TheCultofAbeLincoln
22nd January 2014, 23:01
I brought this up in the Do You Vote? thread, but I feel that the debate over eminent domain in Richmond, Ca is worthy of its own thread. One reason is because of the fact that the fight to use eminent domain to secure deeply underwater mortgages from the banks, and keep people in their homes at a refinanced value reflecting the post-bubble market, is one that is being watched by communities across America. Several news sources have said that while capital is threatening to fly from Richmond and never return, the cities of Newark, North Las Vegas, and Seattle are all actively watching the events pan out (one can be sure many other communities hit hard by falling property values are watching silently as well). edit: Newark's city council has unanimously voted to explore the idea.
The other major reason is that this is a increasingly public test of political resolve between the city of Richmond, led by its Green Party Mayor, against those corporations which both caused and benefited from the global recession more than anyone else. The mayor, Gayle McLaughlin, was elected prior to the financial crisis, and this action seems perhaps to be a product of the (relatively) strong home defenders leagues and Occupy movement that exists in the east bay. Ms. McLaughlin, according to wikipedia, was criticized for attending an Occupy rally on Veterans Day 2011 instead of some militaristic celebration at the former shipyard for instance.
While the plan is far from the collectivization the banks would have you believe, it is quite bold. The city will partner with a private mortgage company, Mortgage Resolution Partners, to purchase 624 homes which represent the worst of the 29% of all Richmond homes considered "deeply underwater." Richmond homes lost 66% of their value in the market crash, and while the banks point out that some gains have been made, on average Richmond homes are worth half their January 2006 peak values. The city would sell the homes who's mortgage it has purchased back to the owner at market value + 10% to cover the investment and return for Mortgage Resolution Partners, which will administer the process.
Essentially, the city is using eminent domain to perform a principal loan reduction on behalf of its citizens when the banks refuse to refinance. Over 15% of all homes in the city were foreclosed upon during the financial crisis and subsequent recession, and this has effectively ended any real chance at market recovery that is either painless or expedient.
In August 2013, Wells Fargo and Deutsche Bank (backed by BlackRock, PIMCO, and Fannie/Freddie), filed to sue the city, but a judge threw it out as premature. That has not stopped the onslaught about the proposed actions.
The ACLU has said that principal loan reduction is a common practice in markets that have suffered, and is now filing a lawsuit investigating moves by the Federal Housing Finance Agency (FHFA) to both launch litigation against Richmond as well as block Freddie Mac and Freddie Mae from backing up mortgage loans made in the city. The ACLU points out that Richmond is made up, mainly, of minorities who would be disproportionately affected by such a withdrawal of federal funds. They also note that the lawsuit intends to expose the too-cozy relationship between the FHFA and the banking industry. They paint a picture of a government agency being used as an instrument to force a corporate agenda on private citizens (Shocking news, I know). The banks are also reportedly moving to craft legislation to stop federal redevelopment funds from getting to Richmond. It may become easier to find American banks to invest in Havana than Richmond from the way they scream bloody murder.
Richmond was locked out of the market when it tried to raise money via bonds recently, and though still able to raise money, it is hard to underestimate, I think, the pending reaction by high finance should Richmond use eminent domain just once. Not necessarily because it may be a bad investment per se, but because Richmond failing miserably in this attempt to keep people in their homes, and failing overall, will have much more of a reward for the banks than buying any Richmond debt ever could.
http://www.nytimes.com/2014/01/12/business/in-richmond-california-a-long-shot-against-blight.html
http://www.occupy.com/article/richmond-expands-battle-eminent-domain-save-homeowners-foreclosure
http://www.bizjournals.com/sanfrancisco/blog/2014/01/richmond-foreclosures-eminent-domain.html?page=all
http://www.bizjournals.com/sanfrancisco/blog/2013/08/richmond-eminent-domain-bondholders-sue.html?page=all
The other major reason is that this is a increasingly public test of political resolve between the city of Richmond, led by its Green Party Mayor, against those corporations which both caused and benefited from the global recession more than anyone else. The mayor, Gayle McLaughlin, was elected prior to the financial crisis, and this action seems perhaps to be a product of the (relatively) strong home defenders leagues and Occupy movement that exists in the east bay. Ms. McLaughlin, according to wikipedia, was criticized for attending an Occupy rally on Veterans Day 2011 instead of some militaristic celebration at the former shipyard for instance.
While the plan is far from the collectivization the banks would have you believe, it is quite bold. The city will partner with a private mortgage company, Mortgage Resolution Partners, to purchase 624 homes which represent the worst of the 29% of all Richmond homes considered "deeply underwater." Richmond homes lost 66% of their value in the market crash, and while the banks point out that some gains have been made, on average Richmond homes are worth half their January 2006 peak values. The city would sell the homes who's mortgage it has purchased back to the owner at market value + 10% to cover the investment and return for Mortgage Resolution Partners, which will administer the process.
Essentially, the city is using eminent domain to perform a principal loan reduction on behalf of its citizens when the banks refuse to refinance. Over 15% of all homes in the city were foreclosed upon during the financial crisis and subsequent recession, and this has effectively ended any real chance at market recovery that is either painless or expedient.
In August 2013, Wells Fargo and Deutsche Bank (backed by BlackRock, PIMCO, and Fannie/Freddie), filed to sue the city, but a judge threw it out as premature. That has not stopped the onslaught about the proposed actions.
The ACLU has said that principal loan reduction is a common practice in markets that have suffered, and is now filing a lawsuit investigating moves by the Federal Housing Finance Agency (FHFA) to both launch litigation against Richmond as well as block Freddie Mac and Freddie Mae from backing up mortgage loans made in the city. The ACLU points out that Richmond is made up, mainly, of minorities who would be disproportionately affected by such a withdrawal of federal funds. They also note that the lawsuit intends to expose the too-cozy relationship between the FHFA and the banking industry. They paint a picture of a government agency being used as an instrument to force a corporate agenda on private citizens (Shocking news, I know). The banks are also reportedly moving to craft legislation to stop federal redevelopment funds from getting to Richmond. It may become easier to find American banks to invest in Havana than Richmond from the way they scream bloody murder.
Richmond was locked out of the market when it tried to raise money via bonds recently, and though still able to raise money, it is hard to underestimate, I think, the pending reaction by high finance should Richmond use eminent domain just once. Not necessarily because it may be a bad investment per se, but because Richmond failing miserably in this attempt to keep people in their homes, and failing overall, will have much more of a reward for the banks than buying any Richmond debt ever could.
http://www.nytimes.com/2014/01/12/business/in-richmond-california-a-long-shot-against-blight.html
http://www.occupy.com/article/richmond-expands-battle-eminent-domain-save-homeowners-foreclosure
http://www.bizjournals.com/sanfrancisco/blog/2014/01/richmond-foreclosures-eminent-domain.html?page=all
http://www.bizjournals.com/sanfrancisco/blog/2013/08/richmond-eminent-domain-bondholders-sue.html?page=all