Mortgage Resolution Partners: Bringing Down The House

A company out of left-wing San Francisco, called Mortgage Resolution Partners (MRP), has concocted a grand scheme to use a community's eminent domain power to seize either underwater or near-foreclosed-on homes from the title holders so that the person or persons living in that home can remain there with a new, lowered mortgage rate that is based on a court-determined, "fair value" of the home.  Of course, the new mortgage would be provided by MRP.   As a result, the bank or financing entity, that originally provided the mortgage and held title to the house, is screwed in the process; winding up with just pennies on the dollar for their investment.  But, MRP doesn't care.  That's because the partners in MRP are a bunch of liberals who blame the banks for all the mortgage/foreclosure problems of today.   In fact, the chairman of MRP, Steven Gluckstern, is a major Obama campaign funds bundler.  Another partner, Graham Williams, pioneered low-income home loans at the Bank of America; a primary reason we even had a housing collapse. Now he thinks he can fix the problem that he helped create with another liberal, screwball idea.

If you think this sounds all too Gestapo-like, your right!  But, more importantly, expanding eminent domain to seize property from one private entity to give it to another private entity is a complete bastardization of the eminent domain laws and the American concept of fairness and fair play.  What's next?  A mayor taking away your home so he can give it to his buddy or campaign donor to sell at a profit?

For sure, most liberals might think that keeping people in their homes, at a much lower cost, is a good thing.  But, what they fail to understand is that there are all kinds of negative consequences to using eminent domain is this way.

First of all, there's the issue of "fair value" versus market value.  Under eminent domain laws, the state or community, which exercises eminent domain, is only required to pay the real owner of the property the "fair value" of that property.  And, fair value is a subjective number that would be determined by a judge who is assigned to mediate the eminent domain process.  Hardly ever is the fair value equal to the market value. Typically it is thousands lower than what the property could be sold for.  That's because judges usually side with the state or community in determining what it should be.  So... What happens when a house is re-mortgaged at fair value?  Well, the transaction price then becomes part of the public record.  Immediately, all the homes in the area of similar size and type will see their home values lowered to that fair value.  Other homes will be adjusted downward on an equivalency basis.  And, if this process is continued, over and over, again, it will substantially drive home prices downward in spiral fashion; with some of those original eminent domain home owners seeing their mortgages underwater again.   At the same time, communities that collect home-value-based real estate taxes will see their tax revenues fall.  As a result, those communities will have to do what they have always done: Raise taxes on everyone to compensate for the losses.  So, in general, everyone will suffer in the process of saving a few from their mortgage problems.

Then, there's the impact on the mortgage lending industry, itself.  Eminent domain seizures will only increase the number and amount of losses in the banking and financing industries.  Those losses will probably result in lowered interest payments to any account holders or, in higher fees to customers. This will also introduce a new risk into making home loans.  As a consequence, mortgage lending requirements will only become tighter than they are today.  Lending rates will go higher and requirements for down payments will become more demanding. Other lenders may just stop giving out home loans, altogether. And, all this will stymie the home buying market; resulting in even lower home prices because the unsold inventory of homes will expand for lack of any easier mortgage lending. In some cases, the losses associated with the eminent domain seizures may cause bank failures; resulting in the FDIC having to step in to cover any valid commitments.  When that happens, all of us, as taxpayers, will pay for the actions of Mortgage Resolution Partners.

As it stands right now, two cities in California (Of course!) are considering MRP's scheme: Fontana and Ontario.   Now, if they proceed with this, it won't be very long before other communities in California and across the U.S. will follow.  This eminent domain use could literally create a whole new housing crisis.  Just so a bunch of San Francisco liberals can, once again, ideologically punish businesses; and, line their own pockets at the same time. 

Story link: http://www.foxnews.com/us/2012/07/16/calif-cities-eye-plan-to-seize-mortgages/