Andrew Edwards, Staff Writer
Posted: 08/05/2012 11:26:10 AM PDT
A Royal Bank of Scotland analysis questions a controversial proposal for a San Bernardino County agency to use eminent domain to buy “underwater” mortgages.
The bank asserts that declining foreclosure rates mean a relatively low number of homeowners will benefit from the plan. With that conclusion in mind, analysts for the Royal Bank of Scotland question whether such bold action as eminent domain is necessary.
“Something is working, and the best approach for government officials might be to simply let the system continue to mend itself,” the bank’s study reads.
The assertion that “something is working,” however may be subject to as much debate as the eminent domain proposal itself.
Although the county’s foreclosure rates have trended downward, they remain high. Also, an estimated 150,000 households in the county are “underwater,” meaning they owe more on their mortgages than their house’s current market value.
The eminent domain proposal itself comes from San Francisco-based Mortgage Resolution Partners.
Company co-founder John Vlahoplus said Friday that banking interests oppose the plan because they want to cherrypick from future foreclosures and convert those homes into rental properties.
“They’ll turn stable middle-class neighborhoods into ones that have transient renters,” Vlahoplus said.
Mortgage Resolution Partners proposes to raise private capital to buy home loans that have been packaged into private-label mortgage-backed securities.
Mortgage Resolution Partners’ plan requires support from a government agency to buy those loans via eminent domain, meaning a court would force the sale at whatever is determined to be fair market value.
The investment firm maintains that homeowners will have better odds refinancing their mortgages if a government agency takes ownership of the loan.
Mortgage Resolution Partners would collect fees for its services while its investors would collect income from mortgage payments, if the plan works out.
Opponents in the investment and real estate industries respond that Mortgage Resolution Partners’ plan would deny investors a chance to receive the full value of their investment and may discourage lenders from issuing new loans.
The county, along with Ontario and Fontana, have formed a special agency to consider plans from Mortgage Resolution Partners and any others who may offer a competing proposal.
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Mortgage Resolution Partners would be the only ones who would have the ability to cherry pick these properties and keep them for themselves at the price they want to pay, with the taxpayer picking up the tab for legal fee’s when these big bank’s and others file lawsuits.
My biggest question is what did these people promise the officials in
the County, Ontario, & Fontana the bastions of ethics that they are.
They have to know steeling is against the law.
What I find interesting is the part where it mentions that of the 31,000 underwater mortgage holders in San Bernardino County, that only 13,000 have made a payment in the last year. 18,000 underwater home owners not making a payment in year or more is really something to be concerned about. The housing market is a long way from any sort of recovery if tose numbers are correct.