Two cities in San Bernardino County and the county itself are considering using eminent domain to seize mortgages on troubled homes, sell them to investors at “market value” who would then create new mortgages for the homeowner with presumably much lower monthly payments. These mortgages would then be sold to other investors, so the original lenders would get their money back. Thus, distressed homeowners get to keep their houses and everyone is happy, right?
I’m of two minds about this. The plan is for Mortgage Resolution Partners, a private corporation, to act as middleman. They would essentially be a vulture fund.
That’s not necessarily a put-down. Vultures perform useful and essential services by getting rid of the dead. Desperate times require desperate solutions. And San Bernardino County is desperate.
San Bernardino County was devastated by the real estate crash. People bought homes there because they cost less than in Los Angeles, even if the commutes to L.A. could be hours each way. When the bubble burst, the San Bernardino area had little left to support it. This plan to seize mortgages is certainly novel and will no doubt be challenged in court. But something needs to be done.