Using Eminent Domain to Seize Underwater Mortgages
AIR DATE: June 29, 2012
Houses across the country are underwater, and San Bernardino County is trying something new: eminent domain. The county would use its power to seize mortgages and restructure them. What are the pros and cons of the program? And would an eminent domain solution work here in Las Vegas?
GUESTS Greg Devereaux, CEO, San Bernardino County Ngai Pindell, Boyd School of Law, UNLV
The original "con" in this situation was real estate investors running up the market prices of residential properties until the bloated buzzard burst. Maybe the eminent domain concept is simply karma ----- well earned.Renee Meyocks –Mar 11, 2013 08:43:50 AM
The entire premise here is asinine: using the force of government to take (steal) money from investors who in good faith put up money to loan out, and then give the money to "underwater" homeowners in the sense that they no longer will have to pay off the entire loan amount that they agreed to (yet still get the house)?!?! Jeesh, the government is not even seizing property here, but essentially money. What's next? Will the government want to seize the notes on cash-strapped "underwater" car owners, and then allow the car owner to pay half of what they agreed to pay, yet keep the car? With things like this even being proposed, it's no wonder that the Founders called eminent domain "the despotic power", and most did not even want it in the Constitution at all.H.S. –Jun 25, 2012 23:22:02 PM
The idea is totally hare-brained. The power to take property for public use is premised on the idea that the sovereign is the eminent holder of the domain. The domain is the land. There is a reason for this. The purpose of eminent domain is to permit public works that would otherwise be thwarted by people refusing to get out of the physical way of a publicly necessary project.
The courts will never open the door to permit the taking of cash or cash equivalents such as debt obligations. By definition, eminent domain cannot be used this way. The lawyer you invited on your program is a complete idiot.
I fully researched this issue when Clark County attempted to use eminent domain to take interest accrued on a court deposit. Not only is there no authority for it, as your guests even admitted, there is ample authority against it.
There is also such a thing in the US Constitution forbidding government to impair the obligation of contracts. !!!
So now, in addition to taking your real estate, the government uses eminent domain to take your bank account. Or your IRA. Or your first born. Or your wife or husband. Mortgage Resolution Partners should be laughed out of existence.Charles Gardner –Jun 25, 2012 20:57:16 PM
The big and obvious "con" of this proposal is that eminent domain is a taking of property rights. In this case, it is the contract value of the original loan that will be taken (stolen) from the banks and their shareholders. And, pardon my political incorrectness, but I'm tired of the "underwater" folks complaining. They happily signed the contract and took possession of the house, and then it turned out to be a bad investment. Big deal! Many investments go bad, and when they do the investor is expected to take the loss, *not* default on the people who, in the expectation of being paid back per contract law, made the loan to them.Tim Hunt –Jun 25, 2012 13:33:18 PM
The reason the "underwater" people complain is that the law is being applied unfairly. The original "people" to be underwater and subsequently bailed out were the banks. This happened, by the way, against the wishes of the vast majority of the public. Those banksters happily signed contracts, too, but were given a pass. Why do you conveniently forget that fact?Carwin Byington –Jul 21, 2012 19:17:37 PM
This sounds like a great solution for Clark County. The LA times is correct in that Real Estate is the foundation of the economy. Too many homes are still underwater and many will continue to walk away and until the bleeding stops. The housing cannot recover in Vegas otherwise. We've been current on our upside down mortgage since 2006 ($650,000 due - worth $250,000) We're tired of throwing money away! The banks have offered us no solution.Jeri Gressman –Jun 25, 2012 11:17:25 AM
Let's be honest here... You're not "throwing money away", but instead honoring a legal contract that you voluntarily entered into. And you've probably done the same thing on car loans, wherein the vehicle goes down in value even while you pay for it. If government stepped in and made everyone whole every time someone made a bad investment, we'd all be millionaires... but that's not the way economics works, is it?Tim Hunt –Jun 25, 2012 13:39:03 PM
This is a great idea if it can be done. No one else, including the federal government, has really done anything effective about this problem. The only negative for me about this approach is that is coming too late to save my house.
I had a unique problem with my mortgage due to my husband's death. I could have kept up payments if the monthly payment had been reduced, but no one, no one would help me with lowering the monthly payment, so I was forced to short sell. An attorney's firm in town who supposedly handled loan modifications even defrauded me.
This approach has my total support, because in the long term, not only the individuals involved are harmed by these upside down mortagages, but also the community at large. Loretta Klem –Jun 25, 2012 09:49:51 AM