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.
Jul 28 2012, 8:55AM by Rob Chrisman
Earlier 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.”
Wouldn't you be embarrassed to overpay by $100,000? Only fools buy houses without knowing neighborhood values. Don't be a fool. Don't suffer the pain of an underwater mortgage. The surest way to lose your house is to overpay for it. Our reports identify overvalued and undervalued neighborhoods. Use it to broaden or narrow your search area. Savvy buyers work with us to find bargains. We've saved thousands from financial ruin. Let us save you too. If you want peace of mind while shopping for your next home, sign up for our monthly market newsletter.
We're sorry, but it seems that we're having some problems loading MLS # P828341 from our database. Please check back soon.