If one looks at what the mortgage firm is seeking, the firm’s belief that it may acquire “underwater” mortgages by eminent domain makes as little sense as allowing people to refinance their homes at one hundred twenty five percent of value with FHA guarantees. Neither one is economically efficient, but we are willing to try any trick in the bag in this country to try to move the markets.
A controversial government power most commonly used to force homeowners to sell their property to make room for new roads is now being invoked as a possible solution to the six-year-old housing crisis.
Rather than forcing people out of homes, the scheme – floated by a group of mortgage investors advised by Evercore Partners and Westwood Capital – would use compulsory purchase powers known as “eminent domain” to keep them in.
Mortgage Resolution Partners, the company behind the plan, has teamed up with local governments in California, where falling house prices have left tens of thousands of residents with negative equity.