By Matthew Goldstein and Jennifer Ablan
Law professor Bob Hockett, widely credited with popularizing the idea of using eminent domain to restructure underwater mortgages, says he continues to be approached by yield-hungry angel investors looking for a way to help out struggling homeowners and make money at the same time.
He said an increasing number of wealthy investors on “both coasts” regularly reach out to him to get more information about how eminent domain would work and get a better read on “the prospects of municipalities adopting one or another variance of the plan.”
Hockett also is continuing to advise local officials in a variety of cities including some in New Jersey and New York (Irvington, N.J. and Yonkers, N.Y. for instance) on how they might use eminent domain to condemn, seize and restructure deeply underwater mortgages for homeowners determined to keep-up with their high monthly mortgage payments.
Local officials continue to consider the idea of eminent domain even after it ultimately was rejected in San Bernardino County, Calif., North Las Vegas and banks and bond investors sued Richmond, Calif., the municipality that is furthest along the path to condemning underwater mortgages. The lawsuit against Richmond was dismissed by a federal judge as being premature because the California city merely has said it is considering eminent domain but has yet to actually condemn any home loans.
The lawsuits, however, were something of a warning shot to local officials in Richmond and elsewhere that Wall Street will fight like tooth and nail against the plan that would effectively give municipalities the powers to rewrite mortgages and in the process reduce the value of the bonds the loans were packaged into it.