 5th Amendment. But the post-Kelo world isn't sane. Handing the land over to Pfizer wasn't "public use" either. 

I have a much better idea to help homeowners.

Jail corrupt bankers.

Sun, 07/22/2012 - 15:17 | Link to Comment Thomas
Thomas's picture

The Pfizer case really was an abomination. Supreme court decided they were economists. I asked a constitutional lawyer (one of our own again) and former Ginsberg clerk if the SCOTUS ever knowingly ignored the Constitution and he said not that they would ever admit. I asked about the gold standard, and he said, "Yeah. That's the classic case, but we were in a depression." My response was, "So these guys decided they were qualified to make economic arguments to override the Constitution. Point seemed to be well taken.

Sun, 07/22/2012 - 16:52 | Link to Comment unununium
unununium's picture

All the govt has to do is hold the auction before it seizes the loan.  Bingo, no problem determining fair value.

 

Sun, 07/22/2012 - 13:19 | Link to Comment Urban Roman
Urban Roman's picture

Did robosigning just go away? I would think these municipalities could simply take the banks to the woodshed over that. If the bank doesn't even have a clear title, it wouldn't be unreasonable to sever them from the property.

On the other hand, if they're just planning to steal people's houses wholesale, and then sell them back to the victims, it is nothing but theft. Will the new loans be recourse or non-recourse? Prinicipal reduced? At LIBOR interest rates?

Sun, 07/22/2012 - 10:38 | Link to Comment DeadFred
DeadFred's picture

Let's see, the mortgage owners give up their property or they send in guys with guns to take it. Our public servants divvy up the good from the bad in the back rooms and the bad properties end up in public housing projects. What can possibly go wrong?

Sun, 07/22/2012 - 11:40 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

That would be my worry.  Is that many of the Houses in really good neighborhoods are turned into Section 8 slums.

I would rather live next to a Foreclosure than have a Section 8 House on each side of me.

Sun, 07/22/2012 - 11:45 | Link to Comment Never One Roach
Never One Roach's picture

Suburbs to Section 8 slums...I sold my house on the golf course four years ago...the new owners, an investment company, rents it out to section 8 folks surprising the other residents and sinking their property values.

 

Just another reason not to buy now...wait until the dust settles, in 5-to-10 years.

 

18 Cities Where The Suburbs Are Rapidly Turning Into Slums


Read more: http://www.businessinsider.com/american-slums-2011-4?op=1#ixzz21MnjMzFT
Sun, 07/22/2012 - 15:13 | Link to Comment DeadFred
DeadFred's picture

It would seem that you are not stupid. I used to think I had some good tennant-from-hell horror stories until I talked to people with Section 8 rentals. The best I've heard is the tennant who always wanted a fireplace and used a chain saw to make the firepit in the living room and a hole through the roof for the smoke to get out. I gladly conceded defeat in the my story is better than yours contest.

Sun, 07/22/2012 - 21:34 | Link to Comment neidermeyer
neidermeyer's picture

So the banks will get market price for homes they foreclosed on when they could show no  legal ownership at trial? ... I am expected to help them convert their theft to profits? Screw that ... lets keep plugging away in the courts ,, maybe someday Dimon will have to pay off the investors that put up the money and actually have a stake in the outcome.

Sun, 07/22/2012 - 10:49 | Link to Comment andrewp111
andrewp111's picture

There are big problems with this plan. States and localities do not have the authority to seize Federal property be eminent domain. 95% of all mortgages are federal property through the FHA, Fannie and Freddie. The best solution is to amend the Federal bankruptcy code to abolish deficiency judgements for secured loans. Let the borrowers simply walk away. However, the Feds have been pursuing a totally contrary policy - they are actively discouraging walk-aways and doing everything in their power to prevent it. The Fed owns a trillion in mortgages and does not want losses. The Government is conspiring with the banks to slowly leak foreclosed property onto the market in order to preserve asset values.These localities are simply rebelling against bad fedreal policy.

Sun, 07/22/2012 - 11:05 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

Doesnt work that way. People own a house when they have a mortgage. When the foreclosure happens and completed they lose that ownership.

Sun, 07/22/2012 - 11:07 | Link to Comment Ray1968
Ray1968's picture

Good point. Don't forget about all the VA loans as well. Now that I think about it, the Feds won't stand for locals to steal... Unless there is something in it for Obama. Then all bets are off.

Sun, 07/22/2012 - 11:50 | Link to Comment Fox Moulder
Fox Moulder's picture

How many MBS's are still out there? Many if not most of these were sold to pension funds, so they would be getting shafted. Oh and if they are public employee funds then it's yet another burden on the taxpayers.

 

*Waiting for CalPERS vs. City of San Bernadino, MRP, et al to reach the USSC*

Sun, 07/22/2012 - 12:31 | Link to Comment MachoMan
MachoMan's picture

Why wouldn't this fall under local police/health/sanitation powers?  Sure, you can't (or might not want to) confiscate it per se, but you can bulldoze it...  levy fines against it...  etc. depending on its condition.  If you'll remember the posting recently regarding a lawsuit against Freddie for not being exempt from transfer taxes on properties (despite claiming to be so), then likewise it shouldn't be afforded federal protection...  this is the government's vise...  either put all the risk/loss on the books, or stfu when we tax the shit out of your quasi governmental entities.

Sun, 07/22/2012 - 18:39 | Link to Comment cejack
cejack's picture

"The best solution is to amend the Federal bankruptcy code to abolish deficiency judgements for secured loans."

If you declare bankruptcy, there is discharge of the debt and there would be no deficiency if the debt is discharged.   The slate is wiped clean.  They cannot pursue you for a deficiency on the loan if the debt is discharged.  I work in a business that deals with tons of deficiency and bankruptcy situations.  I live in Vegas.  I know.  :-)  

Generally they are mutually exclusive.  (i.e., you declare bankruptcy, the deficiency disappears in Chapter 7 other than non-dischargeable debts - student loans, etc. - or if you go Chapter 13 and reorganize some personal debt.)

I think what you mean to say is to allow mortgage cram-downs to the current market value of the underwater home.  To that, I would tend to agree.  And my politics are right of Attila the Hun.  But we're 4-5 years into this already and we're nowhere near the end of this thing.  If you want to pull the band-aid off and let the wound actually "air-heal" you need bankruptcy cram-downs on primary occupancy first trust deeds.  

And you need it now.   You needed this three-four years ago.  There is no moral hazard. Strategic defaulters will be scared off by bankruptcy.  Nobody wants to go through bankruptcy that absolutely doesn't have to go through it.  But for folks that have lost 60-70% of their value in their home - they would benefit from this and the market would heal quicker.  

Mon, 07/23/2012 - 03:28 | Link to Comment Buck Johnson
Buck Johnson's picture

This does have alot of bad side to it.  I already see how local insiders will be making a killing doing this.

Sun, 07/22/2012 - 10:21 | Link to Comment Popo
Popo's picture

Because this "looting" screws those who don't have mortgages (or houses) and helps the two parties that are somewhat to blame: The elites and the deadbeats.

Mortgage forgiveness is ultimately a move to preserve asset values. What we need is for houses to return to the open market and let market rates set the value. What will happen of course, given the massive oversupply of houses returning to the market, is that the price of housing will collapse: which is a good thing.

Remember that the so-called "crisis" is really about the collapse in value. And the collapse in value is considered a "bad thing" only by homeowners -- all of whom have overvalued assets.

A decline in housing prices is a good thing. Sorry if your speculation on real estate prices didn't work out. Them's the breaks. The market simply cannot sustain these values, and concealing inventory, restructuring debt or selectively forgiving mortgages are all just ways of attempting to preserve sticker-prices which are grossly, grossly overvalued.

If you live in a home and can't pay your mortgage, you aren't going to "lose your home" because the home you're living in quite frankly isn't yours. But you are going to have to move. What's wrong with that? Renters live with that reality every day.

I look forward to living in your house for 30% of the price you paid, bagholders. Welcome to adulthood. Don't sink yourself in a lifetime of debt for a place to sleep next time. Houses are shitty investments. Now you know.

Sun, 07/22/2012 - 10:43 | Link to Comment Bobbyrib
Bobbyrib's picture

"Because this "looting" screws those who don't have mortgages (or houses) and helps the two parties that are somewhat to blame: The elites and the deadbeats."

As a non-homeowner I won't be as screwed as the homeowners in the municipality. Where do you think those tax dollars to buy the property will be coming from?

Sun, 07/22/2012 - 14:44 | Link to Comment Umh
Umh's picture

They aren't buying them. They are stealing them, since they get to set a "fair price".

Sun, 07/22/2012 - 10:44 | Link to Comment Another Texan
Another Texan's picture

I agree. 

If people would view housing as a expense rather than an investment, most would not be in this situation.  What is an investment is the land your house sits on.(Scarcity) The acutal improvement is a depreciating asset.  The average house can be built for $75 per foot, not including the value for local utility service or land value.  The improvement will depreciate over time, not appreciate.  Do the math and see what your potential downside is.  (Note: in the Great Depression, housing prices dropped in value to less than what you could build one for.)

A uninformed populace keeps perpetuatuing the myth of ever incresing home values. 

While I understand a potential home buyer in these areas are forced somewhat to particiapte in these dangerious markets, they can always choose to build in lieu of buying.  There is always the option of moving to a less inflated market.

 

 

Sun, 07/22/2012 - 10:50 | Link to Comment Jumbotron
Jumbotron's picture

Because this "looting" screws those who don't have mortgages (or houses) and helps the two parties that are somewhat to blame: The elites and the deadbeats.

Mortgage forgiveness is ultimately a move to preserve asset values. What we need is for houses to return to the open market and let market rates set the value.

Absolutely spot on.  Anything....any plan....no matter how well intentioned....is simply a scam if it is intended on propping up assest prices and/or not allowing asset prices to fall to what they should be...(even if that means for a time they are underpriced vis a vis the way the pendulum swings looking for equilibrium)

This housing bubble started in 1995.  Although I am not saying that all mortgages should be reset and revalued to that time...(you have to take into account what was the normal, at the time, increase in value of around 3% per year and project that out to see what they should be at now)....but A LOT of mortgages should at least touch that point on their way to being reset to fair market value.

Then again....at any given time....fair market value is simply what one is willing to pay for it.   That....in many cases....maybe the majority now....is MUCH lower than what houses were worth in 1995.

Emminent Domain is simply another scam by the state to forestall the inevitable and the corrupt vultures are already circling overhead.  Plus it sets up a dangerous precedent for the state (the state being any and all bureaucracy) to extend their power to abuse your private property rights.

But that really is a moot point now isn't it.  There really is NO private property in America.  As long as any of you pay property tax...you simply rent to the state even if you own your home outright.  The state will always have the opportunity to take your so called private property away for whatever reason.  And it looks like there will be an additional reason coming up very soon.

Sun, 07/22/2012 - 12:21 | Link to Comment RiverRoad
RiverRoad's picture

And while they're taking those houses, exactly WHO will be paying those property taxes?????

Sun, 07/22/2012 - 20:17 | Link to Comment post turtle saver
post turtle saver's picture

"In order to save the tax base, we had to bankrupt the tax base"

Mon, 07/23/2012 - 00:08 | Link to Comment Jumbotron
Jumbotron's picture

The new owner....case on point....houses in Groton and New London Connecticut.

Sun, 07/22/2012 - 15:13 | Link to Comment BigDeuceLittleToilet
BigDeuceLittleToilet's picture

Housing bubble was like a big deuce in a little toilet

Sun, 07/22/2012 - 13:54 | Link to Comment Benjamin Glutton
Benjamin Glutton's picture

<Remember that the so-called "crisis" is really about the collapse in value. And the collapse in value is considered a "bad thing" only by homeowners -- all of whom have overvalued assets.>

Dear Popo,

The so called crisis was caused by a criminally immoral alliance between formerly safe banking, Fed Res policy and a GOP Administration who intentionally substituted a housing bubble for a sound economy. The Administration did everything they could to enable the disaster and fought every State that tried to do something about it. The Dem played their part on many levels as well.

Oddly there is no protest from you regarding the future taxes you will be paying to cover bailouts of industry bad actors as you heap contempt on average Americans. BTW it is unlikely that only homeowners consider falling(collapsing) home prices a bad thing.

Too bad you missed the Friday midnight showing of Batman in Aurora...please step in front of a bus(financial) at your  earliest convenience.

TIA

 

 

Sun, 07/22/2012 - 14:53 | Link to Comment John_Coltrane
John_Coltrane's picture

You don't get it so here's a simple example.  If I own something I want it to increase in value.  If I want to buy it I want it go down.  A specific example:  I want to buy call options in KMB because I think it will go up in value-so I'm vastly underbidding the current market price-waitint to be filled.  I'm short ANR, FSLR, JCP, MS, TSLA etc because I anticipate they not only will go down in value but might go to zero, i.e. BK.  That psychology never changes.  We overvalue things we own and undervalue those owned by others. 

POPO is spot on and I am a homeowner (mulitple homes all paid off).  Houseing prices need to be set by the market, not propped up by government-I believe they are still artificially high due to price fixing schemes as outlined in the excellent article.  I know that theoretically hurts my asset position but I also understand human psychology including my own. 

Sun, 07/22/2012 - 21:56 | Link to Comment rayduh4life
rayduh4life's picture

Didn't R. Kiyosaki write about 25 - 30 years ago that houses are not assets?  Crazy stuff.  I live in the sticks where prices never really moved up much yet they still have managed to fail precipitously.  We're back to late 1990's price levels here. 

Sun, 07/22/2012 - 20:32 | Link to Comment banksterhater
banksterhater's picture

NOT A CHANCE IN HELL, THIS IS BULL.

Sun, 07/22/2012 - 09:31 | Link to Comment steve from virginia
steve from virginia's picture

 

Punt!

 

Everyone is looking for that easy solution, here is another one.

 

None of them work, none of them have worked since 2007. Before then, the easy solutions were called 'expedients' and they were only supposed to work for a short time.

Expedients, kick the can, extend-and-pretend ... we are at the end of the road, the future is now. What cannot be paid cannot be, the municipalities are broke,

The only (hard) solution is physical restructuring, abandonment, demolition and rebuilding over time (maybe centuries) without the 'modern' toys that we cannot afford.

That we never could afford.

Sun, 07/22/2012 - 09:35 | Link to Comment GMadScientist
GMadScientist's picture

Luddite! ;)

Sun, 07/22/2012 - 09:36 | Link to Comment insanelysane
insanelysane's picture

Exactly.  Individual citizens can't afford their loans but somehow, governments, comprised of the same individual citizens, can afford the loans.

Sun, 07/22/2012 - 10:13 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

Nobody can afford anything and money, the dollar, is as crooked as anything else.

Sun, 07/22/2012 - 10:29 | Link to Comment Offthebeach
Offthebeach's picture

Have fedgov borrow( more ) and future generation can pay for your vinyl clad, ni**erboard sheathing, Chinese drywalled, cat pissed carpeted shelter.
As soon as the kids thingamagig/whatchamacallit boom takes off under Fed Chair Shlomo Bernanke II, they'll be rich!

Sun, 07/22/2012 - 10:44 | Link to Comment Offthebeach
Offthebeach's picture

You can trust the banks, pols this time. It will be different.
(/s)

Sun, 07/22/2012 - 13:41 | Link to Comment FeralSerf
FeralSerf's picture

Actually, you really can trust the banks and politicians.  You can trust them to steal as much as they can get away with and keep testing the limits of what they can get away with.  They are testing as we speak and it should be clear that they haven't found their limits yet.  Until those limits are defined, there is no way to predict how much this debacle will cost.  Right now it appears it will cost us everything including our freedom.

Sun, 07/22/2012 - 20:18 | Link to Comment post turtle saver
post turtle saver's picture

"None of us is as stupid as all of us"

Sun, 07/22/2012 - 09:47 | Link to Comment JamesBond
JamesBond's picture

put all defaulted mortgaged homes up for sale beginning at one dollar.

you'll see

 

jb

Sun, 07/22/2012 - 09:56 | Link to Comment New_Meat
New_Meat's picture

sounds suspiciously like "clearing the market" to me.

Although this would reset the tax base of the municipalities, who are also complicit in the fraud.

- Ned

Sun, 07/22/2012 - 11:45 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Foreclosures do not reset the Tax base.  I know.  When I appealed my Property Taxes they would not consider any sale that was a Foreclosure or a Short Sale.  They said that it was not an arms lengh transaction.

Sun, 07/22/2012 - 14:01 | Link to Comment WakeUpPeeeeeople
WakeUpPeeeeeople's picture

Been there, done that. File the lawsuit, request a jury trial,  and they will quickly change their tune.

Sun, 07/22/2012 - 13:48 | Link to Comment FeralSerf
FeralSerf's picture

And you'll see asshole criminals like Romney and his Jooze pals "borrow" newly printed money at ZIRP and own everything.  A giant transfer of wealth -- that sucking sound -- from the middle class to our feudal lords will be complete.  The middle class will not be allowed to bid unless there's no hope the property will ever be worth anything.  Get your Detroit hovel,  er. . . house while you can -- going fast.  Sorry, no agricultural land available.

Sun, 07/22/2012 - 09:33 | Link to Comment cherry picker
cherry picker's picture

If a person has equity in the home, and I mean making mortgage payments for a period of time, ten years or longer, they should just make it against the law to foreclose on it.

Sun, 07/22/2012 - 10:05 | Link to Comment yabyum
yabyum's picture

Cherry Picker, I agree, but please explain that to the county when you can't pay your taxes for five years.

Sun, 07/22/2012 - 09:34 | Link to Comment GMadScientist
GMadScientist's picture

If it works so great for underwater loans, maybe we can use it to wind down a certain five underwater "bank holding companies"!

Sun, 07/22/2012 - 10:55 | Link to Comment Jumbotron
Jumbotron's picture

Hell...for that matter...what's to stop the top five International US Debt Holders (China being one) from forming their own Resolution Group and seizing America ?

Sun, 07/22/2012 - 09:34 | Link to Comment insanelysane
insanelysane's picture

But the homeowner doesn't really own the home the bank does.  It sounds to me that the banks, knowing they can't get money from homeowners or any other buyers in certain markets, are looking at local governments to give them money.  This has everything to do with saving banks that either made bad loans or purchased bad loans.

Sun, 07/22/2012 - 09:38 | Link to Comment GMadScientist
GMadScientist's picture

Maybe they should read the news...

Sun, 07/22/2012 - 16:43 | Link to Comment MachoMan
MachoMan's picture

BANKS DO NOT OWN THE HOMES...  THEY OWN LIENS ON THE HOMES CALLED MORTGAGES...  (presuming all the documents/assignments were executed and assigned properly).  Just because you default on a note/mortgage doesn't mean title to the land is transferred...  in fact, there's a really long row to hoe at this point trying to prove standing to foreclose...  among other issues.  I think what you'll soon find is that the banks don't own shit.

Sun, 07/22/2012 - 09:42 | Link to Comment fonzannoon
fonzannoon's picture

exactly insane. the banks would love this and are most likely behind this plan. goodbye shadow inventory.

Sun, 07/22/2012 - 10:15 | Link to Comment Bobbyrib
Bobbyrib's picture

I'm so glad I don't own a home. They won't be jacking my taxes when the fascist take the loans off the banks' hands.

Sun, 07/22/2012 - 13:52 | Link to Comment FeralSerf
FeralSerf's picture

Au contraire -- they will be jacking up your taxes regardless of whether or not you own a home. On your worldwide income at that, so don't get the idea you can escape.  Death is the only escape from these mofos.

Sun, 07/22/2012 - 14:59 | Link to Comment John_Coltrane
John_Coltrane's picture

So, you believe your landlord won't raise your rent when his taxes go up?  As a landlord I can assure you you are wrong.  Better buy a tent, but prepared for the rent on the land on which you pitch the tent to go up. 

"The rent on a tent is nearly always spent"

Sun, 07/22/2012 - 09:52 | Link to Comment QQQBall
QQQBall's picture

This scheme also has a price support tangent, which never works.  In the end, the people who acting prudently end up carrying the liar loan borrowers and the imprudent. USA has been applying a series of disjointed short-term fixes to long-term, complex probelms. Why did I pay off my home? I should have gotten a 125% LTV Ditech loan and then my neighbors pay for it.

 

What seems to be lost yet again, is that the home will be resold at market pricing to a new, better qualified buyer. The apt renter who has been waiting for real estate prices to approach equilibrium has been getting screwed for ever it seems.

Sun, 07/22/2012 - 09:58 | Link to Comment Winston Churchill
Winston Churchill's picture

Ding Dong.

Sorts out a lot of those problems with MERS ,pretender lenders and pretender

servicers.Bails ot the Fed whose balance sheet if full of worthless RMBS bonds.

So now the taxpayer pays s out of the  fraud again,after having their pensions ripped

off by the banks, the first time round.

Sun, 07/22/2012 - 10:18 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

Half the states out there don't even have mortgages in the true legal sense. It's trust deeds. You don't take out a mortgage in TX or CA even if that's what they call it. These add a third party to the mix.

In mortgage states you "own" the property with the a recorded debt lien placed on it "mortgage."

Sun, 07/22/2012 - 10:35 | Link to Comment greyghost
greyghost's picture

but does the bank own the property?, since the monies in question were either created by "their" own printing press or by creation of x's and o's on computer screens. this has always cracked me up that a bank with "free" money, loans with free money for improvements on bare land creating a house and wealth, then a family buys said house along with all the interior improvements creating more wealth. however, any where along this road, from bare land owner to builder to homeowner should any one not be able to repay the bankers their money created out of thin air, who gets to keep the wealth created along the way? what scares me the most is the fact you take these morons in the local goverment come along with the thought that the above is wrong on so many levels and they would be correct. however their solution is a bad bandaid that will fall off in ten minutes. in their poorly educated minds they see no other solutions nor see beyond their little kingdom or fiefdom. the question has always been....who creates and controls the money and for who's benefit!!!!! yet endlessly, day in and day out bandaids are handed out as solutions, while the evil core churns on and on.

Sun, 07/22/2012 - 11:13 | Link to Comment Jumbotron
Jumbotron's picture

But the homeowner doesn't really own the home the bank does. 

ABSOLUTELY CORRECT !!!

And even if the bank no longer owns it (the morgage payer has completely paid back the loan) the state owns your property on which the house sits.  YOU PAY PROPERTY TAX.....THE STATE OWNS YOUR PROPERTY.

This scam provides relief for both the banks and the state.

And....of course....when banks and the state are in bed together.....that is textbook Fascism.

Everyone is a brown shirt now.

Sun, 07/22/2012 - 15:50 | Link to Comment Debt-Is-Not-Money
Debt-Is-Not-Money's picture

"And even if the bank no longer owns it (the morgage payer has completely paid back the loan) the state owns your property on which the house sits.  YOU PAY PROPERTY TAX.....THE STATE OWNS YOUR PROPERTY."

True. That's because we end up with a title "in equity" and not a title "in law" (allodial title). Property under allodial title cannot be liened or taken for non payment of taxes. I think this change occurred after the "War of Northern Aggression Against the South".

Property given by the government (40 acres and a mule), as an example, were granted as allodial titles.

Sun, 07/22/2012 - 09:37 | Link to Comment Clint Liquor
Clint Liquor's picture

it seems incredibly risky for the taxpayer.

Fuck em' right? In our current Corpocracy that is what 'taxpayers' are for.

Sun, 07/22/2012 - 09:36 | Link to Comment arkel
arkel's picture

How about we just mark the mortgages to market and let the banks fail?

Oh right, that's too easy and beneficial to society. We're all slaves to the banks.

What was I thinking?

Sun, 07/22/2012 - 10:11 | Link to Comment Aziz
Aziz's picture

Real question for me is just what the hell Taibbi is thinking advocating what is effectively another bank bailout...

Sun, 07/22/2012 - 10:14 | Link to Comment Dr. Engali
Dr. Engali's picture

I wondered the same thing. Surely he has to see the insanity of this idea.

Sun, 07/22/2012 - 10:21 | Link to Comment Aziz
Aziz's picture

The commenters on the Rolling Stone site are a real mindfuck. If you question the wisdom of effectively throwing the irresponsible underwater financiers "just compensation" (i.e. a bailout on their toxic waste) they scream "ARE YOU WORKING FOR GOLDMAN SACHS!!!111"

I mean, what the fuck? 

Sun, 07/22/2012 - 10:27 | Link to Comment Dr. Engali
Dr. Engali's picture

They're too stupid to understand what's going on. To them it sounds good so do it. They don't grasp the affects this will have on the tax payer and the market. They also don't get how this effectively bails out the banks again.

Sun, 07/22/2012 - 10:29 | Link to Comment Aziz
Aziz's picture

Asked Max Keiser and Stacy Herbert to cover this issue earlier and Stacy said they would. Thank God for real financial journalism. 

Sun, 07/22/2012 - 13:06 | Link to Comment Let The Wurlitz...
Let The Wurlitzer Play's picture

I didnt know people still read rolling stone.

Sun, 07/22/2012 - 10:20 | Link to Comment Bobbyrib
Bobbyrib's picture

He is thinking he could make money off of it. It's a pure profit motive. He's a douchebag.

Sun, 07/22/2012 - 10:49 | Link to Comment DeadFred
DeadFred's picture

Maybe his family is in 'protective custody' or someone took photos with him and somebody named Kristall? Lots of possible reasons for people to act out of character.

Sun, 07/22/2012 - 11:21 | Link to Comment msjimmied
msjimmied's picture

From Taibbi's article..

"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).


Read more: http://www.rollingstone.com/politics/blogs/taibblog/from-an-unlikely-source-a-serious-challenge-to-wall-street-20120720#ixzz21Mfxu17c

So essentially, what this does is force the banks to mark to market. It's not another bailout. I am confounded,  everyone is talking ethics and moral hazard etc etc. We are way way beyond that point! You see any of those considerations on your enemy's side? That's how you keep the sheep docile, remind them constantly of mental barriers, keeps them penned in...makes picking off a meal a snap. 

Sun, 07/22/2012 - 11:40 | Link to Comment Aziz
Aziz's picture

Municipalities handing over borrowed cash to banks for toxic junk is not a bailout? Since when?

Sun, 07/22/2012 - 13:14 | Link to Comment msjimmied
msjimmied's picture

No, the municipalities are not funding the transactions, the investors are. The investors buy the properties at "current market value" assigned when the municipality enforces eminent domain, with the understanding that the properties are then sold back to the mortgagee at a reduced true value. 

Sun, 07/22/2012 - 18:50 | Link to Comment donsluck
donsluck's picture

So, who owns the property between the excercise of eminent domain and sale back to the occupant? Since municipalities do not have pockets deep enough, they will have to create Special Purpose Vehicles. Think about that, municipal governments creating dozens (or thousands) of huge SPVs, the same creatures that brought down the banks.

Sun, 07/22/2012 - 12:05 | Link to Comment Pants McPants
Pants McPants's picture

I've long felt Taibbi is about 80% on the mark in everything he writes.  For all his good writing he still hearts the state as a solution.

I still enjoy his work, but like I said, his solutions are not quite what one would term Austrian in nature.

(Keep up the good work, John....I enjoy your articles)

Sun, 07/22/2012 - 14:14 | Link to Comment spekulatn
spekulatn's picture

Real question for me is just what the hell Taibbi is thinking advocating what is effectively another bank bailout...

 

Follow the money. 

 

http://mortgageresolutionpartners.com/the-team

 

Taibbi's mask comes off.

Sun, 07/22/2012 - 22:11 | Link to Comment rayduh4life
rayduh4life's picture

These MRP folks have quite the rap sheets. 

Sun, 07/22/2012 - 10:20 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

We will NEVER see MTM ever again. The whole farce of a system will continue until it can't.

Sun, 07/22/2012 - 09:38 | Link to Comment Seize Mars
Seize Mars's picture

This idea is so completely anti-liberty, so completely anti-private property and so completely ruinous that I support it wholeheartedly. It is also supported by all the usual cronies.

In my generation I have eyewitnessed the world's greatest nation be attacked "full spectrum," and the ensuing fall. Amazing to consider, but yes the United States of America is for all practical purposes finished. We all know it.

This idiotic, immature, downright silly idea is simply the most stupid, ineffectual thing I have ever heard of, with a terrific twist: it will hasten the fall into total, complete chaos. Bring it on. A society that completely fractures and disintegrates is really best case. That is, soldiers and cops with no paychecks. Hence, a free people. So I say bring it on, you fucking fucks.

Bring it.

Sun, 07/22/2012 - 10:05 | Link to Comment Dr. Engali
Dr. Engali's picture

I agree its startling to grow up in this nation and see amazing things happen over the course of my life. Now I'm watching it all disintegrate into the pathetic country with no vision and no dreams beyond finding out who gets kicked off of Survivor.

Sun, 07/22/2012 - 10:53 | Link to Comment DeadFred
DeadFred's picture

I talked with a WWII purple heart vet the other day who lamented that he doesn't recognize the country any more and wondered out loud if his service was worth it.

Sun, 07/22/2012 - 11:07 | Link to Comment Jumbotron
Jumbotron's picture

It's a real stab to the heart to read this.....but nobody said it wasn't going to be a bitch to wake up from The Matrix.....

http://www.youtube.com/watch?v=IojqOMWTgv8&feature=fvwrel

Sun, 07/22/2012 - 18:54 | Link to Comment notadouche
notadouche's picture

Well the dude from what truly was the greatest generation you spoke with had to be around say 20 at the youngest and say that year would be 1945 at the latest for the sake of easy math.  Let's see that would make this fellow approximately 75 in the year 2000.  Now it is 2012 which would make the fellow somewhere in the neighborhood of 88 years old and perhaps as even well into his 90's.  Of course he doesn't recognize this country.  He may be very lucky to recognize his children if he didn't in fact out live his children.  I say this not to be mean but this seems to be antectdotal nonsense in order to create an emotional response.   My grandparents were of that generation, lived through the depression in the dust bowl no less, saw the world change in ways they couldn't imagine and by the time the computer came around it was beyond their comprehension.  The world had past them by and one died before 9/11.  The other past about 2 years ago with all her faculties.   When you are 90 you won't recognize this country either.  It's called the natural evolution of being.  Unfortunately that evolution is headed in the worst direction possible with no likelihood of correction.  You can't even get half the people to agree on what direction is the best.  

However, those that served in WWII knew why they served and never would've questioned the worth of their sacrifice.  He's lucky, if he really exist in the fact that he won't have to be long for this nonsense that is our current society.    The one's that we should really feel the pity for are the youngsters today that are seeing their impending adulthood being stolen before their very eyes and without their consent or knowledge.  

Sun, 07/22/2012 - 09:41 | Link to Comment Dr.Engineer
Dr.Engineer's picture

It sucks that your mortgagte is undewater.  The best thing to do is to realize "Life is tragic and it isn't fair."

Now, because you can't face reality that life sucks, you want a magic pixie dust scum to instantly help you.  In desparation you throw all your principles aside (if you had any) and reach out to the fairy werewolf who just ate your lunch before.  You welcome them into your house, they explain why this plan is different (heard that before), that all will be well.  After all the fairy werewolf is looking after your best interest, as long as it profits them the most.

You give the fairy werewolf the key to your city.  They then rape and pillage people you cannot see.  Those that are raped and pillaged make a better counter offer to the fairy werewolf.  After a little cogitation and drooing, the fairy werewolf turns on the city.

"In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

"Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil."

- From an essay by Frédéric Bastiat in 1850, "That Which Is Seen and That Which Is Unseen"

How utterly stupid can we be to do this. What is unseen here?  Everything.

Sun, 07/22/2012 - 09:41 | Link to Comment cherry picker
cherry picker's picture

Property ownership no longer exists.  Mortgage companies, local governments, private enterprise can all rip you off.

It says "In God We Trust"

Me thinks God better foreclose and give it to the people so they can have a roof over their heads, after all, I heard God owns this planet, not a bunch of finance companies.

Sun, 07/22/2012 - 10:13 | Link to Comment DOT
DOT's picture

"God" forgot to render unto "Ceasar"

The universe has become an REO of GS.

"God" is looking for some small dimension to expand on.

Sun, 07/22/2012 - 10:55 | Link to Comment DeadFred
DeadFred's picture

Have patience, some foreclosures take awhile to process.

Sun, 07/22/2012 - 09:43 | Link to Comment JamesBond
JamesBond's picture

two wrongs don't make a right. when the supreme court voted in favor of eminent domain, a significant turning point occurred in politics towards facisim....  

i guess we can all look forward to the time when our politicians wear buttons that read:

It's all eminently ours!

 

jb

Sun, 07/22/2012 - 11:13 | Link to Comment LMAOLORI
LMAOLORI's picture

 

The Mortgage Condemnation Plan: Fleecing Municipalities as Well as Investors (Updated)

+1 Next up

Student Loan Bankruptcy Forgiveness

The Obama administration wants to allow people to get rid of their student loan debt through bankruptcy — but only if the debt is owed to private lenders rather than by the federal government.

Sun, 07/22/2012 - 09:43 | Link to Comment q99x2
q99x2's picture

Hang the bankers first then re-distribute their stolen wealth.

Sun, 07/22/2012 - 10:27 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

What's this wealth you speak of? Paper money? Debt?

75% or so of us economy is based on consumer consumption. That's not wealth creation.

A simple example of wealth creation is a farmer planting more food than needed to eat. That food is exchanged for other needs. He produced, he created wealth.

Sun, 07/22/2012 - 09:48 | Link to Comment malikai
malikai's picture

I'm uncomfortable with Matt's use of the word "Homeowner", as technically it is the bank that owns the home, until it is paid off. Therefore, the real "fix" is ignored. Foreclosure, bankruptcy, etc. The real "fix", does not get implemented. Instead, the debt is pawned off on the "taxpayer", or muni, who will also not pay the bill.

Sun, 07/22/2012 - 11:10 | Link to Comment Jumbotron
Jumbotron's picture

It looks like Matt is still clinging in some respect to The Matrix

 

Sun, 07/22/2012 - 15:11 | Link to Comment John_Coltrane
John_Coltrane's picture

No, No, No.  The mortgage is a lien on collateral.  The collateral is the home.  If the mortgagtee cannot fulfill the contract on the loan (make timely payments of interest and principle), the collateral may be seized by a court procedure (foreclosure) in an attempt to recover the value of the loan.  This is not a mere technicality. 

Sun, 07/22/2012 - 09:51 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

If all of the Mortgages have Title Problems like the destruction of the Note they probably have no value.  Remember that without the Note the Mortgage is not enforceable as a lean against the House.

If the Municipality is taking over a Mortgage for even half the value and that Mortgage is not enforceable then they are assuming the position of Bailing out the Banks and taking over a valuless Bad Debt with Tax Payer Money.

Sun, 07/22/2012 - 10:02 | Link to Comment New_Meat
New_Meat's picture

good comments in the thread.

- Ned

{and usually, I don't have to lean against the house until my second 6-pack. ;-) }

Sun, 07/22/2012 - 14:52 | Link to Comment Miffed Microbio...
Miffed Microbiologist's picture

tx waterfallsparkles, this is my main confusion about the whole thing. Without clear title how can any of this be done? Doesn't one have to establish title first? Or would this somehow screw the banks so it's better left unknown? I guess I shouldn't have gone into the hard sciences because when you're results are erroneous you must back track to a known true point to understand how to fix your problem. I'm finally beginning to understand that rules in finance are really just sham guidelines that are fed to the uninitiated public and the ones in the inner circle have accountability to no one. Too bad the banksters can't bend the laws of of the scientific world and make my job easier or me richer!

Miffed:-)

Sun, 07/22/2012 - 09:53 | Link to Comment Dr. Engali
Dr. Engali's picture

This is like a bad nightmare. Stupid idea after stupid idea continue to be offered up. I do not understand why they can't get it through their heads the only solution is liquidation. Let the house prices fall to a level where the market participants will actually start buying them up. I'm sorry about the borrowers problems , but there is life after bankruptcy. There will be a plenty of places to rent as investors will step in ,and the borrowers can get rid of the headache that's plaguing them.

Sun, 07/22/2012 - 10:28 | Link to Comment Bobbyrib
Bobbyrib's picture

" I do not understand why they can't get it through their heads the only solution is liquidation."

Banks do not want to take the losses. They are trying to figure out another way to pass them off.

Sun, 07/22/2012 - 11:10 | Link to Comment andrewp111
andrewp111's picture

And the Federal Government is helping them in this endeavour.

These CA localities are rebelling. If they forcibly buy a mortgage that had an original 600K value for the 200K value that the house is actually worth today, they are forcing the bank to take the losses now.  The Feds should be doing this by letting the borrowers simply walk away without deficiency judgements. But instead, the Feds are trying to prevent liquidation, and are maintaining asset values to keep the banks alive.

 

side note - the real value of the HELOCs that exist on most of these houses is near zero, so localities should be able to seize these for almost nothing. The point would be to excuse the borrowers from the massive deficiency judgments on their other assets that would take place if they walked away. If you want liquidation, an eminent domain seizure of the HELOCs might even work to loosen up the inventory, and most of these are still privately owned. While CA does not allow deficiency judgments on the primary mortgage, that exemption does not apply if the loan was refinanced or it there is a second mortgage.

Sun, 07/22/2012 - 11:04 | Link to Comment DeadFred
DeadFred's picture

We know  corporations are persons and they have survival instincts too. Since the banks can't take the losses and survive they will try any and every trick to prolong their parasitic lives no matter what the cost is to others. And when you think they're finally down remember Zombieland Rule #2, the double tap.

Sun, 07/22/2012 - 15:08 | Link to Comment RiverRoad
RiverRoad's picture

 

Sun, 07/22/2012 - 09:54 | Link to Comment Never One Roach
Never One Roach's picture

"Home ownership" is a losing deal for at least the 10 years.

Sun, 07/22/2012 - 09:54 | Link to Comment lynnybee
lynnybee's picture

yes, it is called despair or the feeling that there is no where to run, like a trapped animal.    yea, i do remember what it was like to have silver quarters in my pocket and no one had credit cards.    i remember when the NORMAL was to take out a 15-year mortgage and have it paid off in 10 years.    i remember when citizens had savings accounts that paid interest instead of predatory fees extracted from the banks patsy depositors.       i remember my dad being honest and true and hard working and transactions being done in cash, and if he received the wrong change he gave it back.    BLAH!!    so, those were the old days before unlimited credit and never ending interest payments to gdamn bankers.     i remember when bankers were well respected members of the local community.    Robert RUBIN and Clinton.....i can't write anymore, it is so disgusting.

Sun, 07/22/2012 - 10:21 | Link to Comment Dr. Engali
Dr. Engali's picture

Amen.

Sun, 07/22/2012 - 10:37 | Link to Comment Bam_Man
Bam_Man's picture

Rubin, Clinton, Greenspan and Summers. Names that will live in infamy.

Sun, 07/22/2012 - 10:50 | Link to Comment Sisyphus
Sisyphus's picture

Lynnybee,

Why four spaces between sentences? Any special significance?

Thanks!

Sun, 07/22/2012 - 15:30 | Link to Comment lynnybee
lynnybee's picture

4 spaces between sentences.   i had no idea.    my fingers fly, i type so fast , so sorry, will try harder not to do that.   there is no real reason.   but, thanks for noticing !  

Sun, 07/22/2012 - 15:45 | Link to Comment RiverRoad
RiverRoad's picture

Reads like poetry to me.

Sun, 07/22/2012 - 11:30 | Link to Comment infinity8
infinity8's picture

I  feel your pain. When I was young, business transactions were pretty straight forward and honest. In the 80's things started to turn and the 90's brought free-for-all. Everybody working an angle and trying to stick their dirty finger in everyone else's pie - fee fi fo fee fee fee fee fee. Oh to have my 1970's-style 6-7% interest paying Christmas Savings Account back . . .

Sun, 07/22/2012 - 21:07 | Link to Comment JuliaS
JuliaS's picture

"...i remember when bankers were well respected members of the local community."

You do? I don't!

 All I remember is embezzlers trying to blend in with the comunity and earn trust in order to violate it later on. Embezzlement, by definition, is a breach of trust. Can't break something you haven't first secured.

Sun, 07/22/2012 - 09:55 | Link to Comment apberusdisvet
apberusdisvet's picture

Will this be just another way to skirt the title problems?  There may be more than meets the eye here.

Sun, 07/22/2012 - 11:14 | Link to Comment andrewp111
andrewp111's picture

Maybe.

Seizing the property itself (instead of the mortgage) by Eminent Domain would solve the title problems. It would however, leave the borrowers on the hook for the balance of their refinanced and second mortgages.

Sun, 07/22/2012 - 10:00 | Link to Comment Bam_Man
Bam_Man's picture

Rest assured, that when a clever-sounding plan like this is proposed by someone named Gluckstern, it will greatly benefit the someone named Gluckstern and nobody else.

Sun, 07/22/2012 - 09:56 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

A better alternative would be to pass Legislation that says that if a Bank or Lender does not have or cannot produce a Valid Original signed Note then the Mortgage is Null and Void.

There is only one Note and it must have an Original Signature to be Valid.  A copy is not acceptable as a Note.

Sun, 07/22/2012 - 10:17 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

I know that I have paid off Mortgages and the Original Note I signed, once recorded as released was returned to me marked paid.

Sun, 07/22/2012 - 11:43 | Link to Comment Apply Force
Apply Force's picture

We live in different times.  The banks own the judiciary - an electronic copy filed with MERS is enough in almost any state to enforce (through the courts) foreclosure, liens, etc. 

So we not only have a counterfeit currency, but counterfeit mortgage notes - all of which we are forced to abide by, at the point of a gun/jail/etc.  Looking more and more like the tree of Liberty will need watering soon.

 

Sun, 07/22/2012 - 10:03 | Link to Comment Peter Pan
Peter Pan's picture

Looking from the outside in, I see an America that is twisting and turning like a cornered animal not knowing what to do but desperate to do it. I read about scheme after scheme, court deision after court decision, legislation after legislation, all of which amount to the same thing...adding another knot to the Gordion Knot.

America, wake up and bite the bullet before you cop a bullet. Get rid of that damn debt and let that entrepreneurial spirit of yours come surging back in again.

It's time to stop turning America into some kind of human and industrial junk yard which threatens to leave the world on the precipice of chaos.

Sun, 07/22/2012 - 10:13 | Link to Comment 1Inthebeginning
1Inthebeginning's picture

Two sides to every trade.  Someones loss is another persons gain.

Sun, 07/22/2012 - 10:03 | Link to Comment world_debt_slave
world_debt_slave's picture

It started with the American Indians, taking their lands and breaking treaties, they do the same to it's citizens.

Sun, 07/22/2012 - 10:33 | Link to Comment Red Heeler
Red Heeler's picture

During the Civil War Gen'l. W.T. Sherman suggested that the only way to defeat the Confederacy was for the Federal Government to treat all Southerners in the same way that it had treated Native Americans. And so they did.

That was the beginning of the end for the Confederacy. It was also the Beginning of the end for the Republic.

Sun, 07/22/2012 - 10:05 | Link to Comment Heroic Couplet
Heroic Couplet's picture

This is what collapse looks like. The Finance Sector employment will shrink to, oh, 1950 levels.

Sun, 07/22/2012 - 10:10 | Link to Comment 1Inthebeginning
1Inthebeginning's picture

A man had a farm in his family for generations.  A well connected developer pressured the town to seize his property because he could generate greater tax revenues for the town.  The town seized that man's property under eminent domain.  The man sued the town and lost.  A large part of the mans property is now a golf course.  

Wouldn't it be nice if we could actually owned our property?  Wow what a dream, actual property ownership.  Underground mineral rights too.

Sun, 07/22/2012 - 10:34 | Link to Comment Bobbyrib
Bobbyrib's picture

Yep, our country is a corrupt shithole. Bankers and politicians...

Sun, 07/22/2012 - 10:10 | Link to Comment LeisureSmith
LeisureSmith's picture

Something something children waking up homeless in the country their forefathers conquered someting something.

Sun, 07/22/2012 - 10:24 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

I would also require on any Forclosure or Transfer of any property to show a complete chain of Title.  That also includes all of the slices of a loan that were put into different tranches of every investment vehicle.  This would also validate that the Original Loan was only sold once and not multiple times upon origination. I would also like to see all of the transfeer of the investments that took place inside of MERS, where MERS was the recorded Owner.  I would also require that MERS pay Transfeer Tax and Stamps to the Local Municipality for each and every Transfeer of Ownership of the Investment inside of MERS.  If they cannot produce this documentation then the Mortgage and Note are Void and Non Enforceable.

Sun, 07/22/2012 - 10:12 | Link to Comment TheSilverJournal
TheSilverJournal's picture

The liability for US mortgages already has been transferred to the tax payer. The US backs the entire mortgage market. 95% of newly issued mortgages are backed by the US Federal Government. It's the biggest ticking time bomb that nobody talks about. A home is the largest priced item that most Americans own and the entire housing market is false. When the US goes bankrupt, housing is set to drop 75% in real terms.

Sun, 07/22/2012 - 10:33 | Link to Comment Bam_Man
Bam_Man's picture

Yes, at least. When the government defaults, then there will be no mortgage market. Private capital has fled and is not coming back now that homeowners believe that making mortgage payments is "optional".

Imagine what the housing market would look like if all sales were CASH transactions. How much do you think the typical house would sell for? $20,000? $15,000?

Sun, 07/22/2012 - 10:15 | Link to Comment Cisco Kid
Cisco Kid's picture

All that is constant here is that we have some "Gluckstern type" Making Interest on us all....

Sun, 07/22/2012 - 10:24 | Link to Comment dizzyfingers
dizzyfingers's picture

This is the hot potato game.

Passing debt to municipal taxpayers is a dud. Mark to market, force banks to fail. They made the mistake, they should take their medicine.

After all, we've been on the losing end of the interest rate swindle for decades; it's their turn.

Local assessor claims my house is "worth" $395K; we couldn't get $155K at this point but are forced to pay the inflated taxes, with no relief in sight. Assessor won't adjust because of falling "market values".

Bottom line, dump the house, dump the taxes and problems, real estate isn't an investment, it's another swindle. 

Sun, 07/22/2012 - 10:17 | Link to Comment Cisco Kid
Cisco Kid's picture

I have friends who moved back to their homes, not paying loans. They want to make a deal with the banks to stay there. The bank doesn't even know who owns the mortgage at this point...they have no idea who holds the paper on their house.

Sun, 07/22/2012 - 10:22 | Link to Comment ScotlandTheBrave
ScotlandTheBrave's picture

Your home and land are not owned by you. It is owned by the government so they can do as they please with it. Doubt this fact? Pay off that mortgage and then fail to pay the real estate taxes...the "real owners" will sell it a tax auction to new nominal owners.

Sun, 07/22/2012 - 10:25 | Link to Comment Snakeeyes
Snakeeyes's picture

The sheer arrogance of government in property seizures takes your breath away. This was NOT what was envisisioned in the Constitution.

http://confoundedinterest.wordpress.com/2012/06/29/trust-investor-rights...

Sun, 07/22/2012 - 10:33 | Link to Comment mendolover
mendolover's picture

One thing most people aren't aware of about Kelo/Cty of N. London is that the property that was seized by N. London is still to this day a vacant lot.  The developer backed out due to lack of financing.  The fucking lot is a temporary dump! 

http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London

Sun, 07/22/2012 - 10:35 | Link to Comment patb
patb's picture

I think the reason the banks are SH*&ting themselves is that they know that this could scale easily and lots of cities like Detroit, Cleveland,

etc would do this.

 

What this is is "Cram Down" on a regional scale.  If cities with vastly underwater properties were to Eminent Domain these, we would see

the banks 1) Have to face balance sheet writedowns to true current value 2) Lose profitable income streams 3) face severe litigation costs as they dispute these valuations.

 

 

Sun, 07/22/2012 - 10:42 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

If the Municipalities actually bought the Mortgage for even 50% of the original value you also have the problem of paying for everything associated with the Mortgage upon Foreclosure.

The expenses can be a lot more than anticipated.  You have Property Taxes, Association Dues if applicable, Property Insurance (which is extremely expensive for vacant properties), Legal Fees to Foreclose, Property Maintenance, Marketing and Selling expenses, like Realtor Fees, Carrying costs like Interest on the Loan while vacant, etc.  You have fix up costs like painting, drywall repair, carpet, fixing broken or stolen pipes, replacing missing appliances or furnace. You have utility costs or you could winterize the House but then in some area's the sump pump does not work and the House becomes flooded for months on end with extensive mold damage. You also take the risk of vandalism and loss of property value.

Like the Municipalities do not have enough to worry about, they are thinking about taking on a financial obligation of unknown value and all of the expenses implied with its ownership.

Sun, 07/22/2012 - 10:48 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

You then have a Bank like JPM lending the Municipalities the Money to buy all of their non enforceable Mortgages.  When the Municipalities figure out what has happend to them and cannot pay the Debt to JPM, JPM Forcloses on the Municipalities.  JPM gets the Loans back for ten cents on the Dollar and makes a fortune.

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