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Mortgage industry outraged over eminent domain play

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Mortgage Professional America | 31 Jul 2013, 08:53 AM Agree 0
Another city has stepped into the eminent domain fray in a bid to save underwater borrowers
  • Del | | 31 Jul 2013, 10:00 AM Agree 0
    This is great for only one entity and a small percentage of Homeowners. The people the City serves as a whole lose big. This is dumb. There is a time we should make things happen and a time to let things happen. Things are turning around. Lets not lose our patience now. Let things continue to develop in a positive way on its own. Get the Government out of it.
  • Bayview Mortgage Inc | | 31 Jul 2013, 10:27 AM Agree 0
    Any time a city can hold down foreclosures and the loss of city property tax dollars. It is a win -win for everyone. When a mortgage is looking bad. The lender sends it off to a bad servicer for foreclosure. Foreclosure isn't good for anyone but the group that makes all the money going to court. The attorneys.
  • Not Governments place | | 31 Jul 2013, 10:41 AM Agree 0
    Using eminent domain is an overreach of government. Taxes are always due no matter who owns the property. At no time are taxes ever 'waived'. Either MRP profits or atty.'s profit, but MRP and eminent domain disregards contract law, the basis of our economy and society.
  • Wm Matz | | 31 Jul 2013, 11:07 AM Agree 0
    AMI/Mr. Fiorillo should admit that their real complaint is with the Wall Street machine that created, packaged, and sold investors the grossly-misrepresented MBS. Hence the explosion of litigation against Wall St by investors.

    Remember, the use of eminent domain requires the city to pay fair value for the mortgages, albeit the current underwater value. If servicers/investors had been more willing to do mods/workouts with borrowers [as in widely done in commercial mortgages], there would be no need for eminent domain.

    But cities have a legitimate interest in minimzing foreclosure and its related detrimental effects. [Have you looked at Detroit and some of the other hard-hit cities?]

    Servicers and investors have engaged in massive violations of laws over the last five years. This is simply one tool to bring some accountability to this area. The Federal government, despite lip service about helping borrowers, secretly encouraged the violations, according to the former TARP Inspector General. For the most part the only accountability has occurred as a result of private borrower attorneys, such as Tom Cox, who uncovered the robo-signing scandal.

    The bottom line is that investors should really blame Wall St for the junk it sold them. They should also accept some responsibility [and the courts have so held] for failing to do proper due diligence. But it is their widespread refusal to work with borrowers to mitigate the effects of Wall St misconduct that has created the need to resort to extreme measures, such as eminent domain.
  • Paulsmoney | | 31 Jul 2013, 11:12 AM Agree 0
    Interesting. I think the idea of using eminent domain as a hammer is over-reaching, giving eminent domain and redevelopment bad press it doesn't deserve when implemented properly.

    However, banks and lenders in general have pissed in their own mess kits by making the era of the upside down home and home mortgage such a nightmare to navigate.

    The banks and lenders are controlling and protecting their future profits by this far-from-transparent foreclosure boon-dogglery. I can see where they'd hate to have to share in the spoils of homeowner misfortunes.
  • Not Governments place | | 31 Jul 2013, 01:02 PM Agree 0
    Although wrong, Robo-signing was nothing more than a violation of process to expedite the inevitable, not the initiation of the process that was already underway. With every foreclosure investors do lose. Government should not be involved in "mitigating the effects of Wall St misconduct" via resorting to "extreme measures" of eminent domain. If Wall Street broke laws, penalize them for doing so. The government should not be using some extreme measures to change behaviors. This is plainly wrong. Could Detroit's 16% unemployment rate have a correlation with the foreclosure rate? Imagine how much higher the unemployment rate would be if everyone had stayed in the city!
  • Wm Matz | | 31 Jul 2013, 02:11 PM Agree 0
    Not Govt's Place, you are clearly unfamiliar with the depth and seriousness of robo-signing. It involved fabricated documents and/or forged signatures on documents that were necessary to foreclose. In CA "uttering a false instrument" is a felony! Without those documents judicial foreclosures cannot proceed. It is reported that one of the big banks has a Mid-west facility dedicated solely to the "re-creation" [i.e. fabrication] of mortgage documents that are missing.

    Borrower attorneys documented that for just a 1/2 dozen big banks robo-signing involved over 50,000 borrowers PER MONTH! And that was just in half the states that are judicial foreclosure states. The fact the Federal and most state gov'ts turned a blind eye to this widespread pattern of serious criminal activity is what caused the cities to look to a LEGAL remedy they could implement.
  • Not Government's place | | 31 Jul 2013, 04:17 PM Agree 0
    Wm, Not disputing it was widespread, or defending it. The point is, doing it correctly would only have delayed the inevitable. It didn’t cause foreclosures. Your point that eminent domain will somehow correct the unrelated robo signing issue, or any other Wall Street misdeed, is not logical. The specific alleged criminal activity should be the focus, not inventing a way to implement someone's idea of justice for a perceived wrong.
    The article is about seizing mortgages on homes that are underwater and refinancing them at a lower mortgage amount to ‘prevent’ foreclosure. Evidently the logic is that if borrowers were not underwater, they would keep making their payments. This creates a moral hazard for all homeowners to claim they are underwater and will have a depressing effect on home prices, just the opposite of the intention. Further, someone else will have to pay for the loss, and the homeowners may have tax consequences. Cities should be focusing on improving the business climate which create demand and pay for housing. Be wary as eminent domain justifies seizure for the ‘common good’ making it very easy to apply this theory to other assets. This opposes one of the most basic of American principles.
  • Wm Matz | | 02 Aug 2013, 08:25 PM Agree 0
    NGP, the flaw in your reasoning is that you focus only on the robo-signing. Robo-signing is merely one facet of the overarching lender and Wall St attitude that rules and laws do not apply to them and only need be followed when convenient or in their interest. that attitude existed before and during the crisi and continues today. Lenders and Wall St routinely violated Federal and state laws regarding mortgage programs and origination requirements. Had they followed the laws/rules, most of the predatory mortgages never would have been made. Eminent domain is one crude way of trying to bring some balance back to this area. Lenders have refused to cooperate with better alternatives, such as 2008's Hope for Homeowners. And when you have a Deputy US A.G. openly stating that the AG will not enforce the law against violators, why shouldn't the cities take some extreme action? After all, the Chief Exec [and subordinate] are sworn to see "that the laws be faithfully executed."
  • Carl Collicott | | 05 Aug 2013, 02:10 PM Agree 0
    By not judicially Foreclosing on the property the Bank has lost the lien!
    The people of California have been defrauded in the largest way imaginable, in California there is only ONE form of foreclosure on real property. It has to be in a court of law. Code of Civil Procedure section 726, pertinent part reproduced below, states the fact. Furthermore, any deed of trust that contains a waiver of this right is void and unenforceable see Civil Code section 2953. 2953, or C.C.P. 726 can be raised at any time.
    Source: Find California Code (online)
    § 726. Form of action; procedure unenforceable
    Form of action; judgment.
    There can be but one form of action for the recovery of any debt, or
    the enforcement of any right secured by mortgage upon real property,
    which action must be in accordance with the provisions of this
    chapter. In such action the court may, by its judgment, direct the
    sale of the encumbered property (or so much thereof as may be
    necessary), and the application of the proceeds of the sale to the
    payment of the costs of court,
    The banks circumvent this requirement by using a different definition of mortgage, found in Civil Code section 2924, adopted in 1872, the so called non-judicial foreclosure. What has the Supreme Court of California stated about section 2924? The code section pertains to a mortgage of personal property.
    [No. 19385. In Bank.—January 5, 1895.]
    105 CAL. 467
    Under section 2924 of •the Civil Code a mortgage may be made by a transfer of an interest in any personal property, other than in trust, made only as security for the performance of another act, and the power to mortgage personal property, without a transfer of pos¬session, is not confined or limited to the articles enumerated in sec-. 2955 of the Civil Code.

  • Wm Matz | | 05 Aug 2013, 03:36 PM Agree 0

    Wish you were right, but that is incorrect. CCP726 ["Security First Rule"] requires the lender to act against the security first [before any personal action against the borrower]. The courts have held that non-judicial foreclosure [trustee sale] is NOT an action for purposes of 726. And the California Supreme Court and Courts of Appeal have repeatedly upheld the validity of trustee sales [NJ foreclosure].

    However, last week in a potential landmark decision, a CA Court of Appeals held that where a securitized mortgage is not legally owned by the beneficiary in whose name the foreclosure is conducted, the sale is void [i.e. never happened]. That means a pending sale can be stopped, and a completed sale can be reversed. This is HUGE, as it is estimated that over 50% of the millions of securitized mortgages were transferred into the trusts in violation of the trust agreement.

    Other states that are judicial foreclosure states, such as NY and MA, hav e previously recognized this flaw. But this is the first CA case I have seen to allow a successful challenge to securitization.
  • Carl Collicott | | 05 Aug 2013, 05:28 PM Agree 0
    Wm matz
    I don’t think you are sure where the non-judicial foreclosure provision comes from, its Civil Code 2924'
    The definition of mortgage is actually contained in C.C. 2920, hypothecation of property,
    Definition of hypothecation 12 USC; ch. 6, 38 Stat. 251 Sect 14(a)
    The term "hypothecation" as stated in Section 14(a) of the Act is defined:
    "1. Banking. Offer of stocks, bonds, or other assets owned by a party other than the borrower as collateral for a mortgage, without transferring title. If the borrower turns the property over to the lender who holds it for safekeeping, the action is referred to as a pledge. If the borrower retains possession, but gives the lender the right to sell the property in event of default, it is a true hypothecation.
    . Did you know according to the SEC, a holder of stocks and bonds is an "Estate”? The suppose transaction in C.C. 2924, is merely "deemed a mortgage". Deemed definition: to think of it as if it were, a metaphor, The fact that actual change of possession of personal property is deemed a pledge, would make the code section void for embracing two subject matters, California Constitution. You'll also notice that this hybrid mortgage is created in a court of law, twice removed from a common law mortgage, furthermore, the debt existed before the mortgage (to secure the performance of an obligation), this is three times removed from a common law mortgage. The power of sale cannot be exercised unless a court of law orders the sale, the exception is the Commissioner of Corporation who issues the notice of default, the non-judicial foreclosure. Of course the courts have ruled this doesn’t violate C.C.P. 726, as it has nothing to do with real property.
    2924.(a) Every transfer of an interest in property, other than in trust, made only as a security for the performance of another act, is to be deemed a mortgage, except when in the case of personal property it is accompanied by actual change of possession, in which
    case it is to be deemed a pledge. Where, by a mortgage created after July 27, 1917, of any estate in real property, other than an estate at will or for years, less than two, or in any transfer in trust made
    after July 27, 1917, of a like estate to secure the performance of an obligation, a power of sale is conferred upon the mortgagee, trustee, or any other person, to be exercised after a breach of the obligation for which that mortgage or transfer is a security, *the power shall not be exercised except where the mortgage or transfer is made pursuant to an order, judgment, or decree of a court of record, or to secure the payment of bonds or other evidences of indebtedness
    authorized or permitted to be issued by the Commissioner of Corporations, or is made by a public utility subject to the provisions of the Public Utilities Act, until all of the following apply:
    (1) The trustee, mortgagee, or beneficiary, or any of their authorized agents shall first file for record, in the office of the recorder of each county wherein the mortgaged or trust property or some part or parcel thereof is situated, a notice of default. That
    notice of default shall include all of the following:

  • Wm Matz | | 05 Aug 2013, 06:30 PM Agree 0
    You stated there is only one form of f/c in CA. that is wrong. CC 2924 et seq specifically authorizes trustee sales. CCP 580d was expressly added to prhibit deficincy judgments after trustee sales as a means of equalizing the treatment under judicial and non-judicial f/c. As I said, the CA Supreme Ct and all the Courts of Appeal have upheld the validity of the non-judicial f/c process. So until that changes, non-judicial f/c are allowed in CA.
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