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The Next Imminent Bailout: Eminent Domain
It seems that governmental efforts to save the underwater and ineligible homeowner from his own fate are reaching fever pitch. Not only do we hear today of the up to $300mm in Agriculture Department Rural Housing Service loans that may have financed ineligible projects or borrowers with a high potential inability to repay the loans; but yesterday's WSJ reports on the growing call for 'eminent-domain' powers to be used by local government officials in California to stop the "housing bust's public blight on their city". In yet another get-out-of-jail-free card, the officials (helped by a friendly local hedge-fund / mortgage-provider) want to use the government's ability to forcibly acquire property to remove underwater homes, restructure the mortgage (cut principal), and hand back the home to the previously unable to pay dilemma-ridden homeowner.
Following last week's bankruptcy in Stockton, it seems cities are increasingly desperate as they reel from the effects of the housing bust - willing instead to use government funds (provided by the working and mortgage-paying taxpayer) to bailout the underwater (and likely not paying anything at all) homeowner. As PIMCO's Scott Simon puts it: "I don't see how you could find it anything other than appalling", as this would crush property prices further and drive up borrowing costs. As we noted earlier, until these mal-investments are marked to market, there will be no useful growth in our credit-bound economy but transferring wealth to the 'mal'-investor seems like a terrible idea.
The percentage of underwater borrowers remains staggering...
But fraudulently 'giving' these homeowners money is not the way to go:-
Heritage: Ineligible Borrowers Got Hundreds Of Millions In Stimulus Home Loans
The Agriculture Department’s Rural Housing Service likely loaned hundreds of millions of dollars to ineligible borrowers as part of President Obama’s stimulus package, a report by federal watchdogs has revealed.
The stimulus earmarked more than $1 billion for RHS home loans in rural communities. According to the Ag Department’s Inspector General, up to $292.3 million of those loans may have financed ineligible projects, or gone to borrowers that did not meet the loan program’s requirements due to their potential inability to repay the loans.
...
Rural Development field-level personnel made these questionable determinations because they were not sufficiently trained on how to either conduct or adequately document proper determinations; did not have an effective second party review process in place to catch errors; and did not have sufficient guidance on the characteristics and requirements needed for a property to become eligible. Rural Development conducted a follow-up review of the questionable loans and agreed that they were not fully processed in accordance with regulations or handbook requirements.
And 'giving' them principal writedowns seems to just be rewarding the mal-investor once again...
Wall Street Journal: Cities Consider Seizing Mortgages
A handful of local officials in California who say the housing bust is a public blight on their cities may invoke their eminent-domain powers to restructure mortgages as a way to help some borrowers who owe more than their homes are worth.
Investors holding the current mortgages predict the move will backfire by driving up borrowing costs and further depress property values. "I don't see how you could find it anything other than appalling," said Scott Simon, a managing director at Pacific Investment Management Co., or Pimco, a unit of Allianz SE.
Eminent domain allows a government to forcibly acquire property that is then reused in a way considered good for the public—new housing, roads, shopping centers and the like. Owners of the properties are entitled to compensation, which is usually determined by a court.
But instead of tearing down property...
The municipalities, about 45 minutes east of Los Angeles, would acquire underwater mortgages from investors and cut the loan principal to match the current property value. Then, they would resell the reduced mortgages to new investors.
...
The seizure of home-mortgage liens, but not the underlying homes, hasn't ever been conducted through eminent domain, as far as the group's principals can tell. And while they believe they have a strong legal case, they expect loan owners to sue.
"California legal precedent and political posture favor the program and constitute an ideal proving ground," Mortgage Resolution Partners said in a presentation to investors reviewed by The Wall Street Journal.
The document said it would begin with a $5 billion effort in California that could grow to three million mortgages as part of a $500 billion multistate effort.
...
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.
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And the banks and financial houses win again, middle class responsible taxpayers lose. Anyone really surprised?
Imminent Dominions for $1000 (million) Alex...
And the (nearly bankrupt) local governments take the writedown instead of the banks. This idea is just sick and unfair enough to actually happen....
What? Read TFA before you react please.
Government flips the mortgage for a small profit. The investor (bank, fund, etc.) is forced to take a loss.
The banks most certainly do not "win again."
This is a bailout of underwater homeowners who have made timely payments. It is not a bailout of banks, or delinquent borrowers, or strategic defaulters. In other words, it is a bailout of the ACTUAL victims of cabal manipulation of credit.
I'd prefer no bailouts at all. But this is a much more sensible bailout than any that have preceded. Far better than making banks whole, and STILL letting them take the house!
bullshit.
you are completely wrong, despite being techinically correct.
this is a bailout of banks because without programs like this-----the banks would suffer further deterioration and be subject to more lawsuits.
this 'bailout' of homeowners will be structured to ensure no banks go out of business as a result, particular the primary dealer banks---and the fed--who at this point owns more of the garbage on its books than the pd's used to.
by going the traditional path of refinancing----which yields plenty of fees to the banks------the 'eminent domain' will ensure the banks don't get screwed big time.
i'd rather see the banks get screwed and go out of buisness than see a few million homeowners kept in their homes for an extra few years----because in the end of the day, these bailouts DO NOT create income for homeowners and will not result in homes that can be sustainably lived in while paying off the mortgage. it's not about being 'Underwater' it's about income stability relative to ability to pay off teh mortgage.
these bailouts will keep banks alive, or not directly force them out of business. that means the large banks continue to run the corrupt system which screws over people who want to work, people who want income. i could care less if they own or rent or live in someone else's house as a guest-----they are all people willing to work and they deserve not to be absued by a government/banking system depedendant on fraud and bailouts. fuck the homeowners who want to stay in their houses. they SHOULD leave. this is the price of their suffering that , collectively, will result in massive wave of anger piling up against the banks and eventually overwhelming them. politically, pain and suffering is required to get to a point where changes are made.
The problem with your approach is that the crooked, lying, thieving 'banksters' will still make out, as they'll simply leave the situation as it is, and keep hounding the poor, hapless underwater (doomed) homeowners for whatever they can get. Their properties are going to deteriorate (totally screws over the cities and/or counties) and results in additional reductions in overall market values. The end result being that you have municipalities and counties with a multitude of neighborhoods with still declining values, with the areas are now also physically deteriorating. Who wants to buy into a deteriorating marketplace?
And by doing nothing, there's no impact on the banksters. Everybody else suffers.
As long as the banksters can accomplish two things, they're golden - (1) Avoid having to "Mark to Market" on the properties they hold paper on, and (2) Avoid having to take possession of the properties and account for them on their books. For them, it's all about the time element in the process.
In the meantime, units of local government are getting killed. Most municipalities aren't floating this idea to bail out the banksters - you talk to most of the local officials and honestly, they want to string those people up for how they are treating their communities. They're just trying to come up with some type of an alternative to what they are seeing happening right now - which is a sustained deterioration of foreclosed and underwater properties in their communities. And it's a growing problem.
Most of these people aren't ideologues, btw - They are just average, everyday folks trying to figure out a way to save their communities. They've already figured out that the banksters don't care.
What's your answer?
Proving it pays to PAY off the politicians Warren Buffet has his hand in this and so does Soro's they paid off obama. What a deal Buffet's ratings agency lied on MBS, the taxpayer bailed out his billions and now he'll get to make Billions more off this scheme!
Investors With Ties To Buffett, Soros, Obama Plan Mortgage Eminent Domain Grab
http://www.futureofcapitalism.com/2012/06/investors-with-ties-to-buffett-soros-obama-plan
Buffett Extends Real-Estate Bet With ResCap Pursuit: Mortgages
http://www.bloomberg.com/news/2012-06-18/buffett-extends-real-estate-bet-with-rescap-pursuit-mortgages.html
Hot new filing claims internal docs show rating agencies lied on MBS
http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=51259&terms=%40ReutersTopicCodes+CONTAINS+%27ANV%27
Buffett’s Betrayal
http://blogs.reuters.com/rolfe-winkler/2009/08/04/buffetts-betrayal/
this has to be one of the stupidest ideas I have heard in a long time.
Eminent domain seizure is about the govt seizure of private property in the rare occasion that the govt needs or wants said property for a better use which will benefit the community as a whole. House flipping does NOT fit that use. This will never ever work.
It will be wildly successful in order to justify doing more of it. Then it will be a complete and crashing failure.
Banks would have to finally show their loses, making them insolvent, making our entire banking system collapse.
Well in that case, I am definitely for this plan.
you think something promoted in the wall street journal owned by fox news and ultimately backing the FED JPM and banksters is going to HURT THEM???!?!?!??!!??!
Good take, cdy. I like it. Anthing that destroys bankstas is positive. Fuck the system. Embrace Entropy.
Isn't LIEBOR going to do that?
Really? http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London
I agree it SHOULD never work. But that's not how it's GONNA work...
https://www.legalzoom.com/us-law/supreme-court/supreme-court-series-i-eminent
I can't find anything that makes sense, but does this have anything to do with Agenda 21? Is there someone out there with a factual understanding of this that can weigh in?
I'm not sure what it is, but there sure are a lot of people talking about how this is going to affect everyone down to the local municipal level, and this ED/mortgage thing sounds really bad.
Not since the Kelo decision by the Supreme Court. It may now be used to seize any property for any reason. And they'll use it to seize gold, silver, guns, or any other property at some point, I imagine.
Haha yeah good luck with that. Hope they got a SWAT team or ten on standby per municipality if they try. That's assuming the SWAT team members even go along with it before turning on their masters.
See the SCOTUS holding in Hawaii Housing Authority v. Midkiff. Essentially, almost any government action under the police power satisfies the public use requirement: "Where the excercise of the eminent domain power is rationally related to a conceivable public purpose, a compensated taking is not prohibited by the Public Use Clause." http://www.law.cornell.edu/supct/html/historics/USSC_CR_0467_0229_ZS.htm...
So the banks that made the bad mortgage win?
Seems like they lose. They are forced to take less for the home, thus taking the hit for the principal write-down. On the other hand, they may be able to write down the loss more directly since it was a gov action.
we are talking hundreds of billions in loses, you think our banks can take that hit? umm no..
Creative accounting is the only thing keeping them above water.
I don't care if "they can take the hit" or not ,, screw them ,, the losses are REAL ,, and we are all paying for it RIGHT NOW and in a very real way... let them take the hit ,, they created the problem ... there are PLENTY of banks that can and will pick up the pieces...this is the perfect time for them to turn to dust along with their hundreds of trillions in derivatives.
It's called Capitalism... embrace it.
Absolute prize dicks - the people who actually kept up with their mortgage payments.
I"m having to keep paying an underwater mortgage, cause it's USDA insured for 90%. The USDA goes after ur Ass if you default. I'm unemployed now, but as soon as I got a Job or SSI, whatever.The USDA will garnish from my paychecks, including collection costs. May have to look into Bankruptcy, or Expat.
From the WSJ "
The USDA is wielding its special powers even as the Obama administration is forcing private banks to give strapped homeowners a break. Under a $25 billion settlement over questionable foreclosure practices announced in February, five large banks agreed to slash loan balances and forgive the debt of borrowers who lost homes to foreclosure.
USDA Rural Housing Administrator Tammye Treviño says the agency strives to work with borrowers "to offer a path back to sustainability."
"Where these efforts aren't successful and the homeowner goes into foreclosure," she says, "we actually have a process that we are required by statute to follow to collect on the debts owed."
USDA officials say their actions are required by the federal Debt Collection Improvement Act of 1996, enacted well before the housing bust produced a wave of delinquencies. They say the agency came under pressure from its own Inspector General in 1999 and from the Government Accountability Office a few years later for being too soft on delinquent borrowers"
http://finance.yahoo.com/news/usda-is-a-tough-collector-when-mortgages-g...
eminent domain
when all other arm twisting and thumb breaking techniques fail.
Sounds like the former soviet union's central planning has found a home in cali ... Is it much of a stretch to think they won't just take your property all together. The plans backers are unfazed. Someone needs to show the second Ammendment to the unfazed.
Correct, even better is the fact that the leadership that casued the mess will be rewarded. Yeah this will end well.
The reward is proof that they were right and deserve to be elitist.,
Laughable, just back up a second. How does a broke, city, county or state actually do or buy anything?
American's have been doing and buying stupid shit for some time now so, um... magic?
From the WSJ article:
"For a home with an existing $300,000 mortgage that now has a market value of $150,000, Mortgage Resolution Partners might argue the loan is worth only $120,000. If a judge agreed, the program's private financiers would fund the city's seizure of the loan, paying the current loan investors that reduced amount. Then, they could offer to help the homeowner refinance into a new $145,000 30-year mortgage backed by the Federal Housing Administration, which has a program allowing borrowers to have as little as 2.25% in equity. That would leave $25,000 in profit, minus the origination costs, to be divided between the city, Mortgage Resolution Partners and its investors."
Based on the article, this is a forced write-down on the current holders of the notes.
I'd be a seller of any and all MBS with CA mortgages in them...just in case.
I agree. Boy this would generate all kinds of fees and paper to be pushed all the while ignoring the structural problems. Default assholes. Oh yeah, and wages actually matter.
Muni bonds are packed with MBS, as well as mutual funds, treasuries, and a whole other hodge podge of securities in the market. Not to mention the public pension funds. Weeeee!!!!!!!!!!!!!! Sell 'em all baby.
Downvote because those investments are not packed with MBS? HAHAHAHHAAAAAAAAA
Which is what caught PIMCO's attention ...
One way or another, treasury holders are gonna pay for this, damn it. The Bernanke says so.
Doesnt matter what a judge thinks its worth a 300k note is a 300k note. If a homeowner is forgiven 150k, he will have to pay taxes on that.
This whole idea is beyond dumb. According to this the homeowner would still be under water. The market would be flooded with cheap housing, which not avialble to the general public, but will drive down price.
Banks having to declare and show these loses of course go insolvent and our entire banking system fails and seizes up.. Yeah good plan.
What I see happening here is the beginning of the decentralization trend. Individual cities are now circling the wagons to protect their own at the expense of the current investors in those mortgages who may not be part of that community.
Let's see where this potential trend goes....
Complete collapse of this piece-of-shit, corrupt, fraud-ridden, fat, lazy and stupid former great republic would be a wonderful start.
I shudder when seeing a workout plan where the buyer gets a loan on a $120K note for $145K so the sharks can skim $25K for puffing the deal. This is no different than getting an over-appraisal on a crap investment (leased machinery, car loan or home mortgage) where the sellers and loan brokers get a huge takeoff in collusion with the lenders, or by just defrauding them, and leaving the note signer as a long term, "no one will figure this out" bag holder. This is a classic scam in the appraisal and financing markets.
Why not refi the $120 note at $120K or is that too simple a question? If there are $25K in fees, then something is terribly wrong.
Remember that the market value is said to be $150,000 in this example. And this transaction is going to force the note-holder to accept $120,000 on a property with a market value of $150,000?? Why wouldn't the note holder just foreclose and sell the property at market value himself? Maybe because the market value isn't really $150,000?
Wow. I can't wait to see the chain of title on those turkeys.
From the article: "....until these mal-investments are marked to market..." What? You mean impair the basis of these loans as held on the bank books at full value? No can do, dude. That would mean that the banks would have to be recapitalized... again, and again, and again....
"this is a forced write-down on the current holders of the notes"
Yes, holdbuysell, which begs the question, "Who is the current holder of the note?" The mortgages we're talking about are the ones most underwater, i.e. the ones made at the end of the bubble to the least qualified borrowers, bundled into mis-rated tranches and scattered to the four winds of MERS.
Somebody's going to eat it, but they won't go along quietly.
One thing that might f it up is that California is broke.
That doesn't stop capital hill. Monkey see, monkey poo.
Earlier post on zh today (Washington) discussed how the Libor diddling screwed municipalities and home borrowers.
All together now, let us all blame the victims.
Divide and conquer class warfare at its finest.
Remember the old saying, 'Laughing all the way to the bank'?
Now it is the banks that are laughing.
Keep your eye on the real enemy folks - it ain't those deadbeat underwater homeowners.
So many of the foreclosures were related to ARMs, which are directly related to Libor.. I would be curious as to see a timeline of Barclay/BOE emails and arm resets that resulted in foreclosures.
The destruction of the banking sector was a controlled demolition indeed. I guess I understand why there were so many bets placed on the failure of these loans, because those who placed the bets against their own loans were at the detonator.
ARMs have adjusted down since 2006, so... turns out that isn't the problem. The ones that reset higher when LIBOR actually represents real market rates may ultimately have a problem though.
I'm sure this will work out well..choke ...choke..but what do they expect? The banks have been complete assholes when working with people under water. It seems to me that the central planners would be rewarding bad behavior on both sides. Banks who should never have made the mortgages (and might actually get repaid some of the loan) and borrowers who should never have taken them. The bigger issue is the basturdization of eminent domain.
The 'basturdization' of eminent domain was finalized in Kelo. Private party to Private party for tax revenues. Not a single private property in the US has been safe since...
someone check the Golden Gate Bridge for Bill Gross !!!!
dup
dup
All these bailouts are good for gold and gold trading.
Actually I think Amricans should treat poor public policy enacted by elected officials as acts of treason against the United Stares. These treasonous acts should be punished to the full extent of US law.
Uh-huh. You mean like all the other illegal shenanigans have been prosecuted? Good luck with that.
"Law" is not in the lexicon of the former, current, nor future administrations.
So, you actually think their is LAW in the US. LMFAO
Look at that chart, in particular DC.
Why isn't that way up on the list??? hmmm......
a universal settlement with printed money that keeps banksters out of jail...didn't see that one coming.lol
after all JPM will soon lose put back cases totaling 200 Billion on Bear Stearns MBS.
Don't mess with LaRaza - and we know that's where all the money went, to illegals.
Yes ITIN home loans qualify for CA's $100,000 homeowner/aliengrifter relief program-(financed by the feds).
Don't forget Bell CA, where the average per capita family income is $29000-(and they have big families in Bell) http://www.zillow.com/homes/for_sale/Bell-CA/ You too can buy into alien ghetto hood central for the mere price of 250,000-$950,000 for a 90 year old shack on Gage Ave.
the property tax rate is 1.57%* so suppose you buy into Bell @ 300K you owe $4710** in taxes on your ghetto hood every year.
*but that 1.57% tax rate depends on prices remaining where they are, with every drop in value everybody in the city tax district GETS AN INCREASE.
Great, my house got re-assessed from 300,000-to 250,000 but the rate went from 1.57% to 2.5% and your taxes go from $4710 to $6250-which causes more people to leave and lowers prices further causing another tax increase.
Welcome to the Detroit death spiral.
The banks levereged their home loan fraud bubble into an ever bigger municipal debt bubble, those losses have to be written off too.
Government is going eminent domain crazy (as in Marxist/Fascist asset seizures).
Look at what they are thinking about for seizing distressed mortgages.
http://confoundedinterest.wordpress.com/2012/07/03/california-passes-new...
In this environment, there is a lot of competition for 'stupidest idea ever', but this is surely a contender.
1995 was arguably the bottom for housing prices in Southerna California the last time we had a boom bust cycle. the market peaked summer of 1989 and only began to recover after banks, et al, started blowing out inventory. New investors stepped in on a much better price basis and the market was rolling again nicely, within 3 years.
This strategy, not so much. But think of all the _____ we're savi...never, mind. What a waste!
Crony Communism obama and buffet Investors With Ties To Buffett, Soros, Obama Plan Mortgage Eminent Domain Grab
http://www.futureofcapitalism.com/2012/06/investors-with-ties-to-buffett-soros-obama-plan
Buffett Extends Real-Estate Bet With ResCap Pursuit: Mortgages
http://www.bloomberg.com/news/2012-06-18/buffett-extends-real-estate-bet-with-rescap-pursuit-mortgages.html
Hot new filing claims internal docs show rating agencies lied on MBS
http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=51259&terms=%40ReutersTopicCodes+CONTAINS+%27ANV%27
A Huge Housing Bargain — But Not for You
http://www.thestreet.com/story/11224917/a-huge-housing-bargain%E2%80%94but-not-for-you.html
(Warren Buffet's) Wells Fargo Partnered With Insurers To Rip Off Homeowners Class Action Lawsuit Alleges
http://www.propublica.org/article/banks-colluding-with-insurers-to-rip-off-homeowners-lawsuit-alleges
Buffett’s Betrayal
http://blogs.reuters.com/rolfe-winkler/2009/08/04/buffetts-betrayal/
Powerful articles, particularly on Buffett, Soros and Obama. Thanks. The California program is just straight welfare to the Mexicans. As soon as you can see someone like Soros interested, you know it’s so he can put government money in his pocket, And to have Soros and Buffett together shows you who Buffett is.
Throw in Steven Gluckstern, as the article points out, and you can see from what direction the program is coming – the socialist left.
The grafs below from the Domain Grab story are especially enlightening as to how government either is or is in bed with these people:
“The Mortgage Resolution Partners Web site says Mr. Gluckstern ‘worked for investor Warren Buffett and served as General Manager of reinsurance operations of the Berkshire Hathaway Insurance Group.’ Also according to the Mortgage Resolution Partners Web site, the firm's chief of staff, BJ Greenspan, ‘comes to MRP most recently from the Institute of New Economic Thinking (INET), founded in the aftermath of the most recent financial crisis, where she helped to launch their efforts and served as Chief of Staff.’ The Institute for New Economic Thinking was founded by hedge fund manager and philanthropist George Soros with a $50 million pledge in 2009 and a $50 million follow-up grant in 2012.
“The Reuters article reports that Mortgage Resolution Partners ‘is working with investment banks Evercore Partners Inc and Westwood Capital to find institutional investors interested in providing the billions of dollars necessary to fund the condemnation process on a significant scale.’
“Evercore is led by Roger Altman, a Clinton and Carter administration official who was mentioned as a possible successor to Lawrence Summers as President Obama's chairman of the National Economic Council…”
I'm trying to figure this shit out and all I can come up with is some financial engineer is off a-fuckin' the homeowner and local gubamint.
Again.
And this time, both at once.
Brilliant.
What with the state of the underwater homeowner and local finances, this truly gives new meaning to the olde Wall Street adage, SkullFuck.
Pure genius. Wonder who is buying of whom to get this program made politically palatable. Can there be a VIP imminent domain program?
Apparently CountryWide uses its VIP loan program to buy congressmuppets and get unfavorable legislation halted. In other news Kennedy was shot.....
A VIP mortgage program run by now-defunct Countrywide Financial Corp was used
to influence lawmakers with the aim of killing legislation that could hurt the
company's profits, a congressional report released on Thursday said.
The congressional report said a Countrywide lobbyist, Jimmie Williams, would
route individuals in Congress who needed a new loan to the VIP program. Those
with problems with existing loans were referred to a select customer-service
unit, the report said.
Williams used the program to "create a favorable impression of the company on
Capitol Hill," it said.
http://in.reuters.com/article/2012/07/05/usa-housing-countrywide-idINL2E...
At least we can all be comforted by the fact that Mozilo had to pay $67M (10% of the $600m what he "made" at countrywide) in a penalty to SEC for "misleading investors about suprime".
Answer Warren Buffet
Investors With Ties To Buffett, Soros, Obama Plan Mortgage Eminent Domain Grab
http://www.futureofcapitalism.com/2012/06/investors-with-ties-to-buffett-soros-obama-plan
Anyone still holding onto CDO/ABS after 2008 deserves a write down for being an idiot. It is just a vehicle to dump the risk of a two party loan onto some unsuspecting 3rd party.
First of all, this plan is silly. Now that we've established that, all the "sky is falling" rhetoric from these banks/lenders about how this will make borrowing costs go up and it's a disater are crying crocodile tears. Same argument is used to perennially block the ability of a residential homeowner to file for a Chapter 11 type bankruptcy with a cramdown, re-structured mortgage (which is of course par for the course in commercial transactions.)
I'm getting dizzy here reading all the comments! Who is getting fucked? The bank (mortgage holder)? Or the Occupier (supposed owner)? Maybe the FED (I wish)?
Let housing values depress, you fucktards. That's part of the cycle! I feel sorry for no one... many homeowners don't even get the fact that if they'd just let go, they would be in a position to buy not too far down the road for a home that costs less. If you would have let go of that house two years ago you'd be sitting in the batter's box right now.
EDIT: I think you stand in the batter's box? You'd be up to bat!!
Housing values have dropped, but so has the value of a dollar, so the prices we see remain roughly the same.
moved
And are we surprised this begins in CA. The state with the absolute dumbest, and most corrupt politicians on the planet. What a disaster this will be. This will go nowhere. How can anyone with an IQ over 15 think this would work.
Tell that to the jack-booted thugs (who won't even be legal citizens) when they show up on behalf of the city to negotiate.
And who eats the losses on these mal-investmnets? The taxpayer, as usual!
It is an interesting plan proposed by Mortgage Resolution Partners (MRP) and Prof. Hockett of Cornell Law. It is simply a transfer of title from one investor to another. The local government will not put up any cash, as the new investor simply bids on a mortgage, the county takes this money, then uses eminent domain on the original investor. Essentially, the county government is being used as a pawn for wealth transfer (MRP takes a profit). It would writedown asset values, but I don't think it would work - it will be a legal nightmare.
By paying current note holder market value, it can be seen another way - as forcing mark to market, when all kinds of tricks have been employed to prevent that.
There are so many people who are lined up to buy at true market prices (me being one of them), but nobody holding the market up wants to take the pain. WAAAAAAAA! A hole has been dug for RE, the likes I have never seen.
Paging Bill Gross, paging Bill Gross, please check the value of your MBS.
You have. I want.
Big Brother
Well you could do like some counties and keep the appraised property values at pre-recession levels until you tax out the marginal property owner. Then sell it to a fellow government employee for half price.
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/reo/goodn/gnndabot
This means the new .gov employee/owner will be paying less than half in property taxes of what the previous owner was forced to pay. If the county had marked to market the property, the original owner may not have been forced out.
I'm no longer surprised at anything .gov does.
this is such a perversion of the Constitution's eminent domain clause it can in no way be reconciled with the original text. Kelo v New London was an insane, subversive decision but it was at least properly confined to the question of seizing actual physical real estate. so we're now stretching that bastardization of the Constitution to cover any property, real estate or otherwise? that is literally criminal. under this logic the govt could forcibly seize your car if they decided, for any nutcase reason whatsoever, that there was a better public use for it.
All the loans were hypothecated before they were written after about 1998. The investors are only now realizing that their money bought milions of people's obligations and due to the way the MBS were written, they can only go after the banks that knew what they were doing all along. MBS paper has always, always been known to the issuer to be garbage. If people understand this piece of reality, it will change the equation. Everyone of them got screwed by the Libor skim, every month, every year. How much more?
It's FREE!
Much better then Flipping Houses....FREE money.....free health care, free cell phones, free food, even a free golf cart....and on and on......
Why pay for anything when it's all FREE?!
No one buy until everyone who doesn't have a legitimate reason for hanging on to their underwatr RE stops making the payments. Then you see what happens to TPTB as they try to hold up this RE market.
This sense of obligation towards making the payment when you are fucked two ways to Sunday has got to be rejected, people. Drop the checkbook and let the place go!
FYI - When prices tumble and people are lined up to buy a home at truly affordable prices, the TPTB will find a way to get them financed. I've personally witnessed the description I give you, twice in my career.
EDIT: Of course, what I am suggesting will never happen...
Unfuckinbelievable
Criminal banksters, criminal Wall Street, criminal government.
Destruction of the middle class is the goal and they're one step closer every week.
People are better off renting... you never truly own your home anyway. Stop paying the real estate taxes on your home and see what happens.
I don't give a shit what they do, one cartel stealing from another. Go for it.
Renters also pay property tax, you know.
Well, this is no surprise, Apple is in the works of a mini IPad and it's customers need cash.
Wow. Another brilliant idea coming from the broken golden Moonbeam state. Geez, if they can't build their FEMA train boondogle, even with violating their own draconian environmental standards, what could go wrong with this? CA is clearly not guilty of stupidity by reason of insanity.
Underwater for real? (http://en.wikipedia.org/wiki/File:NederlandvolgensNAP.PNG)
Or just Disney Dollars?
Why is everyone so surprised?
Look these f'wads know exactly what they are doing and the effects it will have. They just don't care because they are getting free money from the tax payer.
Listen carefully.
These people, the politicians, were chosen based on their PROMISE to take something from someone else and give it to "you", the voter.
If you vote for a criminal, you get a criminal.
It's really that simple.
The Investors lose.
Chain of title is bullshit.
Loaned money is spent already.
House continues to fall apart. Ever notice how a home can stand for 40 years in good health and then when abandoned or evicted etc they fall apart fast?
My solution.
A CAT D9 Bulldozer and a few hours time converting said properties... PLURAL... into lots ready for new rezoning.
What an idea! Just a few steps removed from declaring eminent domain on fully paid homes (like mine), and selling them to cover Illinois public pensions. Fuckin maggots...
I am one of the hard-working middle-class dumbasses who has been dutifully paying my mortgage every month. Since I took out a loan I could afford, and have equity in the property, I have some incentive to keep playing the game. But this news coming out of CA has got me thinking this afternoon...
My first line of thought was why should I keep paying my mortgage? And then, based on several ZH commenters hoping that they system would just finally collapse, my mind took the next logical (logical by ZH standards anyway): Why don't we all just stop paying our mortgages? Lets shut this mother down. Why wait for the system to collapse from its own corruption? Lets bring it down ourselves. Lets pick a date, spread the word (quickly to prevent govt. intervervention), and just stop paying. Save the money and pay the property taxes (I hate to do it, but this may keep the govt types at bey just long enough to make our point), but lets just stop playing the game.
With all the leverage and toxic shit on the books I am sure there has to be a tipping point that could be reached pretty quickly. And if all of us normally on-time payers take a couple months off at the same time, the bankster would not have the resources to even come close to chasing us all down. Their corrupt ponzi would come crashing down before the Bernanke could even say the words quantitative easing.
What do you think ZeroHedgers? Those of us paying all the taxes, those of us responsibly propping up the gubmint and the bankster just need a little holiday. Atlas, take a break and shrug them shoulders...
Secession anyone?
In.
Toxic is bankster talk for fraud . House prices in the last 10 years were based on fraud . Fraudulent incomes , savings , appraisals and MBS fraud . Why would you keep paying for a fraud ?
The last 3 sentences of the article were omitted ...
"... 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."
What I suspect is that over a period of time virtually ALL housing will revert to the ownership of banks. The banks in their new form will become property owners and banks will find a new niche as pawn shops.
PIMCO Bought the fraudlent MBS they expected the government to buy it from them at a premium. Looks like PIMCO didn't pay enough bribes yet . Keep going you'll get the price right . USA for sale by the politico.
Malinvestment is banksters code for fraud . Forgery = sloppy paper work . Theft of funds = vaporized. Perjury = to complicated for plebs to understand . Securities fraud = uncalculated risk adjustment . 90% of mortgage fraud was committed by the banks 100% ot MBS fraud was committed by the banks . Financial crisis inquiry commission .
On another note, I watched that movie, "Dreams From My Real Father" and it seemed a bit CIAish because although it let you know Obama lied about his cow herding Kenyan pappy it made you feel like letting him off the hook because he was born into such a crappy situation.
I still vote to impeach him for being whoever he is.
This might sound boring but it seems to me that the moral foundation of individuals, governments, corporations and organisations is largely destroyed. Banking scams, meddling in other people's ountries, enslavement through education debt, sub prime loans, etc etc are all the result of severely damaged morality. Money is just a tool which turns into a weapon of destruction when it has no moral compass.
I see the "eminent domain" idea as containing less moral hazard than ZIRP forever to continue propping up insolvent banks. I would want to make sure, however, that bailed out borrowers have to forgo any future gains on sales, up to the loan foregiveness portion, which would be remitted back to the mortgage/bondholder.
The groups that are objecting to it get no sympathy from me:
American Securitization Forum
Mortgage Bankers Association
American Bankers Association
Association of Mortgage Investors
Pimco
I left one out fraudlent mortgages = toxic mortgages thats what PIMCO bought toxic mortgages .
Given that there was a housing bubble, heck yeah, cut principal. Complaints go to Alan Greenspan who didn't see a bubble and called the housing market "frothy" in certain locations. Bullcrap. I remember the quote on a cover of a magazine. There is no reason for a bank to stockpile houses. If each CEO at the bank has ONE house to live in, that's plenty. Goes for the clown roMONEY. There is no reason for a bank to stockpile houses, tulip bulbs, old drivers licenses, or bicycle seats.
no free houses bitchezzzz!!!
I eageraly wait when the life support quits working on the zombies and they are finally left dead.
Once the scammee is locked into a mortgage at 10,7, or even 5 percent that they cannot pay, then who should benefit from the principal write down and inevitable refinancing at 3 per cent or lower?
Pick your masters wisely....
Winners: Statists, Banksters, underwater debtors.
Losers: Working, taxpaying Americans.
Same as it ever was.
At some point, the working, taxpaying American is going to have to decide where to take his stand. Is John Roberts' betrayal of the Constitution the place to say, "no more!" Is Obama's re-election? Is the confiscation of gold? Just where, in all of this "transformative" Statism is the place where, like Howard Beal in NETWORK or like Samuel Adams in 18th C Boston, we say we won't take it anymore?
Why does everyone think that this hurts the banks? It hurts everyone - what do you think your Pension Fund is invested in? How about your Fixed Income Mutual Fund? Of the $42 trillion of debt in the US - over 30% of it is in mortgages, so it hurts you and me. Who do you think guarantees most of those mortgages - you guessed it again, us the taxpayers of America. This little county is basically saying that their citizens get to benefit at the expense of all the rest of us. If they are successful, then other counties will follow suit until eventually some little state far far away is going to say enough, and stop paying for other people's mistakes.
South Carolina seceding from the Union comes to mind as a potential scenario...