People who know me have heard me crack jokes about God creating California as the insane asylum for the United States. Well, the inmates in the asylum have come up with a novel idea: use the state's power of eminent domain to condemn the mortgages on properties that are underwater, then have a consortium of private investors rewrite the mortgages in line with the properties' current values, with payments the homeowners could afford.
It sounds bizarre, but legally, it's within the law; and keeping families in their homes (and paying real estate and school taxes to municipalities) certainly qualifies as being in the public interest. As you may suppose, the bank lenders are underwhelmed by this idea. But this idea is so far out of left field, it just may be the sanest solution anyone has yet devised for the mortgage crisis in America.
If the article is the straight skinny, the banks are incredibly pissed off about this and won't play. It indicated that the money would be raised from private investors, not from any banks.
I suppose much will depend on whether the venture capitalists will be willing to put their money up to back this plan. You can bet that the cities will be looking at the management company to see if they can raise the money to refinance with before they proceed with any condemnation proceedings.
If the article is the straight skinny, the banks are incredibly pissed off about this and won't play. It indicated that the money would be raised from private investors, not from any banks.
I suppose much will depend on whether the venture capitalists will be willing to put their money up to back this plan. You can bet that the cities will be looking at the management company to see if they can raise the money to refinance with before they proceed with any condemnation proceedings.
California cities proceeding cautiously with the taxpayers dollars?? Are you kidding me? Stockton, San Bernardino and several others recently filed for bankruptcy!! Come back to earth, please. I've said this before but it bears repeating: the earth's rotation is such that all the loose marbles roll west to California.
I don't have a clue how that would work, and I don't trust the gummint OR the banks! It sounds like some moneygrabber coming up with a NEW way to make money off the miserable situation.
I don't see any possible good coming from this, the home owner's choice is A) let the bank take your house or B) let the gooberment take your house... Sounds like a crap shoot to me...
There IS no good in this. Capital markets are risk management devices and must be left to run on their own--good times or bad. Government intervention in the housing market (via the community reinvestment act, and forcing banks to lend to racial groups) got us into this--it would be insane to think the same folks with the same ideas could get us out of this. The market MUST be allowed to go through a natural catharsis--we have been preventing this for the last 3 years with predictable results.
That money spent on underwater houses HAS TO COME FROM SOMEWHERE. Whether it`s writedowns or taxpayers or both. The non-government solution would be the best. Gov`t intervention in capital markets has a HORRIBLE track record, has had HORRIBLE effects, and gave us solyndra as well as prevented American automakers from becoming efficient--again we ALL pay for this debt in one way or another if the gov`t gets involved (vice the risk bearers pay without gov`t involvement which is the way it needs to be).
Look at it this way--when is the last time a government economic venture turned out well ?
This will be nothing more than a huge government money laundering propisition. If it were truly worthwhile the lenders would be making arrangements with the homeowners already (which is what happens with RESPONSIBLE borrowers who fall on hard times--banks are very much wanting to try to work almost anything out to prevent default if the borrower shows any effort whatsoever). This scheme merely continues to reward bad economic behaviour--as the government seems want to do in all cases--punish success and reward failure.
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