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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWSJ: Cities Consider Seizing Mortgages (eminent domain to help those who are underwater)
http://online.wsj.com/article/SB10001424052702303933404577505013392791018.htmlA 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 publicnew 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, California's San Bernardino County and two of its largest cities, Ontario and Fontana, want to put eminent domain to a highly unorthodox use to keep people in their homes. 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.
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WSJ: Cities Consider Seizing Mortgages (eminent domain to help those who are underwater) (Original Post)
stockholmer
Jul 2012
OP
AnotherMcIntosh
(11,064 posts)1. Interesting approach. n/t
msongs
(69,451 posts)2. since the mortgage industry is full of criminals it is natural they wouldn't like this nt
meow2u3
(24,880 posts)3. That's one way to stick it to the banksters
If you can't jail the banksters, hit them right where it hurts them the most--right in their assets.
taught_me_patience
(5,477 posts)4. There is no way this idea is constitutional
Even if it were, I don't think I'd support it.
shraby
(21,946 posts)5. Just as constitutional as using eminent domain to build shopping centers and
hotels..that was decided to be okay by the supremes several years ago.
xchrom
(108,903 posts)6. To the extent that it makes the banksters uncomfortable
And may hurt them in pocket book, I like it.
Blight is a real concern - a worthy concern compared to strip malls - and a county or a municipality can exert sovereign issues over banks.