Dan Peterson, Executive Director info@proprights.com 407-481-2289
Copyright © 2012 Coalition for Property Rights
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The Coming Eminent Domain “Heist”
The Constitution of the United States gives government the “Power” to take private property “for public use” provided there is “due process of law” and “just compensation.” The most notorious misuse of this power to date is the U.S. Supreme Court decision in Kelo v. City of New London. But now, certain US cities are promoting a new use of eminent domain that will spell disaster for the housing and financial industries. San Bernardino County and the City of Stockton, California have already crossed over the line of bankruptcy and are in desperate need of revenue. Here’s their plan:
Use eminent-domain powers to buy mortgages where homes are underwater.
Impose losses on lenders.
Write down the principal amounts owed by the borrower.
The results are great for the borrower who gets his loan modified.
The results are great for the financial/investment management company to be selected to operate this scheme because of the fees to be received for each loan modified and their share of the profits realized on behalf of their investors.
The results are great for the municipalities which get a financial piece of the deal.
But, what about the lender of the original loan?
Consider the following scenario as laid out by Jann Swanson in an article entitled, “SIFMA Slams Eminent Domain “Scheme” in Letter to FHFA”:
Let’s suppose – for example’s sake – an owner has a home with a $150,000 mortgage. The home is now valued at $100,000. Government (San Bernardino County) takes the mortgage through eminent domain. A financial management company (in this instance an investor backed entity called Mortgage Resolution Partners – MRP) buys that loan for 80% of current value or $80,000.
It then refinances the home into an FHA loan at a 97.75% loan-to-value ratio producing a new principal of $97,750.
Factoring in securitization, the refinanced loan amounts to $104,592.
The management fee for each such transaction: $4,500.00.
Good for the owner – he’s been refinanced and his home is no longer underwater.
Good for MRP investors holding the new mortgage – they bought a $100,000 mortgage for
$80,000, a handsome, imbedded, and immediate 25% profit.
Good for MRP – it made $4,500.00
Good for the city which gets a cut of the net profit realized through the deal.
But, what about the original lender?
And, what about those who invested their retirement funds or savings in mortgages with the realistic expectation of return on investment? They are stuck with the losses.
What about our Constitution designed to uphold the sanctity of contracts and protect citizens from illegal takings? Are these foundational pillars of society and business to be simply ignored or swept away?
CPR sees the concept of mortgage seizure through eminent domain as a violation of the U.S. Constitution. At best, it is an inappropriate use of eminent domain and a violation of contract law. At worst, it is theft and a government-enforced redistribution of wealth. How will entities be able to lend confidently in the future with a risk of arbitrary and discounted seizure lurking? And, to whom would home buyers go for financing?
Kenneth E. Bentsen, Jr., executive vice president for The Securities Industry and Financial Markets Association (SIFMA), has said, “The use of eminent domain to seize mortgages not only lacks legal and constitutional validity; it has the potential to scuttle a housing market that is working towards recovery and does so at the expense of pension funds and mutual fund investors.
SIFMA and 25 other trade associations have sent out a joint letter to the Federal Housing Finance Agency strongly opposing the eminent domain proposals.
CPR has been in touch with the office of U.S. Representative John Campbell, R-Irvine, CA, who has filed a bill (H.R. 6397) to end this nefarious scheme. His legislation would prohibit Fannie Mae, Freddie Mac, the Federal Housing Administration, and the Department of Veterans Affairs from making, insuring or guaranteeing mortgages in areas where municipalities are seizing loans under the power of eminent domain.
CPR has been asked by the Congressman’s office to invite you to contact your U.S. Representative and ask them to sign on as co-sponsors.
Finally, Florida readers should note, our state has an anti-Kelo statute, F. S. 73.014, prohibiting the use of eminent domain for this purpose. CPR is proud to have participated in the passing of this legislation.
CPR encourages you to stay tuned and alert. Click on the link below to further your education and continue your vigilance regarding this emerging issue:
http://www.mortgagenewsdaily.com/09072012_eminent_domain_loan_mods.asp
Our mailing address is:
Coalition for Property Rights
2878 South Osceola Avenue
Orlando, FL32806
The Coming Eminent Domain “Heist” « Publication-X
Oct 29, 2012 @ 04:42:59
The Coming Eminent Domain “Heist” – Secrets of the Fed
Oct 29, 2012 @ 04:30:56
Oct 29, 2012 @ 01:02:18
I agree with azgirl7. Amerika is the bastion of capitalism as the new Promised Land. When Enlil and Enki had that falling out all those years ago and “competition” replaced “cooperation”, along came Judaism. Some would argue that the Hyksos were the founders of “Judaism” (Josephus seems to some way to confirming this). As most unpopular pharaoh’s they lasted 150 years to give the “Jewish people” 250 years of darkness and “slavery” (sic). As they pinched Hebrew and the “holy doctrine” from the “snakish” [or actual reptiles?] priest class they never knew how to say yhwh or in what circumstance. A couple of enlightened but very contraversial intellectuals have made claim that so-called Israelite “pure bloods” are a very special hybrid made of some very surprising components.
Now you are starting to see that competition IS tyranny. How does it feel?
Oct 28, 2012 @ 23:36:04
Or, you could’ve just lived in Brooklyn and had your home taken for a stadium complex.
Oct 28, 2012 @ 19:41:26
A typical “mortgage” is legally a “false document” and at least a constructive forgery, because it purports to be a receipt for money had and received when none had been received in fact. The issuer of the nominal security (nominal borrower) typically (in most cases) swears under oath and penalty of perjury that they have already received the loan proceeds from the bank and that they are already the existing registered owner of the real estate being pledged as security, when in the vast majority of cases such purported facts are demonstrably untrue.
The bank needs the nominal security to appear to be a pre-funded or certified liability of its issuer/nominal borrower. As and when the (nominal) executed security is delivered to the bank, the actual and rational intent of the nominal borrower is to honour the terms of the security only on condition of receiving a substantial subsequent payment (the stated principal amount) from the bank. But such contingency or conditionality is fatal to the bank’s use of the writing as a security in the financial markets.
Also, by getting the nominal borrower/issuer of the nominal security to put an objective lie to paper the bank negates the possibility of the nominal borrower suing the bank in equity jurisdiction for the bank’s fraud against both law and equity.
Strictly speaking the government is already legally required to confiscate all such nominal mortgages as constructive or actual forgeries/false-documents under the criminal law – and without compensation to the current holders – identical to the process of seizing counterfeit money.
Oct 28, 2012 @ 14:36:00
the constitutionality of the matter is a moot point – because the financial system we have in place that made the loan is unconstitutional in the first instance- if the loan is illicit then what’s good for the goose is good for the gander.
Furthermore – if you are a lender and charged interest on money that’s usury, so serves you right for running with the devil.
Oct 28, 2012 @ 13:00:48
There has been much discussion in news outlets about proposals to use eminent domain to acquire “underwater mortgages”—mortgages where the owner owes more than the worth of the home. State laws and state constitutions prohibit this abuse of eminent domain. Nearly all states reformed their laws in the wake of the U.S. Supreme Court’s notorious 2005 decision in Kelo v. City of New London. There, the Court ruled that the mere possibility of “economic development,” i.e. increased jobs and tax dollars, in a city justified taking private homes and transferring them to a private developer. Although it denied federal constitutional protection for individual’s rights, the Court took care to note that if states wanted to provide more protection to property owners, they could do so.
Oct 28, 2012 @ 09:53:03
Hmmmm
A follow up here bears restating the obvious; corporations have been using “eminent domain” to steal from the taxpayers and citizens for decades. Time after time this “right” has been abused because in the end it is corporations that benefit and not the people. You state yourself that the “taking” has to be for “public good”. The list of examples where eminent domain failed that test is incredibly long and getting longer by the day.
But the bottom line is this case is that the “public good” is served. What is not served is the handful of speculators and banks that are demanding a profit on their investment.
Oct 28, 2012 @ 09:45:29
Hmmm
Why is it that the sanctity of a contract is only material when corporate profits are on the line? What about the sanctity of a contract for say a worker that spends his entire adult life contributing to a retirement plan which is then wiped out by a bankruptcy court handing the assets over to corporate raiders who intentionally bankrupted the company to begin with.
Your argument that a contract is a contract falls flat in the face of corporations which can and do simply file bankruptcy to get out of unprofitable “contracts” Come on the real criminals here are the banks and the mortgage companies.
And isn’t it ironic that it is these same banks that took literally trillions in essential zero interest loans from the taxpayer (without our knowledge or permission) are now demanding we honor their contracts. I think not fella. The banks have gone to the well to steal the water way to many times……The banks should be forced into bankruptcy and the assets sold off to repay the taxpayers.
Anonymous
Oct 28, 2012 @ 07:48:37
Oct 28, 2012 @ 07:28:59
Ah your not going to get much sympathy for those worthless bankers. Which is why perhaps those cities are embarking on this venture.
Oct 28, 2012 @ 07:15:32
Who can blame the municipalities for cooking up this hot little scheme? The banks scammed them with their MERS and robo signing, robbing them of millions in county recording fees every time they sliced and diced the fraudulent mortgage bonds they sold.
In this era of free-for-all theft, where criminals get bonuses instead of years in the slammer, you can hardly blame them for wanting to join the party. In most cases, the ‘originator of the loan’ didn’t lose a dime, or have to mark their books to ‘market’. The cities just want their slice of bubble pie and a chair before the music stops.