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Every twist in the foreclosure crisis.
Sending shockwaves through the financial system.
The city of Richmond California check this out.
Wants to seize homes worth less than their current mortgage using eminent domain and -- refinance -- homes for less than their current value.
All right somebody's gonna pay it off and they're somewhere -- is the latest sign of the government's growing use of eminent domain.
Back in 2005 your members is that -- went all the way to the US Supreme Court after the city of New London, Connecticut -- added domain to -- her home.
And transfer the property to a private developer.
She and other homeowners lost their homes when the court ruled the private use by a developer would serve a public purpose although.
Department and it still hasn't happened -- sharpen his -- -- -- in a small business and real estate expert outlook -- Thank you -- is good to be here all right so explain missing test and Richmond California has what it sounds like to me is that people were under water their homes will be taken away whether they want to participate in this or not.
The city is going to force somebody I guess to refinance at a lower level but there's money -- disappears in their somewhere where does that get bell who's paying for -- us.
-- -- when you look at this concept of eminent domain I was really excited to come on talk about it today.
Because this is an emotionally charged subject and we should all be terrified here.
What is essentially happening is distressed properties with a homeowner can afford the mortgage.
They hit the government's going to seize them through eminent domain and then have somebody else refinance them and pave the original mortgage holder or something now here's the challenge.
If this happens in Richmond you tell me which major lender is going to want to -- there again this is a short -- misguided.
-- solution to a problem -- -- working itself out.
What happens to people who are responsible homeowners it sound like I have any kind of option like this at all no matter how much they've struggled to keep their mortgage current.
-- and it gets even worse than that so.
If you're responsible homeowner or maybe your upside down on your home you kept your mortgage current one the guy next door owns his home.
For -- less than what you oh less than what he paid and you're punished because now you don't have equity in your property but he will soon.
It gets worse than that though if you're the homeowner who's paid your bills.
And you are doing everything you should and then you want to move a year from now but you've had 624.
Properties in your area seized by eminent domain.
And a lender won't loan there you will not be able to sell your home.
Anybody who owns property should be terrified of this concept of eminent domain as an investor and homeowner myself.
I think this is one of the craziest ideas and again.
Distressed properties are working their way through the system already using realtors going through short sales even going through foreclosures but doing this is a totally different strategy it's unproven is dangerous.
Our leaders there like the fact that nearly 40% of the city's homes their mortgages are underwater.
They're pushing for this there financial institutions now -- to try to stop it saying it's unconstitutional they want no part of this.
If this was allowed to proceed.
What does start happening in other cities in -- what kind of precedent does it sat.
Can I think that's the most important -- -- I think that what this is being presented in some places like -- Robin Hood type scenario.
What we're taking these mortgages away from the big banks and letting people stay in their homes.
But here's the challenge this is not a Robin Hood scenario what's happening is we are affecting financial institutions who have just recently loosened the purse strings on mortgages.
If we set precedent here we could see a scenario where.
Interest rates go up the cost of mortgages go up you might have -- eminent domain insurance on your mortgage.
This is simply shortsighted and again it's very misguided.
This is what happens when politicians who do not understand homeownership mortgages to secondary market or really how property is transfer from one person to another.
Come up where -- hare brained scheme.
To solve eight H and short term problem.
With a very long term effective solution.
I asked I know where the money goes where does the -- go that gets written off I mean if it is it financial institutions that -- have to eat that and then they raise rates on everyone else.
Meeting those who are keeping current with their mortgage or underwriting this and write off situation I mean where does that money come from is the government -- weigh in here.
-- is how it works.
Yes and here's you know -- out here's how it works it's even worse than that.
If you -- a mortgage holder -- one of those properties where somebody can afford the property.
This is going to seize the mortgage and then pay you what they determine fair market value -- So if you have a 400000 dollar mortgage and they determine fair market -- a 180000.
You're going to get that lower amount.
And then they're going to sell that mortgage to another investor.
Who's going to sell it back to the property owner.
We're talking about people who -- can't afford their properties and you tell me -- you want anybody in government vowing you'll valuing a mortgage you hold.
For -- how much you should be paid on an investor I own dozens of properties here in Austin and that they'll make should terrify all of us.
All right well you've explained it well Alex.
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