Calif. cities eye plan to seize mortgages | Fox News

Calif. cities eye plan to seize mortgages | Fox News: "The idea was broached by a group of West Coast financiers who suggest using the power of eminent domain, which lets the government seize private property for public use. In this case, they would condemn troubled mortgages so they could seize them from the investors who own them. Then the mortgages would be rewritten so the borrowers would have significantly lower monthly payments."

"In this case, supporters say, the public purpose is served because communities battered by foreclosures have seen tax rolls decimated and services gutted and have suffered economic blight."

"Here's how it would work for a hypothetical city:

— The city goes to court and argues that the public purpose is served by having the county own, and ultimately refinance, the mortgage.

— The city pays fair market value to the owner of the mortgage. That is usually a securitization trust, an otherwise passive financial entity used to bundle mortgages and sell pieces to investors that became a bigger part of the mortgage market during the 2000s housing boom.

— The city, the new owner of the mortgage, encourages and helps the homeowner to find refinancing. Now the principal is lower, and interest rates are at historic lows, so the homeowner winds up with easier monthly payments.

— Mortgage Resolution Partners collects a flat fee, $4,500 per loan, for helping the city find homeowners who can be helped and for handling the other mechanics of the process."

The problem is that people owe more than the house is worth, so a company thinks the government should take the loan an refinance it to lower the payments. So it doesn't solve the problem and the company makes *only* $4,500 per house!