Our friend, Teri Buhl and Congressman Brad Miller (D-NC)  have both written two of the best pieces I’ve seen on this.  

Did San Bernardino County Violate California’s Brown Act in Eminent Domain Talks?

Teri Buhl, www.teribuhl.com

Groups that represent the interest of mortgage bond investors have been caught off guard by a move San Bernardino County, Ca might make to use eminent domain to buy underwater mortgages with the help of wealthy private investors and a San Francisco based venture capitalist firm. Today the Southern California County held it’s first public hearing on the subject and Greg Devourex, county CEO, started the hearing stating they’ve been working to address the issue openly with the community and ideas will be thoroughly vetted in public. But concerned residents and local real estate brokers say they only heard about the plan through press reports last month nor have they actually seen any plan proposals.

Representative of powerful financial investor groups like SIFMA and the Association of Mortgage Investors told me the newly formed joint protection agency hasn’t come to them for viewpoints or research on how this would affect mortgage investors, borrowing rates in their area, or the securitization market. SIFMA has clients like PIMCO and Blackrock who’ve bought billions of residential mortgage securities for investors and even pension funds that could be effected by the plan. They clearly have a role to lobby for only one of the players the plan could affect but they also have deep industry research and data to help elected officials, in one of California’s lower to mid income areas, make informed decisions. I found it interesting that Devourex, or city officials from Fontana and Ontario who also want to use the plan, didn’t think these industry groups were worth speaking with. It wasn’t until the industry groups proactively sent letters of concern that a special public hearing magically happen.

Read more here

No Wonder Eminent Domain Mortgage Seizures Scare Wall Street

Brad Miller (D-NC), American Banker

There is a great disturbance in the force.

Wall Street’s political operatives — the American Bankers Association, American Securitization Forum, the Securities Industry and Financial Markets Association, and the Financial Services Roundtable — wrote a panicked letter to the Supervisors of San Bernardino County in California to express “strong objection” to a proposal by a startup mortgage company. The letter conveys the unmistakable threat that Wall Street will sic its lawyers on the county and will “likely be reluctant to provide future funding to borrowers in these areas.”

The proposal is that the county use eminent domain to buy underwater mortgages, almost half the mortgages in the county. The mortgage company, working with the county, would then negotiate new mortgages with the homeowners that they could afford. If the proposal worked as planned, the county would get relief from the foreclosure crisis, the mortgage company would make a profit, and the idea would spread to other counties and towns.

A legal challenge by Wall Street might be expensive to fight, but the arguments are pretty flimsy.

Eminent domain is commonly used to buy land for projects like roads and schools. Existing law allows the use of eminent domain to buy any kind of property, however, including even intangible property like trade secrets. There is no apparent reason that eminent domain could not be used to purchase mortgages.

Read more here

 

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