Cities Consider Seizing Mortgages

[Rockntractor]

BY NICK TIMIRAOS

A handful of local officials in California who say the housing bust is a public blight on their cities may invoke their eminent-domain powers to restructure mortgages as a way to help some borrowers who owe more than their homes are worth.

Investors holding the current mortgages predict the move will backfire by driving up borrowing costs and further depress property values. "I don't see how you could find it anything other than appalling," said Scott Simon, a managing director at Pacific Investment Management Co., or Pimco, a unit of Allianz SE.

Eminent domain allows a government to forcibly acquire ...
http://online.wsj.com/article/SB1000...392791018.html

[noonwitch]

It would definitely depress property values.


I think it's okay for a city to seize the property if the owner hasn't paid the taxes, whether that owner is a bank or home owner. But when they do so, they also are supposed to maintain the property. A poor city won't be able to maintain a lot of empty buildings.

The trick is for the city to force the owners (including the banks) to maintain the properties. Detroit doesn't do this well, the need is too high and the resources too few. Grand Rapids, on the other hand, manages this pretty well.

[Odysseus]

It would definitely depress property values.


I think it's okay for a city to seize the property if the owner hasn't paid the taxes, whether that owner is a bank or home owner. But when they do so, they also are supposed to maintain the property. A poor city won't be able to maintain a lot of empty buildings.

The trick is for the city to force the owners (including the banks) to maintain the properties. Detroit doesn't do this well, the need is too high and the resources too few. Grand Rapids, on the other hand, manages this pretty well.

First, if the city can seize your property because you haven't paid it for the privilege of living there, then you don't own it, you're a renter. The city should not be able to confiscate property because someone couldn't pay an arbitrary fee that it imposed. Second, NYC took over lots of buildings during the oil crunch in the 70s, because the rent-controlled buildings generated so little revenue that landlords couldn't afford to heat them. The city then failed to maintain them, and so became the single largest slumlord in the nation. The real trick is for government to stop trying to manipulate the economy in order to gain a desired outcome. The more that government intervenes, the worse things get, except for those few connected pals of the politicians, which is why Chris Dodd and Barney Frank got all of those sweetheart deals from the lenders that they were regulating.

[Rockntractor]

No part of government wants to work within the confines of what they are intended for, if we ever rein in the fed we still have state and local to bring back under control, an insurmountable task.

[Starbuck]

....may invoke their eminent-domain powers to restructure mortgages .....

I couldn't read the entire article. And I am trying to get my mind around what the cities are trying to do.

OK....So I owe 200K on a property that is worth 150K. And the cities are trying to do...what?

[Starbuck]

I heard a follow up on a podcast this morning.
The cities are trying to capture the entire mortgage, and then resell it at the market rate. In other words, in the above example they will buy my 200K mortgage (for 200K, I suppose) and then let it out again at 150K.

Gad!
Only a politician who has seen too many car lot ads would think of this. I suppose they think they're going to make it up in volume or some such thing............I dunno.