Andrew Edwards, Staff Writer
Posted: 07/26/2012 05:30:00 PM PDT
A founder of a San Francisco company behind a proposal for local government to use eminent domain to take control of underwater mortgages predicted other companies may follow them and take the plan national.
Mortgage Resolution Partners co-founder and chief strategic officer John Vlahoplus said in an interview Thursday that he believes the controversial plan will survive legal challenges and may be emulated by other firms in areas heavily affected by the post-2007 housing market bust.
A number of banking and real estate groups oppose Mortgage Resolution Partners’ plan on the grounds that the unprecedented use of eminent domain to buy mortgage loans could be a significant overreach of government power.
Vlahoplus, however, defended the plan as a necessary way to repair a market failure and prevent future foreclosures.
“We’re capitalists, but we’re also people who want to solve the problem,” he said.
San Bernardino County, Ontario and Fontana have formed a joint-powers authority, or JPA, to use eminent domain.
The agency is expected to consider Mortgage Resolution Partners’ idea, but has not formally requested detailed proposals from that firm or any others offering competing ideas to reduce foreclosures.
Mortgage Resolution Partners’ idea relies on private investors who would pool money to buy mortgage contracts that have been sold to investors as part of private-label mortgage-backed securities.
The local JPA, or another government agency, would then use its eminent-domain power to compel the sale of mortgage contracts. Once the government owns the loan, the homeowner would have a better chance at refinancing a costly mortgage, Vlahoplus said.
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