If eminent domain is enacted and passes the courts, it will probably prevent the next housing bubble. It will probably completely change how mortgages are underwritten too, higher down payments, higher interest rates, and mortgage eminent domain premiums along with PMI. This is good article to click and read it full.
Why the Industry Cares About this Eminent Domain Thing; Investor Updates
Jul 28 2012, 8:55AM by Rob ChrismanEarlier this week I was in Ontario, visiting the headquarters of a well-run mortgage shop, so this note was very relevant: “Rob, what are you hearing with this eminent domain thing? I am a two-person broker in Iowa – why should I care about what happens up ‘the mortgage food chain’ in California – the land of fruits and nuts?” Remember, the architects of this thing were smart enough to know that they couldn’t pick on the Agencies or GNMA, so they have only picked a fight with SIFMA and left the Goliaths to warily watch and wait from the sidelines. I anticipate that if it goes into effect in San Bernardino, and Ontario and Fontana, then SIFMA would either come out with disclosure requirements around loans in certain geographic areas within pools, or around requiring certain areas to be put in specified and separate pools, or perhaps the rating agencies would take care of it by torpedoing the ratings, or better yet, not rendering a rating on such a pool. So then the loan market dries up because there’s no bid, and then we know what happens next: investors pull out and the borrower pays the price. And one has to ask, “Where is the money coming from to fund this effort?” And what non-agency servicer is going to tell this group that a borrower is behind?
But the use of eminent domain to seize, and then restructure, underwater private-label mortgages would result in more than just losses to private investors. Fannie Mae, Freddie Mac and the Federal Home Loan Banks are also major investors in private-label securities and they too would suffer if the county took over what is estimated to be 150,000 underwater mortgages. It’s a very bad precedent – just try coordinating that with supposed long-term plans to reduce the government’s role in housing by turning as much as possible over to the private sector. And does it put the county in charge of FHFA? I don’t think the staff would care for that very much. (The Housing and Economic Recovery Act of 2008 stipulates that while acting as conservator, FHFA “is not subject to the supervision or direction of any other agency.”) San Bernardino County caused a ruckus with bond investors when it created a Joint Exercise Powers Authority last month in agreement with the cities of Fontana and Ontario to devise a Homeownership Protection Plan. San Francisco venture capital firm Mortgage Resolution Partners, led by CEO Graham Williams, is backing the plan after (per American Banker) it had “pitched the eminent domain proposal to several California cities, singled out performing but underwater loans in private-label securities, in which the borrower is still paying their mortgage but owes more than the home is worth.”
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The mainstream media needs to spin the bad foreclosure numbers or their bottom-is-in meme will be debunked. I look forward to seeing how they spin the dismal July sales numbers due out soon.
Western States See Mixed Foreclosure Numbers for July
ForeclosureRadar’s Foreclosure Report for July 2012 showed mixed month-over-month trends from state to state but revealed an overall year-over-year decline in foreclosure filings.
The report, released Monday, covers Arizona, California, Nevada, Oregon, and Washington. Of the five states, only Arizona and Oregon posted decreases in foreclosure filings from June, while California and Nevada reported relatively small increases.
Washington showed the largest increase in filings, posting a 22.4 percent rise from June.
Oregon reported a 64.2 percent decrease in foreclosure filings, likely due to trends in the state that may indicate a lean toward a judicial foreclosure process. The state saw a new law (SB 1552) that gives homeowners at risk of default the right to request foreclosure mediation. In addition, a ruling from the Oregon Court of Appeals forced some lenders to proceed judicially with foreclosures, contributing to a drop in filings.
At this time, it’s not clear if this is just a temporary decline or a shift toward a judicial foreclosure process in the state.
Foreclosure sales were also mixed across the states. Washington reported the largest decrease in sales, posting a 27.5 percent drop from June. Nevada’s sales also fell 4.6 percent.
Of the other states, Arizona saw the largest increase in foreclosure sales with 27.5 percent. Sales increased slightly in California (10.5 percent) and stayed fairly flat in Oregon (0.4 percent).
Time to foreclose either fell or stayed flat in all five states, with California reporting the largest decrease (10.4 percent) and Washington reporting the largest increase (only 2.0 percent).
While these numbers were too varied to be indicative of a larger trend within the region, ForeclosureRadar founder and CEO Sean O’Toole said long-term trends-which show decreases in foreclosure activity in every state except Washington-are more important.
“While we are as curious as anyone to see the direction foreclosures are headed each month, it is important to keep things in context,” O’Toole said. “It is not unusual to see the number of Foreclosure Filings or Foreclosure Sales go up or down 10 percent or more each month. Whether it’s due to the length of the month, holidays, or internal delays at a lender, trustee, or posting company, it is completely normal to see fluctuations. What’s important is the bigger picture.”