Richmond, California Moves Ahead With Plan to Seize Underwater Mortgages

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The city council of Richmond, Calif., has voted 4-3 to proceed with a plan to use eminent domain to buy up underwater mortgages at deep discounts and give homeowners a new, cheaper loan that would have lower monthly payments and decrease the chance that the home will be foreclosed upon.

In addition, Richmond has agreed to help other cities follow its lead in using eminent domain to help heal the foreclosure crisis blighting many parts of the country. Mortgage lenders — including federally owned Fannie Mae and Freddie Mac — have announced their opposition to such plans and have threatened that any towns utilizing eminent domain to extract unfair concessions from investors would face a shortage of mortgage lending in the future.

[AP]

2 comments
RestoreFannie
RestoreFannie

First off, Fannie and Freddie are not Federally owned -- they're still private, shareholder owned entities. Just go to the Whitehouse website and search for conservatorship (it's the first result). Secondly, using eminent domain to allow private investors in a county to have first dibs on investments made by large institutions introduces a an extremely high probability of investors losing all of their investments when loan payments are not met. This circles back around to the issue of the responsible party for the loans in the first place. As many know, Fannie and Freddie only purchased loans -- originated by banks, which also rated those loans fraudulently as AAA. So while I support the initiative to either force buybacks of the loans by the banks, or punishing the banks by having the loans count as losses on the bank's books while Fannie and Freddie are able to receive a refund for their purchase, I am opposed to using Fannie and Freddie as a scapegoat or tool to spread lies, cribbed by Mercatus institute, AEI, etc. on the root cause of the financial crisis. The truth of the matter is that banks originated loans with zero background checks, zero work history checks, zero credit checks, and then rated them AAA, packed them into CDOs and sold them on Wall Street to Wall Street investors.

Blaming Fannie and Freddie for this problem, and punishing them, is akin to blaming a homeowner for being burgled because he owns a home. Just search for FHFA sues 18 banks for selling fraudulently rated loans. This is another situation where banks win and taxpayers lose.

disinterested3rdparty
disinterested3rdparty

how times have changed.  In past years gone by, nobody saw it as the governments job to keep deadbeats in their homes.  they were foreclosed, and told to move out.