They Can't Do That, Can They? Constitutional Limitations on the Seizure of Underwater Mortgages

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They Can’t Do That, Can They? Constitutional Limitations on the Seizure of Underwater Mortgages

They Can’t Do That, Can They? Constitutional Limitations on the Seizure of Underwater Mortgages

Jones Day-

This Commentary discusses a proposal, referred to below as “the property seizure program,” whereby state and local governments would use their eminent domain power to “condemn” underwater mortgages—that is, mortgages under which the outstanding amount of the debt exceeds the market value of the underlying real property. The property seizure program appears to have generated some momentum over the last few months, collecting the endorsement of both legal scholars and politicians.[1] The L.A. Times recently reported that the Board of Supervisors of San Bernardino County unanimously approved a program to use eminent domain to seize mortgages and restructure them for underwater homeowners stuck in their properties.[2]

Under the property seizure program, private investors would supply state and local governments with capital to provide compensation, at current market value, to banks, lenders, securitization trusts, and other holders of mortgages. Once the mortgages have been condemned, the governments would transfer mortgage rights to the private investors on the condition that they restructure the mortgages to account for the current market value of the underlying real property. The private investors could then retain and service the resulting new mortgages, or sell the new mortgages, presumably at a profit, to another investor.

[JONES DAY]

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4 Responses to “They Can’t Do That, Can They? Constitutional Limitations on the Seizure of Underwater Mortgages”

  1. Ken Hansen says:

    Yes, well, this is very thorough. Jones Day specializes in arguments, (sometimes on behalf of TBTF Banks) and none are better than a crafted utilization or selective interpretation of the Constitution, IF it favors their own interests. Webber’s protests on NC, too, imply “investors” would be harmed. Somehow human rights, like the right to housing and shelter never make it into these agenda heavy arguments the well entrenched elites put forth. One key to their level of influence of course, is first to obscure their agenda.

  2. dinsfla says:

    What caught my eye more than anything was the discussion about “The Constitution”.

    Our rights are being taken from the banks via the courts.

  3. Geanette says:

    Sounds like a plan to me!! The banks sure as hell are unable to do the job or restructuring mortgages…this is a clean, fair and honest way of addressing the housing crisis!

  4. Pamela Edwards says:

    They will just sell them back to the sub-prime lenders and off to the races we will go once more.Sounds good but will it leave the American people at risk once again?

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