The most proficient and highly acclaimed economists, politicians and financial experts have been working endlessly to try to just contain the housing crisis to a more manageable level for the past five years, and after throwing an enormous amount of money at the problem, bailing out countless of banks, with the U.S. government announcing plan after plan to help the unfortunate homeowner, not only are we not getting anywhere, the bleak situation seems to be getting progressively worse. If we have not personally been the victims of the housing crisis ourselves, we all most certainly know of someone who is. The saddest fact is that not only are people losing their homes, they are furthermore losing their retirement expectations.
The unimaginable amount of funds that has been wasted, all in the name of saving the economy, will have to be borne not only by the current generation, but also the subsequent generation as well.
So, What is The Plan All About
However controversial or ambitious, any proposal to subdue the housing crisis for good needs to be evaluated for its merits. It is time to do what successful people all do, that is to think out of the box.
Mortgage Resolution Partners, a San Francisco based mortgage firm, has been working with local politicians in California and other states hard hit by the foreclosure crisis to restructure under water mortgages using a little known or mentioned law called eminent domain. Most people have heard of the law; however, how the law works and what it entails is largely unfamiliar to the general public.
Eminent domain is invoked by municipalities wishing to rehabilitate blighted areas or to make room for another more desirable purpose that serves the public good, and homeowners are compensated at fair value for transferring title of their properties to the governing authorities.
On the surface, this highly controversial proposal to subdue the housing crisis for good seems to have everything going for it.
Institutional investors will be engaged to provide the tens of billions of dollars needed for the financing of the condemnation process, thereby bypassing the need for taxpayer dollars and transferring the distressed mortgages from lenders to the municipalities. Lenders will be compensated at fair market value, which means they may be facing a huge haircut on their holdings and put up resistance. However, let us remember that the foreclosure issue has already been factored into the value of the securities these lenders hold.
Mortgage Resolution Partners would then restructure the mortgages for eligible homeowners, thus lowering their monthly payments and enabling them to remain in their homes.
Investment banks Evercore Partners Inc. and Westwood Capital have been recruited to get institutional investors on board and San Bernardino County, along with some of their municipalities, appear to be the closest to moving forward with the proposal. San Bernardino alone counts some 100,000 mortgages as being under water.
Details of this controversial proposal to subdue the housing crisis for good have not been made publicly available and it is highly expected that the proposal will be subjected to legal challenges that do not have any precedent; however, homeowners get to stay in their homes, present lenders will see their securities become liquid once again, and even politicians may be acclaimed for effectively helping with the housing crisis.