Tucked in on page 4 B section of Saturday’s Times was an
article that could; perhaps should be of interest to Plainfielders and
especially a proactive government.
Titled “More Cities Consider Eminent Domain to Halt
Foreclosures” it goes on to explain that the plan is to use the Eminent Domain
process in in situations where the
house’s value has dropped below the mortgage, and where the owner is
faced with foreclosure. The plan is not
to acquire the property but use the process to obtain the mortgage.
The City has mortgage holder would then reduce the value of
the outstanding loan and enable the homeowner to preserve his/her house. There
would of course be an inbuilt loss in the process but it would eliminate the growing
number of foreclosed and abandoned houses that create blighted areas.
The homeowner would continue to live in and maintain his
home. That would be an essential agreement before picking up the mortgage.
Initially the municipality would try to negotiate with the
holder but would revert to the eminent domain process if resistant was
encountered.
There are of course many legal question involved. In New
Jersey the ACLU has taken an active positive position on this matter despite
resistance from the banks etc.
There is also questions on how to finance the operation; if
bond issues would be feasible?
Richmond California, Yonkers NY, and recently Irvington NJ
have shown interest in the process. Some towns that previously investigated doing
it have backed away.
I do not know if this is feasible. I think that it should be
investigated unless there is a consensus that the day of massive mortgage
defaults and foreclosure has past. Perhaps a limited life commission could be
the means to pursue this option.
Agree to my terms or I take your property, and there is nothing you can do to stop me. I am all powerful!
ReplyDeleteBlackdog as I understand he city s not seizing the property but the mortgage itself. The present holder will get "fair value" which will be at least market value if less than the mortgage.
ReplyDeleteDo cities really want to get into the mortgage business?
ReplyDeleteOne reason foreclosures are taking years because in many cases the banks can't prove that they are the owner, especially when the bundled mortgages into securities and sold them.
The courts are holding banks' feet to the fire to prove the ownership chain, due process to the owners, etc., etc.
The banks want to be able to foreclose. Most eagerly want to do short sales, so they can sell the property and move on.
In many cases people won't short sale because right now they are living for "free" in their homes, paying no taxes, insurance, etc. or they are renting out, making "free" money. They don't have motivation to do a short sale.
The cities would be faced with the same issues.
Also, how can anyone determine "fair market value"?
Also, if the city takes the loss, or basically underwrites the loss and gives a new, lower mortgage to the homeowner -- who is footing the "purchase" of the mortgage? Where will the "purchase" funds come from? The other people in the community via taxes into a fund, I'm guessing.
It's a bad idea. It's taking a private loss (the bank's) and making it a public loss (the city's).
It is also putting the city into the banking business. What happens the city gets the mortgage, arranges new terms with the homeowner -- and the homeowner defaults? What does the city do? Is the city going to "sell" the mortgage to someone else (what most small banks do).
It is a bad, bad idea. I know they mean well, but they don't know enough.
Whenever anyone in government gets a good idea, someone gets hurt!
ReplyDeleteAffordable care act, need I say more?