Joe Nelson, Staff Writer
Posted: 06/19/2012 06:48:21 PM PDT
The San Bernardino County Board of Supervisors on Tuesday approved the forming of a joint-powers authority that would look into establishing a program to help homeowners who are upside-down on their mortgages.
The joint-powers authority (JPA) would consist of the county and the cities of Fontana and Ontario, with an opt-in agreement for other cities desiring to join. It would require a vote of approval from each respective city council in order to join the JPA.
Fontana’s City Council has already approved the JPA in its current form, and the Ontario City Council was expected to vote on it Tuesday night, county spokesman David Wert said.
“The group is eager to get started and will most likely conduct its first meeting before the end of June,” Wert said in an e-mail.
A San Francisco-based consortium of venture capitalists calling themselves Mortgage Resolution Partners pitched the idea of using eminent domain to seize private label mortgage-backed securities, which are loans held by a trustee but bundled and sold in bulk to private investors.
Once seized, the county would retain title of the loans and the loans would be restructured to reflect current market value, said Steven Gluckstern, chairman of Mortgage Resolution Partners.
In return, Mortgage Resolution Partners would receive a fee for each loan seized through eminent domain.
Eminent domain is a process typically used by government to seize private property through a court order for neighborhood revitalization or large-scale infrastructure projects.
Mortgage Resolution Partners is proposing the same plan to public officials in seven other states hardest hit by the mortgage crisis, Gluckstern said.
Under the proposal, Mortgage Resolution Partners would work with the county to find private investors to bankroll the eminent domain process to avoid using taxpayer dollars, Gluckstern said. He said roughly $1 billion would need to be secured to initiate eminent domain proceedings on roughly 5,000 homes in the county with negative equity.
More than 150,000 home in San Bernardino County are underwater
Though the county hasn’t yet decided which way it will go, Mortgage Resolution Partners has been pushing its proposal aggressively in California and other states. It is working with two New York investment banks, Evercore Partners Inc. and Westwood Capital, to find private investors interested in the proposed venture, Gluckstern said.
“We’re talking to some 20 institutional investors who may or may not choose to participate,” he said.
County leaders are intrigued by the idea, but some have expressed concerns about the program and its impact on homeowners, especially in the real estate community.
“By now, you are aware that we have deep reservations about expanding the scope and definition of eminent domain to an entirely new area,” said Steve Manos, president of the Inland Valleys Association of Realtors, in a letter to the Board of Supervisors on Tuesday. “We have concerns about the long-term impact on lending, the moral hazards, the impact to homeowners who participate, and the legal liabilities that fall on local governments already straining to meet budget demands.”
Though proponents of the JPA – including county Chief Executive Officer Greg Devereaux – stress that no program will be formed and no action taken without extensive public vetting and approval, Manos said in his letter that the county’s JPA agreement approved Tuesday by the board, does not reflect that.
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