Comments on: Eminent domain, MBS and the U.S. Constitution: A one-sided fight? On the Case Fri, 15 Jul 2016 20:42:45 +0000 hourly 1 By: paintcan Thu, 19 Jul 2012 12:07:18 +0000 @HerrCIO – I found a text in the NYT yesterday afternoon before I saw your comment and after I had done a more general online search.

I didn’t mean to suggest a “conspiracy”. If one does a docket search at the SC site it comes up empty. These sites still confuse me.

Obviously – not every Justice on the SC believes the arguments presented by every other Justice. Having difficulty finding the text made me think that perhaps they didn’t consider it one of their shining achievements? A silly notion I suppose but the more I read it the more I can see that may well be the case. Justice Scalia seems to think it wasn’t one of their better decisions.

I haven’t read the New London case but I won’t be surprised if that isn’t all that fine a piece of reasoning either. I have read that many municipalities have already attempted to protect themselves from some of the implications of the New London decision. But that’s the next read.

BTW -Thomas’s opinion at the end of the text re: the commerce clause is so brief it looks to me like it is missing most of the argument he is trying to make. But ag after p 193 there were no more pages.

As Scalia criticized the ACA, it is possible that the New London decision will/is breeding more constitutional problems than it might solve.

Maybe this issue will go to the SC too and the court could have a chance to reconsider the New London decision. Perhaps Congress may have to redefine the issue of eminent domain and put very well defined limits on it because this idea of claiming that private indebtedness (most of whom are probably more recent home buyers) is a public issue is a bit of a stretch, to say the least.

By: breezinthru Tue, 17 Jul 2012 11:16:40 +0000 @NoVaCre

Yesterday’s Reuters article about Citi’s continuing saga of misfortune attributes the recent big losses to MBS generated in the several years before the collapse, so the MBS market is already losing money. Decreased credit availability for would-be homeowners is already a problem and has been for the past several years.

Even though negotiating a workable alternative to default is in the interest of both parties regarding mortgages that are deeply underwater, the ‘two parties’ can’t negotiate a payment strategy that both parties are willing to live with MBS’s created a situation where there is no 1:1 correspondence between the party that owns the mortgage and the party that is making payments on it.

In the brave new world created by MERS, the mortgage servicer is seldom the sole owner of the mortgage.

Most people who are still making timely payments on their deeply underwater properties… like me… will eventually default if no resolution is found. My 50K down payment is gone, the principal portion of my monthly payment is gone before I even “write the check” each month and 15K that I put into improvements when I bought my modest rambler in 2006 is also gone. I planned to live here until retirement in 2019. I intended to sell at that point because I can’t afford these payments on my projected retirement income, but I can’t sell and come anywhere close to breaking even.

I and millions more homeowners like me will eventually default if no resolution is found. A principal reduction to fair market value now won’t enrich me, but it would allow me to sell and at least break even at some point. That removes the incentive to walk away.

By: NoVaCRE Sun, 15 Jul 2012 21:36:44 +0000 Its clear that something needs to be done to address the household balance sheet issue in the country; the lack of improvement in that area has been a continued drag on the economy by depressing demand, in contrast to the improvements seen on the corporate side, which would also benefit significantly from a household balance sheet clean up. That said, if San B’s strategy disrupts the MBS market significantly, which i fear likely would, it would result in decreased credit availability for would-be homeowners, it would be a self defeating plan as housing prices could decline further or remain stagnant well into the future. I do not have an alternative plan, but I hope someone with the expertise in this area that I do not have is able to find a workable solution.

By: breezinthru Sat, 14 Jul 2012 19:56:19 +0000 @alignedinterest

You realize of course that if we don’t get our economy back on track, it would very well collapse which would leave pension funds and 401K funds destitute and it just might unravel the social fabric on which we all depend for a normal life.

I take issue with your characterization of people who are still making timely payments on their underwater mortgages as real estate speculators. The real estate speculators walked away as soon as it was clear that property values were in a tailspin.

The people who are continuing to make payments at this stage are people who bought their homes intending to live there… and they are. They are the salt of earth, people with jobs and families, who put most of the cash they managed to slowly accumulate during their lives as a down payment on their home only to watch it evaporate due to irresponsible lending practices and money games on Wall Street.

They are precisely the people who should be made whole and since the federal courts have been unwilling to take action against the silk-suited bandits, being able to repurchase their homes at fair market value through eminent domain seizures is the only justice those ordinary people will ever have.

Once those homeowners have recovered from their immense financial losses, they will resume spending and our economy just might have a chance to get some legs.

By: usagadfly Sat, 14 Jul 2012 00:04:43 +0000 Every time, it is the taxpayer who ends up holding the bag and the bankers who laugh all the way to … the bank. This will almost certainly turn out the same way every other “bailout” has turned out. The common people lose and the banks win. Time after time after time.

No more insurance for banks! The only deposit insurance should be for Credit Unions (which must be non-profits). Why insure idiotic loans? Federal insurance should only protect people, not “corporations” or other types of “association”. And it should not protect anything but deposits below a reasonable value, say $250,000. Every other “guarantee” has been turned into a blank check on the treasury by wealthy crooks.

By: JP007 Fri, 13 Jul 2012 04:30:53 +0000 Eminent domain (ED) is almost never ruled dysfunctional like the other “ED” by the courts.

ED gets a pass by the courts just like Roberts gave Obamacare a pass, ties go to the Government.

Sad fact is that 99% of all ED takings have never been for a valid public good or purpose, almost all are based upon the whimsy of politicians, developer bribes of politicians, gifts to railroads, gifts to China etc. So do you honestly believe that any form of property is safe? There are no property rights whatsoever in the U.S. only “hope” that springs eternal.

By: paintcan Fri, 13 Jul 2012 01:24:33 +0000 @sanitymonger- If the city is planning to “take” the mortgages (for fair market value)that means they have the deed to the property. That’s the collateral.

I hope the city doesn’t have an easy time trying to implement this program.

alignedinterest raises the prospect that big multi property investors may be most avid for relief? Do commercial mortgages qualify: eventually if not now?

By: Benny27 Thu, 12 Jul 2012 22:29:07 +0000 Maybe we think it shouldn’t be used, but that doesn’t mean they can’t. There is no question that it will raise property values, in accord with eminent domain, because of those who are underwater, some will default and be foreclosed. If you don’t think that drops property values you haven’t been paying attention these past years. It is just like saying, “if we don’t build a highway, these properties will languish in value.”

Additionally, who says investors have the right to never lose money? You make a bad loan, it can’t be payed back, you take a haircut. NOTHING is inherently sacrosanct about debts. If it is pension funds that lose out, they have the right to sue those who bundled the securities, and probably others too. Messy its true, but arguably a lot less messy than what is happening now.

By: alignedinterest Thu, 12 Jul 2012 18:28:42 +0000 “Yes, it is too bad investors in bundled mortgages will lose out, but the banks, financial institutions, and regulators did not seem to get too upset over the underlying Goldman Sachs fraud in bundled securitized mortgages”

You realize of course that the owners of those MBS are now pension funds and 401K funds with companies like Fidelity and Vanguard. So, you are prepared to raid the retirement funds and pensions of these innocent investors in order to help out real estate speculators in San Bernardino?

There is plenty of blame to go around. However, attacking the mortgage backed securities at this point will have little to no impact on Goldman Sachs and the like. In fact, part of the problem with mortgage securitization is that the originators carry little to no long term risk (no skin in the game) from their products.

As for not being upset, it appears that Fannie-Mae and Freddie-Mac are upset enough to demand mortgage repurchases at “unprecedented levels”. ues/imfpubs_imf/29_25/news/FHFA-GSE-Buyb ack-Policy-Transparency-1000020010-1.htm l

Even if it were legal, eminent domain should not be used in this way. If we start nullifying contacts for less and less reason, then we are no longer a nation of laws. Have you ever noticed how poverty and despair are most rampant in places where laws and contracts are not enforced?

Hopefully, the courts in CA will deal with this accordingly.

By: Sanity-Monger Thu, 12 Jul 2012 16:47:11 +0000 paintcan — Based on Ms. Frankel’s description above, San Bern is not proposing to sieze any physical property. They are siezing the mortgages.