An Express Article from the California Land Title Association
Bulletin 12/13-4 - July 2, 2012
The CLTA joined banking, securities, and housing groups objecting to a Joint Powers Agreement contemplating the use of eminent domain to seize troubled mortgages from investors in an effort to help homeowners.
The group sent letters to the cities of Fontana and Ontario, and the county of San Bernardino (an example of which can be found here). The letters caution that implementation would likely significantly reduce their residents’ access to home loans.
In June the local governments approved a resolution to allow them to acquire underwater mortgages under the right of eminent domain. The mortgages would then be modified to help homeowners to stay in the houses.
The letter states that it is essential to remember that investors in mortgage-backed securities channel the retirement and other savings of everyday citizens through their investment funds. The eminent domain program may cause loans to be excluded from securitizations, and some portfolio lenders could withdraw from these markets. In other words, the program could actually serve to further depress housing values by restricting the flow of credit to home buyers.