A California-based mortgage services firm has a novel concept to control the number of underwater home loans. The concept is to use the power of eminent domain, where local governments would „condemn“ the underwater mortgages and drive a refinance.

Is it safe to use eminent domain?

There is one power that has been debated a lot by the federal, state and local government authorities called „eminent domain.“ This is the right for the government to pay any homeowner for loss of property and seize the house as long as it is for „public good,“ or if it would be detrimental to public welfare to not take the land. This is just one of the many debated government powers.

There are a lot of issues associated with eminent domain seizures. Even though they are for the common good, such as for highway extensions, people are generally not given what the land is worth from the government. For example, one landowner in the city of Hoboken was given $2.3 million for an acre of land worth $10 million to make a park, according to New Jersey.com. Lots of people think this is the worst type of abuse of power.

One good way to use it

A property is known as „condemned“ when eminent domain is used, but Mortgage Resolution Partners, a California-based real estate business, wants to condemn the loans associated with the house. This is the idea MRP has brought up, according to Reuters.

One concept that MRP brought up would be to get private investors with a lot of cash to buy the loans from consumers, according to Reuters. Then, the house would be seized from banks meaning less would be paid for the house than it is really worth. Then, MRP would sell the loans to brand new investors and lower payments to help the mortgage borrower. This would be a good plan considering 22 percent of the home loans in the nation are underwater according to CoreLogic estimates and Zillow estimates that number to be higher at 31.4 percent, according to CNN. These consumers might really appreciate the help.

Governments in California would simply need to turn in the eminent domain paperwork. No taxpayer cash would be used for it since investors would fund it.

Just a suggestion for now

It is only a proposal at the moment; MRP is pitching the concept to various local government authorities in California. It has been well received in some circles, as California is one of the worst-affected states by drastically lowered real estate values. However, according to the Hesperia Star, the city council of Hesperia, Calif., has already turned it down, in spite of 50 percent of Hesperia homeowners being underwater on their mortgages.

In spite of the fact that a lot of people are underwater, a lot of them are still paying on their payments, according to CNN. The Zillow survey showed that 90 percent of underwater home owners are still making payments regularly. It is extremely dangerous for a homeowner to own more than the property is worth because they could end up in foreclosure.

Article resource: get details at our own blog!