Ed Morrissey
HotAir.com
7/6/2012
If one wanted to craft a strategy to make the home-mortgage market even less stable, increase already-unsustainable public debt, and erode private property rights even further than we have already seen, it would be hard to top a new idea from California, of all places. Two cities have fashioned a plan to use eminent domain not to seize real estate, but to seize the mortgages on them. Call this … Kelo meets Hugo Chavez:
Eminent domain allows a government to forcibly acquire property that is then reused in a way considered good for the public—new housing, roads, shopping centers and the like. Owners of the properties are entitled to compensation, which is usually determined by a court.
But instead of tearing down property, California’s San Bernardino County and two of its largest cities, Ontario and Fontana, want to put eminent domain to a highly unorthodox use to keep people in their homes.
The municipalities, about 45 minutes east of Los Angeles, would acquire underwater mortgages from investors and cut the loan principal to match the current property value. Then, they would resell the reduced mortgages to new investors. …[emphasis CAJ]
…If cities began doing this, it will create a number of problems, especially in mortgage markets, which are still unstable thanks to the 2008 housing bubble crash created by government interventions over a decade in the market…
The entire article is at HotAir.com
