Sacramento Area Officials Explore Using Eminent Domain To Aid Underwater Homeowners

RICHMOND, CA - JULY 13: Mold covers the walls of a foreclosed home during a bus tour of foreclosed and blighted properties on July 13, 2012 in Richmond, California. (Photo by Justin Sullivan/Getty Images)

Sacramento Bee :

Sacramento and Elk Grove officials are exploring a controversial plan to use their powers of eminent domain to seize underwater mortgages from private investors and slash the amounts borrowers owe.

Read the whole story at Sacramento Bee

Comments

[doctorw2]

08:36 AM on 08/15/2012

the foreclosures need to be banned because they are destroying our neighborhoods and the economy while the banks continue their misconduct with impunity. enough is enough!

[quantumhockeypuck]

04:09 PM on 08/13/2012

This is the most serious issue that is driving the rest of our economic woes. If local governments and civic committees can drive action, I'm all for it.

[JumpStreet1983]

12:19 PM on 08/13/2012

This is just another way to kick a man when he's already down. Putting people into empty, derelict homes is unthinkable and it's too expensive to renovate these hulks. The banks have all but stopped loaning to people who even MIGHT be a risk, so that means people with bad credit/eviction/foreclosure on their records are just gonna have to get creative and/or save up money and move to an area where they can buy with cash.

I'm a huge proponent of walking away from toxic mortgages, especially if the house is worth significantly less than what you owe on it. Corporations file bankruptcy all the time. It's only the old-fashioned types who believe that since you signed on the dotted line, you should own up and pay. That mindset is a relic of the dinosaurs, and we're living in different times. The banks gave out loans to people who should have never qualified, therefore being crooked from jump street. In a deal like that, I believe no homeowner should remain stuck to a mortgage that was given out on a lie. WALK AWAY!

[ajahenry]

02:24 PM on 08/13/2012

So, you are saying that all these "homeowners" are stupid pawns of the banking industry and shouldn's have to pay their bills? Not saying much for your fellow man are you? If people are as dumb as you think they are, we're in trouble.

[JumpStreet1983]

02:38 PM on 08/13/2012

I said no such thing, so you basically heard what you wanted to hear. What I said was that the loan officers and banks were crooked to force-feed loans to many homeowners that never should have qualified (no money down, bad credit, evictions, etc). If you have no money to buy a house with, how do you expect to pay the bills? Now the homeowner is behind on mortgage payments, the market has dropped and that $300,000 home is now worth $150,000. When it comes to having peace of mind and food on the table, that's more important than remaining locked into a toxic mortgage and some old crab that yells, "I paid for my house and you should, too!".

[Lenape105]

12:59 AM on 08/14/2012

Do a search on 'countrywide fraud'. Loan officials at Countrywide forged signatures and altered qualification records to get people into loans for which they weren't qualified, without knowledge of the mortgage applicant. It's not a matter of being stupid; it's a matter of being conned.

[Soc3947]

07:13 PM on 08/12/2012

The moral hazards just get worse and worse..but hey it's should drive home prices down even further. Who would give loans knowing the govt can reduce the principal on a whim..

[Cory Gudwin]

10:19 AM on 08/13/2012

Exactly. Banks are going to loan to nobody in the higher-risk demographics.
If they have gotten burnt by certain types of buyers, that whole group is going to find it impossible to get mortgages in the future. I suspect this is already occurring.

[Lenape105]

01:00 AM on 08/14/2012

Fraudsters.

[VikingQuest]

03:19 PM on 08/12/2012

If your home can be considered "public use" then there is really no reason that the Government can't claim anything they want to and use eminent domain to snatch up everything and anything.

There is no way this practice will make it through the courts.

[MSROADKILL612]

11:49 AM on 08/12/2012

I have got some support for my derelict (houses) super tax idea.

but my supporters have still fallen for the big lie

I am not my brothers keeper & certainly not my neighbors

why is his value my problem?

If my house keeps me warm & dry - the rest is nobodys biz

now u have to get scammed by a nursing home cos u prefer a meadow to a lawn

in days of yore - was always an unkempt old guys house on the block

wonderful

I do not advocate propping values at all - the opposite

just honesty - let true values prevail

[Lenape105]

01:02 AM on 08/14/2012

Everyone for himself. To hell with society. I'll stop donating blood, because it's mine, all mine.

[MSROADKILL612]

01:12 AM on 08/14/2012

Hope I am wrong, but are you equating donating blood w/ a tidy yard?

[gdoud]

10:54 AM on 08/12/2012

I like the idea that local governments are looking for solutions, solutions that SHOULD be coming from the federal government but won't because the banks own them.

But I smell a scam here. It seems like INVESTORS want to use the power of government to make a quick buck, which actually happens all the time. This seems like a twist on that. From private, to public, back to private for 7 - 20% profit.

But on the other hand, homeowners are suffering. In part because of their own bad timing or judgement, but in part because of MASSIVE fraud by the big banks, who are immune from meaningful consequence, as we just saw by the Goldman Sachs fluffing from the DOJ. Homeowners should get fraud relief. If the Fed won't do it, and local govts. have to power to do it, then I say go. Especially if one of the five largest banks that we bailed out are owners or servicers of the loans.

But I still worry that this is yet another scam.

[Tresco]

10:03 AM on 08/12/2012

I live in California and there are countless empty houses sitting and rotting. They are eyesores, targets for vandalism and arson and they drive the property values down. The banks that own the properties are somehow insulated from paying the cost of the deterioration. In a free market they would be taking unsustainable losses. These blights should be condemned and bulldozed at the banks expense. The banks need to be condemned too but that's another story. The lots could be left empty in some cases or small, affordable quality homes (like the Katrina cottages) could be built for a tiny fraction of the inflated derelict houses.

[MSROADKILL612]

10:01 AM on 08/12/2012

Trouble is, councils are the biggest crooks of all.

The last thing they want is affordable housing.

They want taxable value to the max.

Try dodging a mortgage by living in a trailer on your block & building a home on w/eS?

[gdoud]

10:59 AM on 08/12/2012

Councils aren't the biggest crooks, they are just much cheaper (more easily bought) toadies of the big crooks. And yes, they want maximum taxable value, and so should home-owners. This plan will actually lower taxable value, but hopefully allow it to build again because folks can stay in their homes, and move in to empty, rotting ones and restore their value.

I just worry that crooks have already bought these councils and that this is a scam, a poor cousin to the scam that Wall Street worked on us all.

[MSROADKILL612]

12:00 PM on 08/12/2012

pls consider

councils have been falsely boosting values from the year dot

wall st was a late starter

consider aesthetic building regulations for starters? - why is that relevant in the land of the free?

[thereisonlyoneparty]

01:26 PM on 08/12/2012

Why would anyone move into an empty rotting home?

did you not read the explanation of the proposal?

The company would only advise the government to take homes where people are currently making their mortgage payments. They would not look to empty homes because they can be bought cheaply already (foreclosure auctions and such things). The houses that people are paying on are not available on the market because most are worth less than the mortgage. They would take huge losses selling them and still owe the bank.

[MSROADKILL612]

09:48 AM on 08/12/2012

Why not a derelict tax (on non eminent domains :) )

Up the holding costs to force them onto the market.

This is a bigger scam than the bubble.

Clearly they are not worth what they state on the books. Its fraud.

Sadly, fanny & freddy hold most of the paper, so taxpayers get stiffed anyway, but thats not SacamentoS problem

[Tresco]

10:16 AM on 08/12/2012

Ordinarily jacking up taxes is not the way to spur any kind of economic activity but in this case your idea makes a lot of sense. This horrible situation was certainly not brought on by anything like a free market. Stupid housing policies in Washington brought on the rise of these rotting "zombie houses". Putting poor people in these hell holes is unconscionable. It would be unaffordable to make them habitable and poor people could not afford to maintain the wasteful designs. Tear these rotting hulks down and replace them with affordable, efficient homes. As it is the deralicts will never be anything but a drag on the tax roles and the housing market.

[gdoud]

11:19 AM on 08/12/2012

Your last point is too true. Not only Fannie and Freddie (which took on a TRILLION's worth of the banks' most toxic junk), but through the VA and other federal programs we (the taxpayer) guarantee 90% of American home mortgages. This is why the banks don't care, and would just as soon keep these derelicts on their books at the original mortgage value. They know they can ultimately get us to pay, and they can use the original value on their books as leverage to gamble in the derivatives market.

And this is why I see a ray of hope in this story, although, like you, I fear yet another scam. IF (and it's a big if) cities like Sacramento can use this program to help homeowners and restore communities AND take a toxic home off the back of the rest of the nation's taxpayers, then I say hooray!

A derelict tax is an interesting idea, and would incentivize the banks to move homes onto the market, and to keep them up, thus preserving neighborhood property values. But that still leaves the underwater homeowner out in the cold.

In this last round of bubble/fraud, the banks were able to use the power of govt. to privatize executive bonuses, and socialize the massive losses. I say use the power of govt. to socialize the losses of their fraud victims for a change.

[Georgia Yankee]

08:48 AM on 08/12/2012

I'm sure this is an Obama administration test site to see how it will work on a federal level.

[hamsteronwheel]

08:25 AM on 08/12/2012

we're all hamsters on neocon "financially engineered" and "financially innovated" wheels

"MRP has told investors they could see a return of 20% to 30%, said one investor who met with the firm."

http://online.wsj.com/article/SB10000872396390443295404577547243807191280.html

Steven Gluckstern raised $120,900 for the Obama campaign in 2008 as a bundler, according to opensecrets.org, the web site that tracks political donations.

here we have another neocon vulture capitalist who probably made a killing in the housing market securitizaion that caused our 2nd Great Depression

with tons of investor $$ to throw around

using Emminent Domain!

to acquire assets vulture caitalists DESTROYED

for pennies on the dollar

and ANOTHER BIG PROFIT!

the rape and pillage cycle never ends!

FINANCIAL TERRORISTS!

[Romper7]

08:16 AM on 08/12/2012

More communism.

The U.S. is done for, they might as well stop patrolling the borders and dismantle the armed forces since now you can borrow money and not pay it back.

[MissTake1989]

07:04 AM on 08/12/2012

Ha...

Kelo vs. New London comes back to bite them.

Own it.

[whisky2]

06:03 AM on 08/12/2012

I moved out of Sacramento area in 2004. I lived in a lesser (I guess that's the word) area. I remember when they were building North Natomas. It was all the rage. Big McMansions squeezed together going up like mad. My wife and I would wonder "who the hell is buying these $300-$400K places?" Like a lot of places it was people who figured it could only go up and up and up. I would drive through and look at the pools and fancy SUV's. I suppose if I was way underwater I'd rather they bough the thing, got me out of it entirely and went and lived more frugally. This plan sounds like more Gov't. confusion. It also sounds like the mortgage brokers are trying to make money out of a losing proposition.