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(San Bernardino Sun)   New way to fix underwater mortgages -- have government take the mortgage from investors using eminent domain, then sell it back to the occupants   (sbsun.com) divider line 120
    More: Asinine, partners, eminent domain, Mortgage Resolution, market failures, request for proposal, board of supervisors, mortgages, investors  
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1253 clicks; posted to Politics » on 09 Aug 2012 at 2:01 PM (2 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-08-09 11:44:07 AM
This is me, weeping for the investors.
Wah.
 
2012-08-09 11:53:35 AM
You mean use eminent domain for good rather than evil?

4.bp.blogspot.com
 
2012-08-09 12:05:20 PM
Eminent domain is actually a pretty quick and clean way to clear title issues.
 
2012-08-09 12:26:53 PM
Those poor, poor predatory investors and banks.
 
2012-08-09 12:30:54 PM
Sell it to the same occupants that didn't have enough money to pay the mortgage in the first place?

I don't think you've thought your cunning plan through.
 
2012-08-09 12:39:19 PM
It's worked well for business. Especially those with friends in local government.
 
2012-08-09 12:41:31 PM

Krieghund: Sell it to the same occupants that didn't have enough money to pay the mortgage in the first place?

I don't think you've thought your cunning plan through.


You new to business? There are many examples of why this works. Here's one:
 
2012-08-09 12:45:32 PM

ecmoRandomNumbers: Those poor, poor predatory investors and banks.


Like your grandma, and her annuity full of mortgage-backed securities, or all the public employees' funds invested in the same funds?

It's not all the louts on Flip That House.
 
2012-08-09 01:10:59 PM

edmo: Krieghund: Sell it to the same occupants that didn't have enough money to pay the mortgage in the first place?
I don't think you've thought your cunning plan through.

You new to business? There are many examples of why this works. Here's one:


I must be, because I have no idea how that has anything to do with the subject at hand.
 
2012-08-09 01:17:51 PM
Interesting...
 
2012-08-09 01:19:52 PM

Krieghund: Sell it to the same occupants that didn't have enough money to pay the mortgage in the first place?

I don't think you've thought your cunning plan through.


The houses were overvalued and, in many cases, homebuyers were intentionally pushed into loans they couldn't repay even when they qualified for ones they could.
 
2012-08-09 01:34:54 PM
If this were to catch on and be rendered constitutional, it would be disastrous for consumers trying to get loans in the future. The risk that the property could legally be bought by the government during a market turn and sold back to consumers at less than the loan value would be a new factor in underwriting the loan, resulting in higher interest rates, higher credit requirements, larger LTV ratios, etc.

Some people may say "good, then only people who can afford to pay it back will get loans" and I would respond, "Ok, but that's not exactly right and is a different discussion altogether and you have a small penis and smell like farts."
 
2012-08-09 01:42:20 PM
Some one remind me again, which side wrote the majority opinion in Kelo?
 
2012-08-09 01:49:13 PM
If you could fix things by nationalizing them, people would be risking everything trying to get to Cuba from Florida for a chance at a better life
 
2012-08-09 02:00:52 PM

Il Douchey: If you could fix things by nationalizing them, people would be risking everything trying to get to Cuba from Florida for a chance at a better life


Yes because that is why these individuals are fleeing Cuba! LAUGHTER OL!

Also I do not see the issue here. J.P. Morgan Chase et al. do not seem to be all that into playing fair with the money of them. This seems to be a nice way to keep the home ownership without rewarding the unfair business practices upon which they engaged.
 
2012-08-09 02:05:40 PM
You know, that would probably allow the banks to write the mortgage off as a loss, something that they have a hard time doing now. Maybe it would be win-win.
 
2012-08-09 02:06:07 PM

WaltzingMathilda: If this were to catch on and be rendered constitutional, it would be disastrous for consumers trying to get loans in the future.


Not really. See, when the Government takes properties through eminent domain, it pays the fair market value into court ("estimated just compensation" we call it in PA). Once the money goes into court, the creditors line up to take their cut; if not one shows up, the money passes back to the owners.

So, let's assume that the banks have decided to foreclose anyway. They've already f*cked up and will take a loss on their books with these properties. However, with eminent domain proceedings, they'll stand to gain at least some money now, rather than an indeterminate amount of money at a point in the future. Moreover, they don't have to keep the properties up or pay the taxes anymore.

If anything, using eminent domain is just another bailout of the banks who made shiatty loans in the first place and (now with minimal downside) they'd probably take the risk and lend again.
 
2012-08-09 02:06:24 PM
Investing is risky. Better luck next time.
 
2012-08-09 02:06:43 PM

Krieghund: Sell it to the same occupants that didn't have enough money to pay the mortgage in the first place?

I don't think you've thought your cunning plan through.


Do you not know how numbers work?

If they re-fi, they're paying less per month, and likely less overall than they would without the re-fi. Unless the agents doing that work are borderline retarded and the homeowners now signing up to pay MORE for the same overvalued house are full retard, it wouldn't work any other way.
 
2012-08-09 02:07:20 PM
Seems like it should get a HERO tag rather than an ASININE tag.

Resetting the mortgage inline with the actual value of the house would be extremely economically beneficial to the economy. If you disagree... well you has a stupid or an ignorant. And no, it wouldn't prevent people from getting mortgages in teh future zomg.

/shakes head at economic illiteracy of the crowd from derpistan.
 
2012-08-09 02:08:05 PM

Krieghund: Sell it to the same occupants that didn't have enough money to pay the mortgage in the first place?

I don't think you've thought your cunning plan through.


I assume they sell it back at the current appraised price, meaning they can possibly afford the mortgage now. Even if they can and are currently paying, the extra money in their pockets can fuel economic growth as they spend it, and those dollars ripple out through the economy. We need to get money moving, not sitting in safe investments. This is an interesting way to do it.

I wonder how the IRS deals with it, since don't they count the "loss" the bank took as a "profit" for you.
 
2012-08-09 02:08:18 PM

WaltzingMathilda: If this were to catch on and be rendered constitutional, it would be disastrous for consumers trying to get loans in the future. The risk that the property could legally be bought by the government during a market turn and sold back to consumers at less than the loan value would be a new factor in underwriting the loan, resulting in higher interest rates, higher credit requirements, larger LTV ratios, etc.

Some people may say "good, then only people who can afford to pay it back will get loans" and I would respond, "Ok, but that's not exactly right and is a different discussion altogether and you have a small penis and smell like farts."


There's always that risk, though. In all probability they'd get more from the government buying the property than they would from auctioning off an REO after going to court to foreclose.
 
2012-08-09 02:08:39 PM

Dr Dreidel: Krieghund: Sell it to the same occupants that didn't have enough money to pay the mortgage in the first place?

I don't think you've thought your cunning plan through.

Do you not know how numbers work?

If they re-fi, they're paying less per month, and likely less overall than they would without the re-fi. Unless the agents doing that work are borderline retarded and the homeowners now signing up to pay MORE for the same overvalued house are full retard, it wouldn't work any other way.


He thinks that they're signing up to the original terms that got them underwater in the first place. Mostly because he's either being deliberately stupid and obtuse, or it's not deliberate.

CHOOSE ONE.
 
2012-08-09 02:08:50 PM
We've waited too long for banks to act. They had the chance to work with borrowers to forgive principal and/or lower interest rates.... and they blew it. It's high time for this! LOVE IT.
 
2012-08-09 02:09:15 PM
They don't need a new law to pay off someone's mortgage. The bank doesn't care who pays them as long as they get their money. oh wait
 
2012-08-09 02:09:39 PM
The government is NOT in the loan modification business!

Farking banks. They don't want to pay the costs associated with modifying mortgages, so now the taxpayers have to foot the bill? Haven't we paid enough already?

I can see how maybe this would make the process of mortgage modification faster, but using eminent domain is just asking for further trouble down the road.
 
2012-08-09 02:10:13 PM

Angry Drunk Bureaucrat: If anything, using eminent domain is just another bailout of the banks who made shiatty loans in the first place and (now with minimal downside) they'd probably take the risk and lend again.


and might compel them to finally start proactively refinancing, as opposed to just ignoring obama's refinancing program
 
2012-08-09 02:10:20 PM

mainstreet62: using eminent domain is just asking for further trouble down the road.


How so?
 
2012-08-09 02:11:52 PM

qorkfiend: mainstreet62: using eminent domain is just asking for further trouble down the road.

How so?


Socialism and such as.
 
2012-08-09 02:12:00 PM

thomps: Angry Drunk Bureaucrat: If anything, using eminent domain is just another bailout of the banks who made shiatty loans in the first place and (now with minimal downside) they'd probably take the risk and lend again.

and might compel them to finally start proactively refinancing, as opposed to just ignoring obama's refinancing program


That too. Depending on the deal structure, having the long term series of (reduced) payments could be better than the lump sum from eminent domain proceedings.
 
2012-08-09 02:13:08 PM

Angry Drunk Bureaucrat: Not really. See, when the Government takes properties through eminent domain, it pays the fair market value into court ("estimated just compensation" we call it in PA). Once the money goes into court, the creditors line up to take their cut; if not one shows up, the money passes back to the owners.

So, let's assume that the banks have decided to foreclose anyway. They've already f*cked up and will take a loss on their books with these properties. However, with eminent domain proceedings, they'll stand to gain at least some money now, rather than an indeterminate amount of money at a point in the future. Moreover, they don't have to keep the properties up or pay the taxes anymore.

If anything, using eminent domain is just another bailout of the banks who made shiatty loans in the first place and (now with minimal downside) they'd probably take the risk and lend again.


Except, with a lot of these mortgages which have been sliced, diced, and made into julienne fries, there are many parties that own chunks of these mortgages.

Is this eminent domain proceeding taking advantage of the probability is that a lot of the mortgages out there may not have someone come to try to collect the eminent domain payment?
 
2012-08-09 02:13:29 PM
It's not the best sounding idea I've ever heard. I can understand the objection to it. On the other hand, real estate is still the albatross around the neck of this economy. Our economy is built on the value of real estate. But you've got millions of empty homes rotting in bank possession, stalled by backlogs in foreclosure dockets. The banks won't lend money even to people with good credit because the banks have too much capital tied up in properties they can't sell and are losing money on in taxes and depreciation. There's no liquidity because it's tied up in limbo.

Some of the liquidity crisis could be solved by resolving some of these foreclosure actions for a fraction of the loan's worth - and the banks wouldn't really be losing money because the equity of those homes has gone through the shiatter. But the banks have not budged for whatever reason.

We need liquidity. Give the banks a way to get, say, 40% of their loan money back in these underwater properties and let them move on. If bankruptcy won't work because of the mortgages and a lack of market for properties, then help it along by breaking up the log jam.

As long as the housing market is broken, cities are losing revenue, tens of thousands of city and state employees are left for want of work, and small businesses that rely on commercial banking cannot expand.
 
2012-08-09 02:16:14 PM
[offers friendly but extremely hesitant ankle rub to meow said the dog]
 
2012-08-09 02:16:30 PM
You cannot set the price of the mortgage value (how much a mortage is of a value to the bank) via the fair market price of the property.
 
2012-08-09 02:16:38 PM

imashark: Angry Drunk Bureaucrat: Not really. See, when the Government takes properties through eminent domain, it pays the fair market value into court ("estimated just compensation" we call it in PA). Once the money goes into court, the creditors line up to take their cut; if not one shows up, the money passes back to the owners.

So, let's assume that the banks have decided to foreclose anyway. They've already f*cked up and will take a loss on their books with these properties. However, with eminent domain proceedings, they'll stand to gain at least some money now, rather than an indeterminate amount of money at a point in the future. Moreover, they don't have to keep the properties up or pay the taxes anymore.

If anything, using eminent domain is just another bailout of the banks who made shiatty loans in the first place and (now with minimal downside) they'd probably take the risk and lend again.

Except, with a lot of these mortgages which have been sliced, diced, and made into julienne fries, there are many parties that own chunks of these mortgages.

Is this eminent domain proceeding taking advantage of the probability is that a lot of the mortgages out there may not have someone come to try to collect the eminent domain payment?


After all the robo-signing and the banks not sure who owns what mortgage, I'd say turn-about is fair play.
 
2012-08-09 02:21:08 PM

Angry Drunk Bureaucrat: WaltzingMathilda: If this were to catch on and be rendered constitutional, it would be disastrous for consumers trying to get loans in the future.

Not really. See, when the Government takes properties through eminent domain, it pays the fair market value into court ("estimated just compensation" we call it in PA). Once the money goes into court, the creditors line up to take their cut; if not one shows up, the money passes back to the owners.

So, let's assume that the banks have decided to foreclose anyway. They've already f*cked up and will take a loss on their books with these properties. However, with eminent domain proceedings, they'll stand to gain at least some money now, rather than an indeterminate amount of money at a point in the future. Moreover, they don't have to keep the properties up or pay the taxes anymore.

If anything, using eminent domain is just another bailout of the banks who made shiatty loans in the first place and (now with minimal downside) they'd probably take the risk and lend again.


they will lend again, but it will be another risk factor in underwriting the loan and like i said, add to the requirements of qualifying for the loan and increase interest rates. they don't make loans thinking they will have to foreclose, they make loans trying to minimize the loss from a potential foreclosure (and to make money). it will definitely be considered by the banks as an added underwriting risk, to be sure.
 
2012-08-09 02:21:41 PM
The executive branch of whatever government doing the taking would have to do, however, is convince the judicial branch that these takings are within the public interest and that private benefit is only incurring incidentally to individuals.

That may be tricky, as, at least in PA, that would all hinge on the definition of "blight" used to prove public purpose.
 
2012-08-09 02:22:01 PM
Yes, nationalize the mortgage industry, because that's not one step closer to facism or anything. You people are farking crazy.

http://www.youtube.com/watch?v=OiO-7xRo3c0
 
2012-08-09 02:22:09 PM
Saiga410 2012-08-09 02:16:30 PM

You cannot set the price of the mortgage value

(how much a mortage is of [a] value to the bank)

via the fair market price of the property.


Can....can someone a LOT smarter than me look at this and tell me why I smell bullshiat??

I'm trying to parse it and there's a really huge distant storm siren going off in my head and I DON'T KNOW WHY.
 
2012-08-09 02:23:36 PM

socodog: Yes, nationalize the mortgage industry, because that's not one step closer to facism or anything. You people are farking crazy.

http://www.youtube.com/watch?v=OiO-7xRo3c0


Is linking also facism (sic)?
 
2012-08-09 02:24:05 PM

WaltzingMathilda: they will lend again, but it will be another risk factor in underwriting the loan and like i said, add to the requirements of qualifying for the loan and increase interest rates


if it's only used in cases where foreclosure is the only option, and net cash flows won't change (except for a possible upside for the bank) then it shouldn't affect risk at all, should it?
 
2012-08-09 02:26:18 PM

WaltzingMathilda: If this were to catch on and be rendered constitutional, it would be disastrous for consumers trying to get loans in the future. The risk that the property could legally be bought by the government during a market turn and sold back to consumers at less than the loan value would be a new factor in underwriting the loan, resulting in higher interest rates, higher credit requirements, larger LTV ratios, etc.


I'm not entirely sure how this is different from bankruptcy. The government can (with no risk to itself) force lenders to take less than what they bargained for in order to clear up intractable insolvency issues. As long as the lender is receiving fair market value for its mortgage, how are they any worse off than in they foreclose today and sell the property for fair market value? Banks have had to factor in bankruptcy and insufficient equity risks for centuries. If they didn't account for the risk that collateral could lose value, whose fault is that?
 
2012-08-09 02:27:10 PM

WaltzingMathilda: Angry Drunk Bureaucrat: WaltzingMathilda: If this were to catch on and be rendered constitutional, it would be disastrous for consumers trying to get loans in the future.

Not really. See, when the Government takes properties through eminent domain, it pays the fair market value into court ("estimated just compensation" we call it in PA). Once the money goes into court, the creditors line up to take their cut; if not one shows up, the money passes back to the owners.

So, let's assume that the banks have decided to foreclose anyway. They've already f*cked up and will take a loss on their books with these properties. However, with eminent domain proceedings, they'll stand to gain at least some money now, rather than an indeterminate amount of money at a point in the future. Moreover, they don't have to keep the properties up or pay the taxes anymore.

If anything, using eminent domain is just another bailout of the banks who made shiatty loans in the first place and (now with minimal downside) they'd probably take the risk and lend again.

they will lend again, but it will be another risk factor in underwriting the loan and like i said, add to the requirements of qualifying for the loan and increase interest rates. they don't make loans thinking they will have to foreclose, they make loans trying to minimize the loss from a potential foreclosure (and to make money). it will definitely be considered by the banks as an added underwriting risk, to be sure.


Eminent Domain proceedings are usually written into mortgages already. Pretend this isn't about the foreclosed loan; pretend it's about widening a street or building a police station or some other public purpose. The banks are already at some level of risk that the government is going to come and take the property for public purpose.
 
2012-08-09 02:28:40 PM

Angry Drunk Bureaucrat: Eminent Domain proceedings are usually written into mortgages already. Pretend this isn't about the foreclosed loan; pretend it's about widening a street or building a police station or some other public purpose. The banks are already at some level of risk that the government is going to come and take the property for public purpose.


yeah but those reasons aren't predicated on a wild shift in fair value of the property.
 
2012-08-09 02:29:29 PM
As someone who sees Kelo as one of the worst SCOTUS decisions in decades, I have to also oppose this. Government should only take private property away if it is for public use. The mental gymnastics required to call a thing like this "public use" are impressive indeed, and also utterly bankrupt.
 
2012-08-09 02:29:29 PM

thomps: WaltzingMathilda: they will lend again, but it will be another risk factor in underwriting the loan and like i said, add to the requirements of qualifying for the loan and increase interest rates

if it's only used in cases where foreclosure is the only option, and net cash flows won't change (except for a possible upside for the bank) then it shouldn't affect risk at all, should it?


it depends. it sounds like it's being used on underwater mortgages in general. if the program is used for homeowners who are current on their mortgages, but owe more than current worth, the bank is like "wait, you exercised eminent domain on something i was contractually entitled to earn cash flow on for a determined period of time, and i haven't had to exercise any foreclosure options"

lots and lots of people are underwater but are still paying their mortgages as agreed. if the government can constitutionally cut that off because of a market turn, then it will increase the risk of giving the loan.

if the government can only do it on underwater mortgages where the borrower is actually in default and actually facing foreclosure, then i don't see why the banks would be protesting it at all. i don't think this article says this is the case.
 
2012-08-09 02:29:59 PM
I don't know enough about economics and mortgages to know whether or not this is a good or bad thing (and can't decide if not knowing is a good or bad thing), but deep down I can't help but think that if the government is going to get involved with claiming properties and arranging to sell them back to owners then investors shouldn't be able to get involved before the property is claimed.

FTFA: "...private investors who would pool money to buy mortgage contracts that have been sold to investors as part of private-label mortgage-backed securities.

The local
JPA, or another government agency, would then use its eminent-domain power to compel the sale of mortgage contracts..." [emphais mine]

In my head, that reads like, "hey, how about we invest in these and you force them to be sold?" If anyone with a GED in economics feels like explaining how that's not a bunch of investors using the government as their personal profit making biatch, please feel free.
 
2012-08-09 02:31:04 PM

WaltzingMathilda: if the government can only do it on underwater mortgages where the borrower is actually in default and actually facing foreclosure, then i don't see why the banks would be protesting it at all. i don't think this article says this is the case.


and if this were the case it would encourage borrowers who would have otherwise kept paying their underwater mortgages to default and refi through eminent domain.
 
2012-08-09 02:32:35 PM

indylaw: WaltzingMathilda: If this were to catch on and be rendered constitutional, it would be disastrous for consumers trying to get loans in the future. The risk that the property could legally be bought by the government during a market turn and sold back to consumers at less than the loan value would be a new factor in underwriting the loan, resulting in higher interest rates, higher credit requirements, larger LTV ratios, etc.

I'm not entirely sure how this is different from bankruptcy. The government can (with no risk to itself) force lenders to take less than what they bargained for in order to clear up intractable insolvency issues. As long as the lender is receiving fair market value for its mortgage, how are they any worse off than in they foreclose today and sell the property for fair market value? Banks have had to factor in bankruptcy and insufficient equity risks for centuries. If they didn't account for the risk that collateral could lose value, whose fault is that?


see my last response, i don't think this is about foreclosures only. at least it doesn't seem so in the article. it looks like it is being used on "underwater mortgages" whether they are in default or not. if they're not in default, the bank is definitely losing more than it bargained for based on prior risk assessments. in this case, losing because of a market downturn would definitely be a new risk factor.
 
2012-08-09 02:34:59 PM

thomps: WaltzingMathilda: if the government can only do it on underwater mortgages where the borrower is actually in default and actually facing foreclosure, then i don't see why the banks would be protesting it at all. i don't think this article says this is the case.

and if this were the case it would encourage borrowers who would have otherwise kept paying their underwater mortgages to default and refi through eminent domain.


and now you've identified an issue. doesn't change the analysis, right?
 
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