The Attack on U.S. Property Rights Continues
“Gayle McLaughlin, the mayor of Richmond, Calif., is threatening to use the city’s power of eminent domain to seize 624 mortgages from banks that are unwilling to sell these mortgages to the city. This brazen attack on property rights and the sanctity of contracts will ultimately harm the citizens of Richmond. This threat is also the latest in a long string of governmental abuses that are undermining the security of property rights in the United States.
Almost half of the mortgages in Richmond are “underwater,” where home owners owe more on the mortgage than the current market value of the home. The city is offering to buy the mortgages from banks at prices below the current market value and then to work with Mortgage Resolution Partners (MRP) to offer existing home owners a new mortgage at a value between the city’s purchase price and the current market value. The city and MRP would split the profits and the home owner would no longer be “underwater.”
Sounds great. Right? But here’s the catch; the city has sent out more than 600 offers and the banks aren’t biting. Why should banks sell to the city? Not all of these mortgages are in default. Some owners are still paying what they owe. Even when owners don’t pay, banks could foreclose and try to collect market value for the home rather than the lower amount the city is offering.”
Powell, Benjamin. Huffington Post 6 September 2013.