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June 11, 2012
RPTInvestors, Mortgage Firm, Pressuring States To Use Eminent Domain To Solve Housing Crisis
Reuters via The Huffington Post
by Matthew Goldstein and Jennifer Ablan
Eminent domain taketh away, and now these financiers want it to giveth back.
Here's a controversial but intriguing approach to the U.S. housing crisis: keep cash-strapped residents in their homes by condemning their mortgages.
A mortgage firm backed by a number of prominent West Coast financiers is pushing local politicians in California and a handful of other states hardest hit by the housing crisis to use eminent domain to restructure mortgages that borrowers owe more money on than their homes are actually worth.
San Francisco-based Mortgage Resolution Partners, in a presentation reviewed by Reuters, says condemning so-called underwater mortgages and taking them out of the hands of private lenders and bondholders is "the only practical way to modify mortgages on a large enough scale to solve the housing crisis."
...Over the years, governments have used eminent domain authority to clear urban slums or seize land to build highways and bridges.
And also to take a perfectly fine neighborhood and give it to Bruce Ratner to build a much-need basketball arena.
Under the ambitious proposal, Mortgage Resolution Partners would work with local governments to find institutional investors willing to provide tens of billions of dollars to finance the condemnation process to avoid using taxpayer dollars to acquire millions of distressed mortgages.
A local government entity takes title to the loans and pays the original mortgage owner the fair value with the money provided by institutional investors.
Mortgage Resolution Partners works to restructure the loans, enabling stressed homeowners to reduce their monthly mortgage payments. The restructured loans could then be sold to hedge funds, pension funds and other institutional investors with the proceeds paying back the outside financiers.
And now for the money shot:
Mortgage Resolution Partners, which up until now has tried to keep private its discussions with local politicians and the two investment banks it is working closely with, would collect a negotiated fee on every loan that is condemned and restructured.
Posted by eric at June 11, 2012 11:26 AM