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The Eminent Domain Mortgage Heist
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.
Lady in Red
July 23rd, 2012
Thanks, Cardigan. I’m pleased to see BFH’s “Whifflehead Tiabbi” get some good press at IOTW.
Beyond your ZeroHedge link, here’s the original Tiabbi article:
http://www.rollingstone.com/politics/blogs/taibblog/from-an-unlikely-source-a-serious-challenge-to-wall-street-20120720
As interesting, Neil Barofsky has a new book out with a (unusual) glowing review in the MSM NYT and, today, Barofsky has this in Bloomberg News. It’s pretty hot — and damning of the banksters:
http://www.bloomberg.com/news/2012-07-22/bungled-bank-bailout-leaves-behind-righteous-anger.html
…Lady in Red
He IS a whifflehead. This idea is horrendous, and UNCONSTITUTIONAL. The horrendous Kelo decision is supposed to be “BLIGHTED” properties. That does not include perfectly fine houses in the middle of a neighborhood that happen to be in financial trouble.
Kelo is supposed to be used for municipalities to clear blighted land to increase a property tax base for “the greater good.” Are the going to tear down the house or simply seize it and resell it? And will the property taxes GO UP as the house is devalued?
They are marketing this as “keeping people in their houses. I guess that fools the asshole Taibbi. But as I see it, the only houses that qualify are abandoned ones that are now boarded up and are crack dens.
Your admiration for Taibbi is embarrassing. You admire what, his non-existent intellect, or his misshapened bald head, mean spiritedness,creepy eyes, Clint Howard teeth or speech impediment?
Or was it the article that said he was glad Breutbart was dead and may he rot in hell?-bfh
I had to include my comment here because it needed to be addressed quickly. I will put it in a separate comment as well.
Danne
July 23rd, 2012
That’s some scarry stuff. Anytime Gov’t is allowed to seize real estate for whatever nefarious reason you should be rightfully suspicious, if not downright against such. But, then the liberals have trashed the rest of the Constitution at will without recourse…what’s to stop this?
norman einstein
July 23rd, 2012
This stinks on ice. Period.
Lady in Red
July 23rd, 2012
There are caution signs all over the floor with this plan. Yes. There are many places one might slip on this “wet floor.”
At the same time, today, the banksters are holding mortgage holders by the balls. “Foreclosure sales” are bank scams between the auction house and the bank, just looking for new pigeons.
The *potential* difference here is that this would *only* be done with the cooperation of the homeowner, to reduce the mortgage back to a realistic value. Homeowner doesn’t want to play; nothing happens.
Neil Barofsky was the Inspector General during TARP. He is disgusted by the “cooperation” between Treasury, the Fed, Congress and The Banksters. Obama is no White Hat, but this mess pre-dated him.
The issue, now, is getting the greedy octopus suckers yanked away from the taxpayers. Caution is in order, but this could be a damn cool way to get the bastards — if it is set up correctly.
….Lady in Red
PS: Pls Danne, don’t do kneejerk left-wing/right-wing stuff! I’m as apprehensive as anyone about Agenda 21. The world is nuanced. There are Black Hats and White Hats on both sides of the church.
Lady in Red
July 23rd, 2012
Ooooooooooo, Mr. Einstein. It’s so-ooooo sexy when you think! ….Lady in Red
cfm990
July 23rd, 2012
Where is it written in stone, that property values will never go down? 99.9% of goods purchased, lose value as soon as you use them. Why not help for the second biggest purchase in your life, your car? You will never get out of it what you payed for it.
For years, warnings were issued about the over inflated housing market. Economists predicted the housing bubble, like all bubbles, would pop. (remember the . com bubble?) Buyers, did not beware. I refrained from jumping on the bandwagon. Yet, one way or another, my money will be involved. It is the same house you signed a note for. So shut up, suck it up, and honor your commitment.
Doc Zhivago
July 23rd, 2012
for continued wealth redistribution, note that illegals and millions of muzzies deployed into the US by the UN will be given incentives to buy properties that legal American citizens (just can’t afford) USED to own and pay taxes on…
ya ever wonder why the county employees, union or otherwise, get to raise property taxes for new programs? …maybe it’s to drive people out of their homes
Chinquapin
July 23rd, 2012
Kelo was an egregious miscarriage of justice, and now we begin to see its slippery slope.
bitterclinger
July 23rd, 2012
Localities, esp. in BLUE states, taking over mortgages will result in nothing good. The commies don’t believe in private property. Everything belongs to the state. Now, you can rent it if you like, but you’ll be beholden to the state.
Anyone asked those who own homes free and clear in San Bernardino how they feel about this? Gee, you don’t think the City Fathers will reward certain folks (i.e., democrat voters) with nifty new homes next to well-to-do conservatives, do ya?
Who thinks govt involved in what should be private, free enterprise is a good thing?
Steve
July 23rd, 2012
I read somewhere a few days ago that the outfit that is giving the whitehouse recommendations on implementing this plan is a group of Obama cronies in San Francisco.
norman einstein
July 23rd, 2012
@bitterclinger, your avatar is making me queasy, so I’m going to go and crack open some lunch.
Lady in Red
July 23rd, 2012
Damn, but I cannot believe you folk think that Jamie Dimon and Lloyd Blankfein:
1) are capitalist White Hats who “earned” their millions;
2) want them to continue to rape the American taxpayer in cooperation with Dodd-Frank.
I’d hire either one of those banksters to mow my lawn — but not much else. Not only do I believe they are corrupt, I don’t even think they are very smart.
I’d trade you eight plumbers and one carpenter for the duo, any day. ….Lady in Red
Lowell
July 23rd, 2012
Would these towns buying the properties be the same towns struggling to make payroll? Good luck with that.
MNHawk
July 23rd, 2012
Here’s how it will work in plain English
One group of corrupt, connected garbage “buys” a $300,000 loan agreement for $150,000. They then sell that debt to the city for $175,000, pocketing a tidy profit. The lawful holder of the debt is out $150,000.
This will work out as well as anything else concocted by these people works.
Andrew Parker
July 23rd, 2012
Widespread implementation of this type of program will knock the bottom out of home prices. Maybe the goal is for mortgage rates not seen since the early ’60′s to be matched by housing prices not seen since the early ’60′s?
Roscoe P. Soultrane
July 23rd, 2012
@Chinquapin: “Kelo was an egregious miscarriage of justice”
Hell, on most issues, the Supreme Court is little more than a rubber stamp for the expansion of government power – no reason for that one to have been any different.
BigFurHat
July 23rd, 2012
He IS a whifflehead. This idea is horrendous, and UNCONSTITUTIONAL. The horrendous Kelo decision is supposed to be “BLIGHTED” properties. That does not include perfectly fine houses in the middle of a neighborhood that happen to be in financial trouble.
Kelo is supposed to be used for municipalities to clear blighted land to increase a property tax base for “the greater good.” Are they going to tear down the house or simply seize it and resell it? And will the property taxes GO UP as the house is devalued?
They are marketing this as “keeping people in their houses. I guess that fools the asshole Taibbi. But as I see it, the only houses that qualify are abandoned ones that are now boarded up and are crack dens.
Your admiration for Taibbi is embarrassing. You admire what, his non-existent intellect, or his misshapened bald head, mean spiritedness,creepy eyes, Clint Howard teeth or speech impediment?
Or was it the article that said he was glad Breutbart was dead and may he rot in hell?-bfh
mkultra
July 23rd, 2012
Lady in Red left a comment on another site recently saying how much she’d like banks to become public utilities run by people like Matt Taibbi.
no. really. i’m serious.
Lady in Red
July 23rd, 2012
Well, Fur, you have company. The Securities Industry and Financial Markets Association agrees with you: unconstitutional! And, don’t even think of trying it, suckers!
SIFMA has threatened to red line communities with the gall to try it: no future private mortgage loans for you!
Why don’t you file an amicus brief with SIFMA, Fur? (Oh, hell: just throw your hat in the ring for the next SCOTUS appointment. I’m sure Obama would love to consider you…..) And Jamie Dimon might give you an, ah, “tip” for your “cooperation….?”
Let’s keep the bankster bonuses flowing, eh, pardner?
You are such a mindless, knee jerk, non-thinker, Fur. *That* is what is embarrassing, not your ridicule of others, like poor Tiabbi’s looks, who, in my estimation, is about 55 IQ points above you — never mind his research and knowledge of the banksters and the mortgage and real estate corruption.
You can out photoshop him, Fur, but, when push comes to shove, is that really what America needs now? …more funny photoshop? ….Lady in Red
mkultra
July 23rd, 2012
that didn’t take long.
Lady in Red
July 23rd, 2012
You just keep thinkin,’ MKUltra.
And, then, see if you can figger out what I *really* wrote. Read it slowly. Very slowly.
….Lady in Red
mkultra
July 23rd, 2012
I did read it *slowly*, LIR, because I like to savor the idiocy of every stupid word you write (even if I have to go to other sites to do it). It brings joy and laughter to my life.
ps
‘the intellectual pond you swim in’??!! Special thanks for that one!
FreedomCat
July 24th, 2012
Wow what happened to LIR? Good looks of obama got to her? Anyway, have you guys/gals seen the commercials for reverse mortgages? Is the the same thing?