California’s San Bernardino County and the cities of Ontario and Fontana are considering the use of eminent domain to seize underwater mortgages. A private company, Mortgage Resolution Partners, is pushing the idea.
An article on the website for the ABA Journal quotes the Wall Street Journal:
For a home with an existing $300,000 mortgage that now has a market value of $150,000, Mortgage Resolution Partners might argue the loan is worth only $120,000. If a judge agreed, the program’s private financiers would fund the city’s seizure of the loan, paying the current loan investors that reduced amount. Then, they could offer to help the homeowner refinance into a new $145,000 30-year mortgage backed by the Federal Housing Administration, which has a program allowing borrowers to have as little as 2.25 percent in equity. That would leave $25,000 in profit, minus the origination costs.
This is cronyism at its worst. Mortgage Resolution Partners proposes to use government force to obtain business that it would not otherwise get. Unable to compete in the market, the company wants government to arbitrarily devalue existing loans so that it—the company—can profit.
Of course, this legalized theft is “justified” on the grounds that it will keep people in their homes. But theft is theft.
In principle, this proposal advocates using eminent domain for any purpose whatsoever. Auto prices too high? Use eminent domain to seize the auto dealership and sell the cars for a lower price. Grocery prices too high? Seize the grocery stores.
This really shouldn’t be surprising, since the Supreme Court has given a green light to mob rule. The Court, Roberts told us last week, will not protect the people from the consequences of their political decisions. If the people vote tyrants into office, the court will not intervene. This is a naked power grab, and if it succeeds in California, it will likely sweep the nation as more and more governments get in on the act.
If this proposal succeeds, property rights in America are absolutely dead. Governments will be empowered to seize anything in the name of the “public interest.”
HT: Keith Weiner