Welcome to The Home Equity Theft Reporter, a blog dedicated to informing the consumer public and the legal profession about Home Equity Theft issues. This blog will consist of information describing the various forms of Home Equity Theft and links to news reports & other informational sources from throughout the country about the victims of Home Equity Theft and what government authorities and others are doing about it.
Friday, July 13, 2012
More On The Growing Wall Street 'Panic' On Underwater Home Mortgage 'Cramdown' Proposal Involving Use Of Eminent Domain
Congressman Brad Miller (D-NC) writes in American Banker:
There is a great disturbance in the force. Wall Street's political operatives — the American Bankers Association, American Securitization Forum, the Securities Industry and Financial Markets Association, and the Financial Services Roundtable — wrote a panicked letter to the Supervisors of San Bernardino County in California to express "strong objection" to a proposal by a startup mortgage company. The letter conveys the unmistakable threat that Wall Street will sic its lawyers on the county and will "likely be reluctant to provide future funding to borrowers in these areas."
The proposal is that the county use eminent domain to buy underwater mortgages, almost half the mortgages in the county. The mortgage company, working with the county, would then negotiate new mortgages with the homeowners that they could afford. If the proposal worked as planned, the county would get relief from the foreclosure crisis, the mortgage company would make a profit, and the idea would spread to other counties and towns.
A legal challenge by Wall Street might be expensive to fight, but the arguments are pretty flimsy.
Eminent domain is commonly used to buy land for projects like roads and schools. Existing law allows the use of eminent domain to buy any kind of property, however, including even intangible property like trade secrets. There is no apparent reason that eminent domain could not be used to purchase mortgages.
The Constitution requires only that the county pay fair market value and that there be a public purpose. Deciding a fair price would not be hard. There are frequent auctions of mortgages with a sufficient number of informed, sophisticated buyers. The auctions are an almost perfect pricing mechanism. There would be comparable sales to determine almost any mortgage's fair market value.
Showing a public purpose would not be hard either. A public purpose can be cleaning up contaminated land, renewing a "blighted" neighborhood, or even stimulating economic growth by replacing residential neighborhoods with commercial development.
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[T]he real losers from the program would be the biggest banks, the holders of second liens, not investors in first mortgages. And even for the biggest banks, eminent domain would not cause losses but reveal losses.
The biggest banks have delayed recognizing losses on seconds for years while paying dividends and lavish executive bonuses. Involuntary sales of seconds at fair market value would end fictitious valuations and require an immediate accounting loss, making dividends and executive bonuses much harder to justify and perhaps even revealing some banks to be insolvent.
CBC News: Betrayal of Trust (A CBC investigation reveals how lawyers across Canada have misappropriated and mishandled clients money, to the tune of tens of millions of dollars, or sometimes even charging vulnerable people top dollar for shoddy services)
Land Contract/Contract For Deed/Rent-To-Own Rackets
The New York Times: The Housing Trap (In the wake of the housing crisis, low-income families have turned to seller financing to buy homes but these deals can be a money trap)
Beware The Fine Print: Consumers Forced To Sign Away Their Rights To Use Court System
The NY Times: Arbitration Everywhere, Stacking the Deck of Justice(Part 1 in series examining how clauses buried in tens of millions of contracts have deprived Americans of one of their most fundamental constitutional rights: their day in court)
Foreclosure Mills' Abysmal Record In Complying With New NYS Foreclosure Requirements
Justice Deceived: How Large Foreclosure Firms Subvert State Regulations Protecting Homeowners
MFY Legal Services Report On Questionable Practices By Process Servers In Debt Collection Cases
Justice Disserved: A Preliminary Analysis of the Exceptionally
Low Appearance Rate by Defendants in Lawsuits Filed in the Civil Court of the City of New York
Mortgage Mess Redux: Robo-Signers Return (A Reuters investigation finds that many banks are still employing the controversial foreclosure practices that sparked a major outcry last year)
CNN Video: As Foreclosures Mount, Florida Court Turns To 'Rocket Docket'
The Wall Street Journal: A Florida Court's 'Rocket Docket' Blasts Through Foreclosure Cases (2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' Says a Judge)
"Produce The Note" Strategy When Dealing With Missing Promissory Notes In Foreclosure Actions
ABC Video: Fighting Against Foreclosure (Some homeowners have found a new tactic to keep the banks at bay)
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