The banksters are pissed. How dare the City of Richmond, California try to use its power of eminent domain to stop housing foreclosures in its city?
Generally, governmental bodies use eminent domain to force people to sell their land and/or homes to make way for projects (like freeways) which are for the common good. Long ago, the Occupy Wall Street movement suggested that cities could use eminent domain to buy up mortgages and reduce homeowner debt– before the homeowners are forced out of their underwater mortgages by the banksters.
Remember the old Occupy chant? “Banks got bailed out. We got sold out.” The US government bailed out the Wall Street gamblers who crashed the worldwide economy, created and burst the housing bubble, caused businesses to close and lay off workers, and plunged millions of Americans into homelessness or rental units when they lost their homes. The federal government has done almost nothing to help the millions of beleaguered homowners who have lost their homes or are on the verge of it. Check out Richmond's plan after the jump.
From the New York Times…
Scarcely touched by the nation’s housing recovery and tired of waiting for federal help, Richmond is about to become the first city in the nation to try eminent domain as a way to stop foreclosures.
The results will be closely watched by both Wall Street banks, which have vigorously opposed the use of eminent domain to buy mortgages and reduce homeowner debt, and a host of cities across the country that are considering emulating Richmond.
The banks have warned that such a move will bring down a hail of lawsuits and all but halt mortgage lending in any city with the temerity to try it.
But local officials, frustrated at the lack of large-scale relief from the Obama administration, relatively free of the influence that Wall Street wields in Washington, and faced with fraying neighborhoods and a depleted middle class, are beginning to shrug off those threats.
“We’re not willing to back down on this,” said Gayle McLaughlin, the former schoolteacher who is serving her second term as Richmond’s mayor. “They can put forward as much pressure as they would like but I’m very committed to this program and I’m very committed to the well-being of our neighborhoods.”
Despite rising home prices in many parts of the country, including California, roughly half of all homeowners with mortgages in Richmond are underwater, meaning they owe more — in some cases three or four times as much more — than their home is currently worth. On Monday, the city sent a round of letters to the owners and servicers of the loans, offering to buy 626 underwater loans. In some cases, the homeowner is already behind on the payments. Others are considered to be at high risk of default, mainly because home values have fallen so much that the homeowner has little incentive to keep paying.
Many cities, particularly those where minority residents were steered into predatory loans, face a situation similar to that in Richmond, which is largely black and Hispanic. About two dozen other local and state governments, including Newark, Seattle and a handful of cities in California, are looking at the eminent domain strategy, according to a count by Robert Hockett, a Cornell University law professor and one of the plan’s chief proponents. Irvington, N.J., passed a resolution supporting its use in July. North Las Vegas will consider an eminent domain proposal in August, and El Monte, Calif., is poised to act after hearing out the opposition this week.
But the cities face an uphill battle. Some have already backed off, and those who proceed will be challenged in court. After San Bernardino County dropped the idea earlier this year, a network of housing groups and unions began working to win community support and develop nonprofit alternatives to Mortgage Resolution Partners, the firm that is managing the Richmond program.
“Our local electeds can’t do this alone, they need the backup support from their constituents,” said Amy Schur, a campaign director for the national Home Defenders League. “That’s what’s been the game changer in this effort.”…
The city is offering to buy the loans at what it considers the fair market value. In a hypothetical example, a home mortgaged for $400,000 is now worth $200,000. The city plans to buy the loan for $160,000, or about 80 percent of the value of the home, a discount that factors in the risk of default.
Then, the city would write down the debt to $190,000 and allow the homeowner to refinance at the new amount, probably through a government program. The $30,000 difference goes to the city, the investors who put up the money to buy the loan, closing costs and M.R.P. The homeowner would go from owing twice what the home is worth to having $10,000 in equity. [Read the rest of the storyhere.]
Strike Debt, Occupiers, and public banking proponents all have talked about buying debt– student loans, credit cards, or mortgages– and excusing the debt altogether (as Strike Debt did recently with student loans) or reducing the debt to a reasonable amount (which is what Richmond wants to do). I hope they succeed. I’m tired of watching people’s lives be destroyed by debt.