danivon wrote:I get it now. San Bernardino County has looked at the city and thought "we do not want that!", so are suggesting a way to avoid it.

I guess that the idea is to stop people who are currently in negative equity from going further into trouble - say for instance they lose their job. Not everyone who is in negative equity would need it, but surely the fact that it's designed for people who have not got behind means that it rewards 'responsible' borrowers.

Precisely. Well said, actually.

I'll tell you what we did--and what a lot of people could do.

I called the bank. I asked if they would lower my interest rate. I did not threaten. I am not behind. All I said was I would like to give them the first shot at a lower interest rate. They lowered it more than a point and a half and we kept exactly the same length of loan.

Win/win, not win/shaft.

fate

I called the bank. I asked if they would lower my interest rate. I did not threaten. I am not behind. All I said was I would like to give them the first shot at a lower interest rate. They lowered it more than a point and a half and we kept exactly the same length of loan.

Let's assume there are lots of other people just as smart as you with mortgages under water. And that most have tried this...

You said that "breaking the law" is not an answer.
What law are they breaking?

fate

Think like a capitalist

I think you also mean, think like a business man. And I do, since I negotiate contracts all the time. A mortgage is just a contract.
Contracts are reopened and renegotiated all the time. You yourself were wise enough to do so....
If we assume that not everyone is dumber than you, and that most in San Bernadino also tried renegotiating.... we can probably assume that they were turned down or that the deal they were offered didn't substantively help.

A capitalist wouldn't hold onto an investment that was declining in value every day , when offered an option that would preserve some of his capital. It seems to me that some banks in the US haven't realized that by letting, or forcing so many people into foreclosure they are damaging their own market place. (Housing.) Values plummet as housing in an area is foreclosed in unusual levels. Values further plummet when the houses are allowed to erode in condition because banks don't keep them in presentable manner....

The city government sees the value of real estate plummet, meaning that their tax base is being eroded. If they simply stand by, banks will foreclose their city into bankruptcy...
I agree that the use of eminent domain is a blunt instrument. But if banks won't act to protect the larger picture (The housing market) because they don't want to lose a nickle on individual mortgages.... then they aren't acting as capitalists even thoughn they are acting as bankers.

Its the usual case of intervening to prevent a market collapse that will have devastating effect for all involved (including the banks) . Or standing by and watching the disaster on point of principle saying, "hey, wadda ya gonna do?"

rickyp wrote:fate

I called the bank. I asked if they would lower my interest rate. I did not threaten. I am not behind. All I said was I would like to give them the first shot at a lower interest rate. They lowered it more than a point and a half and we kept exactly the same length of loan.

Let's assume there are lots of other people just as smart as you with mortgages under water. And that most have tried this...

You said that "breaking the law" is not an answer.
What law are they breaking?

First, why would we assume this? What evidence is there?

Second, it's not the homeowners who are breaking the law. It is municipalities. Eminent domain is not an ax to be wielded to right perceived wrongs. It is supposed to be exercised for the common good only.

If used this way, it will be tied up in court for years. In the meantime, investors will stay away from mortgage investments like nothing we've ever seen. It will kill the market.

rickyp wrote:fate

Think like a capitalist

I think you also mean, think like a business man. And I do, since I negotiate contracts all the time. A mortgage is just a contract.
Contracts are reopened and renegotiated all the time. You yourself were wise enough to do so....
If we assume that not everyone is dumber than you, and that most in San Bernadino also tried renegotiating.... we can probably assume that they were turned down or that the deal they were offered didn't substantively help.

A lot of people don't even know this is an option. I had people around me telling me my bank would not do it. However, there was no downside for me.

Yes, contracts are renegotiated all the time.

However, by third parties? Maybe not so much.

For the benefit of one at the expense of the other? Maybe, but not via legal coercion and chicanery.

This would overthrow hundreds of years of contract law. It is a bad plan.

rickyp wrote:A capitalist wouldn't hold onto an investment that was declining in value every day , when offered an option that would preserve some of his capital. It seems to me that some banks in the US haven't realized that by letting, or forcing so many people into foreclosure they are damaging their own market place.

Ah, now we've entered the murky world of bank balance sheets. Banks don't want to write down the value of assets so they actually do just that: hold on to investments that are declining in value every day. Here is where, I think, cities could come in and use eminent domain. Normally if a property is abandoned the city won't get it back for three years until it is lost to taxes. By that time the property often has negative value. If a city knows a property is bank owned and the bank isn't doing anything to try and sell it, or otherwise protect its investment, then that is a potential use of eminent domain. And I say potential because it would have to be the right circumstances, but not when the property is occupied, a mortgage is in place, that's just complete overreach with the potential for serious unintended consequences.

geojanes wrote:

rickyp wrote:A capitalist wouldn't hold onto an investment that was declining in value every day , when offered an option that would preserve some of his capital. It seems to me that some banks in the US haven't realized that by letting, or forcing so many people into foreclosure they are damaging their own market place.

Ah, now we've entered the murky world of bank balance sheets. Banks don't want to write down the value of assets so they actually do just that: hold on to investments that are declining in value every day. Here is where, I think, cities could come in and use eminent domain. Normally if a property is abandoned the city won't get it back for three years until it is lost to taxes. By that time the property often has negative value. If a city knows a property is bank owned and the bank isn't doing anything to try and sell it, or otherwise protect its investment, then that is a potential use of eminent domain. And I say potential because it would have to be the right circumstances, but not when the property is occupied, a mortgage is in place, that's just complete overreach with the potential for serious unintended consequences.

You have my vote.

rickyp wrote:Its a preventative program. Its there to help people who might consider defaulting as oppossed to throwing money into the mortgage hole .
It doesn't reward those who've already used the strategy, or through necessity, have walked away from their mortgage. There's no reward for potentially immoral behaviour.

I think it most likely will not work. Pennsylvania has a program called Homeowner Emergency Mortgage Assistance Program (HEMAP). It was a program that was meant to help residents of the state that were having problems with their mortgage payments. If you were 6months behind through no fault of your own, i.e. unemployment or medical issue, etc, and had recieved a notice of foreclosure, you could apply for HEMAP. The state would bring your mortgage current and pay it for an additional 6-18 months after which you would have to start paying again. The year I left the Senator's staff, only 20-25% of those applying were actually approved.

Because they are required to, Steve. Do you understand how our banking system works?

And I don't see why eminent domain should matter with regard to a mortgage. If you have a mortgage, you don't own your home any more than a renter. In fact, renters have more rights in many states.

Guapo wrote:And I don't see why eminent domain should matter with regard to a mortgage. If you have a mortgage, you don't own your home any more than a renter. In fact, renters have more rights in many states.

The Eminent Domain in this instances isn't being used against the nominal homeowner Guap but rather against the Banks. The proposal is that the city will force a refinance on the mortgage so the nominal homeowner stays in the house.

Admittedly, I'm not expert in Eminent Domain case law, but my question is why is eminent domain invalid simply because it's bank owned? Unless you're saying that they failed to give just compensation to the banks.

archduke

think it most likely will not work. Pennsylvania has a program called Homeowner Emergency Mortgage Assistance Program (HEMAP). It was a program that was meant to help residents of the state that were having problems with their mortgage payments. If you were 6months behind through no fault of your own, i.e. unemployment or medical issue, etc, and had recieved a notice of foreclosure, you could apply for HEMAP. The state would bring your mortgage current and pay it for an additional 6-18 months after which you would have to start paying again. The year I left the Senator's staff, only 20-25% of those applying were actually approved

Any idea why such a low percentage qualified?
you say:

If you were 6months behind through no fault of your own ...

If someone wasn't unemployed, but the housing market plunged and their house plunged in value ...and suddenly a house that had a value of $900K and a mortgage of $400K when mortgaged now had a value of $250 K is that the homeowners fault?
We're talking about a circumstance created by a banking and mortgage system that created an artificial circumstance that millions of faultless people have been caught within...
The banks were bailed out, by tax payers, in order to save the economy, But there has been a general failure to try and cushion the circumstance of the under water mortgages.... Unless they were someone doubly afflicted with unemployment or ill health.
At its heart this is a fundamental reason the economy is stuck. And yet, when a city government seeks to level the negotiating table and force banks to deal with its citizens.... thats judged immoral?
No one has offered evidence that the use of ed in this instance is illegal by the way, despite Fates claim that it is... (I suspect it would have to go to the state supreme court?)
I'm not sure that wide spread use of ED will indeed be wise...however the threat of its use might move banks to more willingly accomodate mortgage renegotiations...And for the threat to be real, ED must be actually used in a few instances to prove the potential...

Guapo wrote:Admittedly, I'm not expert in Eminent Domain case law, but my question is why is eminent domain invalid simply because it's bank owned? Unless you're saying that they failed to give just compensation to the banks.

Maybe I misunderstood what you were saying. I took from your comment that it wasn't a big deal because a mortgagor doesn't own the house, which in and of itself is not true in all cases, and the nominal homeowner was just being evicted like a renter.

Based on that understanding, I was trying to say the idea under discussion is that the nominal homeowners wouldjn't be evicted but rather the banks would be forced to refinance the loan.

rickyp wrote:Any idea why such a low percentage qualified?

There were two qualifications to be approved. The deliquency was through no fault of your own and you would be able to start making the payments again after the state assistance. Most people failed one or both of those requirements. Either they were over extended to begin with, i.e. purchased a home the couldn't afford and/or lived in credit cards, or there was no way the would be able to start paying the mortgage after the state assisted. The last thing the state wanted to do was pay 12 months worth of mortgage payments and then have the bank end up with the property anyway.

rickyp wrote:If someone wasn't unemployed, but the housing market plunged and their house plunged in value ...and suddenly a house that had a value of $900K and a mortgage of $400K when mortgaged now had a value of $250 K is that the homeowners fault?

I would say that was through no fault of their own. But the question becomes would they be able to afford a refinanced mortgage either way? If they are going to lose the property, why give the bank gov't money when they are going to end up with the property anyway.

rickyp wrote:No one has offered evidence that the use of ed in this instance is illegal by the way, despite Fates claim that it is... (I suspect it would have to go to the state supreme court?)

I am not sure. ED is supposed to be used to take property from a private actor for public purposes such a road construction, utility right of way and not given to another private actor. However, case law in the law 30-40 years has been expanding the definition of public use. Given Hawai'i Housing Authority v. Midkiff, that I reference above, seems to be somewhat on point, I think there is a 50/50 shot of the proposed use being upheld.