A California-based mortgage solutions firm has a novel idea to curb the amount of underwater home loans. The idea is to use the power of eminent domain, where local government authorities would "condemn" the underwater mortgages and drive a refinance.
Super controversial concept
"Eminent domain" is a government power allowing the government to seize land for any reason as long as it is for "public good." It would be considered detrimental to public welfare to do otherwise typically. During this process, the land owner is compensated by the government. This is one power that federal, state and local governments have access too, and it is very questionable.
A number of people think that eminent domain is an abuse of power and should not be allowed, although it is typically used to put in highway extensions and other things, according to New Jersey.com. There was one landowner who had 1-acre of land taken with eminent domain by the city of Hoboken. Even though the land was valued at $10 million, they only gave him $2.3 million, and the land was getting used to put in a park.
One good way to use it
A property is recognized as "condemned" when eminent domain is used, but Mortgage Resolution Partners, a California-based real estate business, wants to condemn the loans associated with the house. This is the idea MRP has brought up, according to Reuters.
Millions of homeowners are underwater. CoreLogic estimates 22 percent of the nation's home loans are underwater; Zillow, according to CNN, estimates 31.4 percent of the country's homes are in negative equity. MRP's concept, according to Reuters, is to get private investors to invest the funds needed to seize the loan and pay the bank that owns seized properties a fair market price, which would be lower than the purchase price, for the deeds to said properties. The loans would then be restructured by MRP for a fee and sold to new investors, lowering payments for the mortgage borrower.
Since investors would fund the entire action, no taxpayer cash would be spent; all any governments in California would be doing is turn in the paperwork for eminent domain actions.
Only a proposal
It is only a proposal at the moment; MRP is pitching the idea to various local governments in California. It has been well received in some circles, as California is one of the worst-affected states by drastically lowered real estate values. However, according to the Hesperia Star, the city council of Hesperia, Calif., has already turned it down, regardless of 50 percent of Hesperia homeowners being underwater on their home loans.
Regardless of the truth that a lot of people are underwater, a lot of them are still paying on their payments, according to CNN. The Zillow survey showed that 90 percent of underwater home proprietors are still making payments regularly. It is very dangerous for a homeowner to own more than the home is worth because they could end up in foreclosure.
Super controversial concept
"Eminent domain" is a government power allowing the government to seize land for any reason as long as it is for "public good." It would be considered detrimental to public welfare to do otherwise typically. During this process, the land owner is compensated by the government. This is one power that federal, state and local governments have access too, and it is very questionable.
A number of people think that eminent domain is an abuse of power and should not be allowed, although it is typically used to put in highway extensions and other things, according to New Jersey.com. There was one landowner who had 1-acre of land taken with eminent domain by the city of Hoboken. Even though the land was valued at $10 million, they only gave him $2.3 million, and the land was getting used to put in a park.
One good way to use it
A property is recognized as "condemned" when eminent domain is used, but Mortgage Resolution Partners, a California-based real estate business, wants to condemn the loans associated with the house. This is the idea MRP has brought up, according to Reuters.
Millions of homeowners are underwater. CoreLogic estimates 22 percent of the nation's home loans are underwater; Zillow, according to CNN, estimates 31.4 percent of the country's homes are in negative equity. MRP's concept, according to Reuters, is to get private investors to invest the funds needed to seize the loan and pay the bank that owns seized properties a fair market price, which would be lower than the purchase price, for the deeds to said properties. The loans would then be restructured by MRP for a fee and sold to new investors, lowering payments for the mortgage borrower.
Since investors would fund the entire action, no taxpayer cash would be spent; all any governments in California would be doing is turn in the paperwork for eminent domain actions.
Only a proposal
It is only a proposal at the moment; MRP is pitching the idea to various local governments in California. It has been well received in some circles, as California is one of the worst-affected states by drastically lowered real estate values. However, according to the Hesperia Star, the city council of Hesperia, Calif., has already turned it down, regardless of 50 percent of Hesperia homeowners being underwater on their home loans.
Regardless of the truth that a lot of people are underwater, a lot of them are still paying on their payments, according to CNN. The Zillow survey showed that 90 percent of underwater home proprietors are still making payments regularly. It is very dangerous for a homeowner to own more than the home is worth because they could end up in foreclosure.
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