A big part of the country's mortgages are underwater, meaning more is owed on the loan than the house is really worth. However, a California company has a novel repair in mind, which involves local governments using the power of eminent domain to force a refinance.
Super controversial concept
Among the powers of the federal, state and local governments in the U.S., and certainly one of the single most debatable, is the power of "eminent domain." Eminent domain is the right of a government to seize land from its owner for the "public good," as not doing so would be considered detrimental to public welfare. Home or land proprietors whose property is thus seized must be compensated for the loss of their property.
There are a lot of issues associated with eminent domain seizures. Even though they are for the common good, such as for highway extensions, people are usually not given what the land is worth from the government. For example, one landowner in the city of Hoboken was given $2.3 million for an acre of land worth $10 million to make a park, according to NJ.com. Lots of people think this is the worst sort of abuse of power.
A great way
California-based real estate company Mortgage Resolution Partners, according to Reuters, has a novel idea for using eminent domain. When eminent domain is used, the house is known as "condemned." However, MRP wants to use it to condemn the mortgage loans.
Millions of homeowners are underwater. CoreLogic estimates 22 percent of the country's home loans are underwater; Zillow, according to CNN, estimates 31.4 percent of the nation'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 brand 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.
Not the law yet
It is only a proposal at the moment; MRP is pitching the concept 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, in spite of 50 percent of Hesperia homeowners being underwater on their home loans.
Despite the truth that a ton of people are underwater, a ton of them are still paying on their payments, according to CNN. The Zillow survey showed that 90 percent of underwater home owners are still making payments regularly. It is very dangerous for a homeowner to own more than the house is worth because they could end up in foreclosure.
Super controversial concept
Among the powers of the federal, state and local governments in the U.S., and certainly one of the single most debatable, is the power of "eminent domain." Eminent domain is the right of a government to seize land from its owner for the "public good," as not doing so would be considered detrimental to public welfare. Home or land proprietors whose property is thus seized must be compensated for the loss of their property.
There are a lot of issues associated with eminent domain seizures. Even though they are for the common good, such as for highway extensions, people are usually not given what the land is worth from the government. For example, one landowner in the city of Hoboken was given $2.3 million for an acre of land worth $10 million to make a park, according to NJ.com. Lots of people think this is the worst sort of abuse of power.
A great way
California-based real estate company Mortgage Resolution Partners, according to Reuters, has a novel idea for using eminent domain. When eminent domain is used, the house is known as "condemned." However, MRP wants to use it to condemn the mortgage loans.
Millions of homeowners are underwater. CoreLogic estimates 22 percent of the country's home loans are underwater; Zillow, according to CNN, estimates 31.4 percent of the nation'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 brand 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.
Not the law yet
It is only a proposal at the moment; MRP is pitching the concept 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, in spite of 50 percent of Hesperia homeowners being underwater on their home loans.
Despite the truth that a ton of people are underwater, a ton of them are still paying on their payments, according to CNN. The Zillow survey showed that 90 percent of underwater home owners are still making payments regularly. It is very dangerous for a homeowner to own more than the house is worth because they could end up in foreclosure.
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