A large part of the nation's mortgages are underwater, meaning more is owed on the loan than the home is worth. However, a California business has a novel fix in mind, which requires local governments using the power of eminent domain to force 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 governments called "eminent domain." This is the right for the government to pay any homeowner for loss of property and seize the property 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.
A number of people think that eminent domain is an abuse of power and should not be allowed, although it is generally used to put in highway extensions and other things, according to NJ.com. There was one landowner who had 1-acre of land taken with eminent domain by the city of Hoboken. Even though the land was valued at $10 million, they only gave him $2.3 million, and the land was getting used to put in a park.
Novel use
A property is considered "condemned" when eminent domain is used, but Mortgage Resolution Partners, a California-based real estate company, wants to condemn the loans associated with the house. This is the idea MRP has brought up, according to Reuters.
One idea that MRP brought up would be to get private investors with a ton of cash to purchase the loans from customers, 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 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 country are underwater according to CoreLogic estimates and Zillow estimates that number to be higher at 31.4 percent, according to CNN. These customers might really appreciate the help.
Governments in California would simply need to turn in the eminent domain paperwork. No taxpayer money would be used for it since investors would fund it.
Just a suggestion for now
Even though the bill has been well-received in some areas, it has already been turned down by the Hesperia city council, according to the Hesperia Star. This is despite the truth that 50 percent of homeowners in the city have underwater mortgages. Since California has been hurt a lot by the decreased home values, a number of people in California are really anxious about the plan. MRP has talked to a ton of local government authorities about this already. Remember, it is just a proposal at this time.
Negative equity, or owing more on a loan than the asset is worth, is dangerous to homeowners as it puts them at higher risk for falling into foreclosure. However, according to CNN, a good number of people are diligently paying their home loans anyway. A recent Zillow survey, which found 31.4 percent of homeowners were underwater, also found that 90 percent of underwater homeowners were current on mortgage payments.
Is it safe to use eminent domain?
There is one power that has been debated a lot by the federal, state and local governments called "eminent domain." This is the right for the government to pay any homeowner for loss of property and seize the property 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.
A number of people think that eminent domain is an abuse of power and should not be allowed, although it is generally used to put in highway extensions and other things, according to NJ.com. There was one landowner who had 1-acre of land taken with eminent domain by the city of Hoboken. Even though the land was valued at $10 million, they only gave him $2.3 million, and the land was getting used to put in a park.
Novel use
A property is considered "condemned" when eminent domain is used, but Mortgage Resolution Partners, a California-based real estate company, wants to condemn the loans associated with the house. This is the idea MRP has brought up, according to Reuters.
One idea that MRP brought up would be to get private investors with a ton of cash to purchase the loans from customers, 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 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 country are underwater according to CoreLogic estimates and Zillow estimates that number to be higher at 31.4 percent, according to CNN. These customers might really appreciate the help.
Governments in California would simply need to turn in the eminent domain paperwork. No taxpayer money would be used for it since investors would fund it.
Just a suggestion for now
Even though the bill has been well-received in some areas, it has already been turned down by the Hesperia city council, according to the Hesperia Star. This is despite the truth that 50 percent of homeowners in the city have underwater mortgages. Since California has been hurt a lot by the decreased home values, a number of people in California are really anxious about the plan. MRP has talked to a ton of local government authorities about this already. Remember, it is just a proposal at this time.
Negative equity, or owing more on a loan than the asset is worth, is dangerous to homeowners as it puts them at higher risk for falling into foreclosure. However, according to CNN, a good number of people are diligently paying their home loans anyway. A recent Zillow survey, which found 31.4 percent of homeowners were underwater, also found that 90 percent of underwater homeowners were current on mortgage payments.
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