Growing mortgage industry concerns about the spreading popularity of eminent domain

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 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.”

Westminster Overview

Proprietary OC Housing News home purchase analysis

15740 POINSETTIA Way Westminster, CA 92683

$547,000 …….. Asking Price
$460,000 ………. Purchase Price
10/21/2008 ………. Purchase Date

$87,000 ………. Gross Gain (Loss)
($36,800) ………… Commissions and Costs at 8%
============================================
$50,200 ………. Net Gain (Loss)
============================================
18.9% ………. Gross Percent Change
10.9% ………. Net Percent Change
4.5% ………… Annual Appreciation

Cost of Home Ownership
——————————————————————————
$547,000 …….. Asking Price
$109,400 ………… 20% Down Conventional
3.70% …………. Mortgage Interest Rate
30 ……………… Number of Years
$437,600 …….. Mortgage
$101,613 ………. Income Requirement

$2,014 ………… Monthly Mortgage Payment
$474 ………… Property Tax at 1.04%
………… Mello Roos & Special Taxes
$137 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
………… Homeowners Association Fees
============================================
$2,625 ………. Monthly Cash Outlays

($319) ………. Tax Savings
($665) ………. Equity Hidden in Payment
$134 ………….. Lost Income to Down Payment
$157 ………….. Maintenance and Replacement Reserves
============================================
$1,931 ………. Monthly Cost of Ownership

Cash Acquisition Demands
——————————————————————————
$6,970 ………… Furnishing and Move In at 1% + $1,500
$6,970 ………… Closing Costs at 1% + $1,500
$4,376 ………… Interest Points
$109,400 ………… Down Payment
============================================
$127,716 ………. Total Cash Costs
$29,600 ………. Emergency Cash Reserves
============================================
$157,316 ………. Total Savings Needed
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599……
sales@ochousingnews.com…..

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	$759,000 9570 NEWFAME Cir		0.23 miles 4 bd / 3 ba 2,561 Sq. Ft.
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	$699,000 16583 TEAK Cir		0.88 miles 5 bd / 3 ba 2,145 Sq. Ft.
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	$700,000 9814 PETUNIA Ave		1.07 miles 4 bd / 2.5 ba 2,101 Sq. Ft.
	$779,000 16889 HELENA Cir		1.16 miles 4 bd / 2.5 ba 2,412 Sq. Ft.

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