On Mon, 12 Aug 2013 21:22:05 -0400, "F.O.A.D." wrote:


City Uses Eminent Domain to Rescue
Homeowners from Predatory Lenders, and
Wall Street Freaks Out



The little city of Richmond, California has taken steps to do what other
cities have so far only dreamed of: take on the mortgage industry to
protect its residents. Other municipalities have considered using the
same option as Richmond, but have backed off in the face of threats and
bullying by the corporations and trusts that hold their citizens’ mortgages.

In an innovative step, Richmond is using eminent domain–a weapon that’s
usually wielded to build sports stadiums and highways in low-income
neighborhoods–to buy underwater mortgages and refinance them to keep
residents in their homes. Richmond is the kind of community–low-income,
with a large minority demographic–that is typically targeted for
predatory lending practices. Many residents have ended up with mortgages
that are three or four times the current worth of their homes.

Last month, the city sent letters to lenders and mortgage servicers
offering to buy 626 underwater mortgages at the current fair market
value. If the companies refuse, the city will use eminent domain to
seize the mortgages. Refinancing will then be offered to homeowners via
a contract the city has with Mortgage Resolution Partners, a private
investment firm in San Francisco. After refinancing for a price that’s
close to market value, residents will suddenly have a small amount of
equity in their homes rather than being tens of thousands of dollars
underwater–plus, the city can stop a persistent hollowing out of its
population.

On Wednesday, mortgage-bond trustees from Wall Street companies filed a
lawsuit in federal court against the city of Richmond to try and halt
the process. In a laughable statement, a lawyer for some of the mortgage
investors, John Ertman, wrote in an email:

Mortgage Resolution Partners (MRP) is threatening to seriously harm
average Americans, including public pension members, other retirees and
individual savers through a brazen scheme to abuse government powers for
its own profit.

Apparently, ‘brazen schemes to abuse government powers for profit’ are
the sole province of Wall Street–in Ertman’s not-so-humble opinion. The
Federal Housing Finance Agency (FHFA)–a federal regulatory
agency–immediately chimed in on the side of Wall Street, saying it might
insist that Fannie Mae (FNMA), Freddie Mac and the Federal Home Loan
Banks “limit, restrict or cease business activities within the
jurisdiction of any state or local authority employing eminent domain to
restructure mortgage loan contracts.”

The threat that mortgage companies would either forbid the financing of
homes or raise the interest rate to prohibitive levels in communities
that use eminent domain has so far caused other localities to back off
of similar plans. However, Richmond Mayor Gayle McLaughlin will not be
dissuaded from this path. After the companies’ lawsuit was filed, she said:

“We feel strongly that we’re on legal ground. We’re not afraid of
going into the courtroom. We believe our legal reasoning will prevail.”

While the Wall Street corporations are trying to argue that this use of
eminent domain is not for the good of the whole community, but rather
the gain of specific individuals, the benefits to the community are
clear. Among other things, stopping foreclosures would allow property
values to rise and would stop a drain of the tax base.

John Vlahoplus, an officer for MRP, addressed the threat presented by
the FHFA, saying:

“The FHFA was created to be independent of the mortgage industry
that it regulates. But instead it has been in bed with the mortgage
industry for over a year to oppose this solution to the mortgage crisis.”

Some local governments continue to evaluate the use of eminent domain
as an option, such as North Las Vegas, Nevada, and El Monte, California.
But as Amy Schur, of the national movement Home Defenders League said:

“Our local electeds can’t do this alone, they need the backup
support from their constituents. That’s what’s been the game changer in
this effort.”

If it only took one David to fell the original Goliath, surely millions
of constituents can fell the opposition of the current Goliath–otherwise
known as Wall Street.

http://tinyurl.com/n689sxu

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Predatory lending practice:

Lending money to people who want it and then expecting to be repaid.