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Ryan Smith
(ViolentGreen) - M

Locale: Southeast
Local govts consider eminent domain for underwater mortgages? on 08/20/2012 18:25:42 MDT Print View

I thought this was an interesting & dangerous idea on the part of some local govts. Do I think it would ever happen? Not a chance, and it's probably just posturing on the part of politicians. If it's not posturing, it shows the ignorance of some elected officials. How does an underwater mortgage affect the obligor's ability(not desire) to repay the debt? Thoughts on the article?

http://tinyurl.com/8kc778b


Ryan

drowning in spam
(leaftye) - F

Locale: SoCal
Re: Local govts consider eminent domain for underwater mortgages? on 08/20/2012 19:10:15 MDT Print View

It depends. There are definitely some properties which the lenders should have no right to.

Ryan Smith
(ViolentGreen) - M

Locale: Southeast
Re: Re: Local govts consider eminent domain for underwater mortgages? on 08/20/2012 20:15:41 MDT Print View

In what cases would the lender not have the right to the property? Assuming it was collateral for the debt of course. I'm assuming you mean in cases of predatory lending?


Ryan

Jeremy B.
(requiem) - F

Locale: Northern California
Re: Local govts consider eminent domain for underwater mortgages? on 08/20/2012 20:18:27 MDT Print View

How does an underwater mortgage affect the obligor's ability(not desire) to repay the debt?

It doesn't. What it does affect is the debtor's ability to spend money elsewhere in the community and possibly their vote. It would also provide cities a better return than Treasuries and probably reduce the number of foreclosures.

(I am also curious as to how many communities blessed with so many underwater mortgages are themselves in a financial position to purchase the properties, even at current market values.)

While simply being underwater wouldn't affect someone's ability to pay, it certainly affects their incentive to pay. While circumstances vary, walking away from a severely underwater property may be the smart financial decision. Of course, being in such a situation suggests that smart financial decisions are a tool of last resort.

That said, to me eminent domain is a disturbing power with great potential for abuse. Use in a case like this seems incredibly inappropriate.

drowning in spam
(leaftye) - F

Locale: SoCal
Re: Re: Re: Local govts consider eminent domain for underwater mortgages? on 08/20/2012 20:24:20 MDT Print View

Your assumption is correct.

David Thomas
(DavidinKenai) - MLife

Locale: North Woods. Far North.
Re: Local govts consider eminent domain for underwater mortgages? on 08/21/2012 00:08:24 MDT Print View

We have a mortgage on our "13.5 acres" as it was platted 45 years ago. But with rising sea levels and bluff erosion, we now have 11.5 acres (we lose about 800-2000 square feet a year). So 2/13 of my mortgage is quite literally "underwater". I'm not looking for any handouts, though.

Erik Basil
(EBasil) - M

Locale: Atzlan
Not gonna happen on 08/23/2012 09:02:43 MDT Print View

That would be an inappropriate use of eminent domain, and would not survive the inevitable challenge(s) that would result. Understand, in virtually ALL ED cases, there's a challenge over valuation at the minimum, but here there's a pretty strong case against the public use/need component.

Nah. Cute idea, nice way to rustle the bushes, but not gonna happen.