Time Magazine recently covered a controversial plan proposed by Mortgage Resolution Partners to acquire distressed mortgages using the government’s eminent domain power. The article highlighted some of the concerns raised in a post on this blog (here), as well as in other local and national media outlets.
Specifically, mortgage holders will not likely accept the value offered by the condemning agency, and this can lead to a lengthy and expensive legal battle. The legal battles could be especially difficult if Robert Kuttner’s blog on The Huffington Post is correct that Mortgage Resolution Partners only wants to acquire performing mortgages (mortgages where payments are current). Similarly, a story in the San Francisco Chronicle notes that bond investors and private capital may abandon areas that adopt this proposed solution. This could cause decreased access to capital by borrowers, and higher interest rates.
The plan has received a mixed response from politicians as well. Although several academics and Mortgage Resolution Partners support the plan, a Wall Street Journal article notes that the White House rejected the idea when it was presented by a group of congressional Democrats two years ago. Instead, the President has suggested his own plan to help property owners who own homes with underwater mortgages.
We’ll continue to watch this one, but for more on this story in the interim, please see the following news articles and opinion pieces:
What’s With All the Chatter About Eminent Domain Takings of Underwater Mortgages? – Gideon’s Trumpet
Should Eminent Domain Be Used to Save Underwater Homes? – Time Magazine
An Eminently Bad Idea – Huffington Post
Bondholders See Eminent Domain as Latest State Attack: Mortgages – San Francisco Gate
White House Skeptical of Plan to Seize Mortgages by Eminent Domain – Wall Street Journal
- Can Eminent Domain Save the Housing Market? (fool.com)
- Businesses, Investors Protest Eminent Domain in Virginia and California (thenewamerican.com)
- Using Eminent Domain for Underwater Mortgages Is a Bad Idea (washingtonmonthly.com)
- Calif. Cities Eye Plan to Seize Mortgages (abcnews.go.com)
- Rep. Brad Miller on Using Eminent Domain to Reset the Housing Market (news.firedoglake.com)