There are literally hundreds of articles about the plan of acquiring underwater mortgages by eminent domain. This writer has been asked by numerous people whether the process would be constitutional.
The short form answer to this question will likely be that the legality of the action will depend upon the police powers in the local State jurisdiction. If the activity is legislated as a valid public use, it potentially will be found valid.
The founder of the investor group that stands to profit from a plan to utilize eminent domain to force private-label investors to take a loss on securitized performing mortgages is confident that the controversial plan will survive a legal challenge.
John Vlahoplus spent almost two decades in new business development for the Zurich Financial Services Group, BNP Paribas and Credit Suisse.
But it's his position as founder and chief strategy officer at Mortgage Resolution Partners that is causing a stir in the mortgage industry and among investors of private-label mortgage-backed securities.
Even as it comes under fire from the financial industry, a proposal to use condemnation proceedings to seize underwater mortgages in San Bernardino County is being looked at by other communities.
And it gained support from a top state official on Friday, July 27.