July 14 & 17, 2012, Reuters and KQED News Services
If the Government is allowed to use eminent domain law to force lenders to sell loans, the RULE OF LAW will be trampled on again by the Progressives in Sacramento and Washington DC. If this is allowed, why should any bank ever loan $ to anyone? Socialism at it finest; The government, not the FREE MARKET, can cure all ills.
Former San Francisco Mayor Willie Brown and a longtime business partner are among investors in a company drawing criticism for working with local government officials to take over and discount underwater mortgages.
The plan gained impetus last month, when officials in San Bernardino County formed a joint powers authority to consider a proposal from San Francisco-based Mortgage Resolution Partners for local governments to use their powers of eminent domain to seize underwater mortgages.
The company would raise capital to buy the mortgages from lenders at their depressed market price, perhaps less than half their original value. It would then offer the existing homeowners a new mortgage at a value in between the two, preventing foreclosure and pocketing a profit in the process.
The strategy, which Berkeley real estate investor Bill Falik told The Bay Citizen he helped develop, is expected to generate profits of as much as 20 percent, according to an October pitch to potential funders.
Brown and Falik are among 12 founding investors in Mortgage Resolution Partners, according to company spokesman Peter Ragone. Though San Bernardino is the furthest along, the company hopes to partner with local governments across the country to use eminent domain as a tool in fighting blight, Ragone added.
Bond investors, the real estate industry and the editorial pages of national newspapers have denounced the plan as a politically wired money grab, warning that lenders will shun areas where they face the threat of government seizure of their home loans.
New buyers would be unable to get new loans in those communities, they allege. House prices might drop further, increasing, rather than reducing, blight.
Reuters News, July 13, 2012
KQED News, July 17, 2012