By Joe Nelson
Posted: 09/21/2012 08:06:25 PM PDT
Cyclical spikes in the housing market will not fix the long-term housing crisis plaguing San Bernardino County, but a unique proposal to acquire underwater mortgages using eminent domain likely will, a legal expert said Friday.
“We can’t just sit back and watch the cycles and hope this year’s spring peak will be better than last year’s spring peak or this year’s summer peak will be better than last year’s summer peak,” said Robert C. Hockett, a Cornell University law school professor who specializes in finance regulation.”
Hockett has been working with San Francisco-based community advisory group Mortgage Resolution Partners on their unique propsoal to work with municipalities across the country, including San Bernardino County, hardest hit by the subprime mortgage crisis. Their pitch: use eminent domain to seize underwater mortgages tied up in private label securitized mortgages – loans that are held in trust but bundled and sold in bulk to private investors across the globe.
Roughly 50 percent of mortgages in the county are underwater, but only a small fraction of that 50 percent are held in private label securitized mortgages.
The California Association of Realtors released a report this week showing that selling prices of existing homes in San Bernardino and Riverside counties increased 11 percent in August over the previous year, while the number of homes sold dropped 5.7 percent. It preceded an announcement Tuesday by the National Homebuilder’s Association that its builder’s confidence index had reached its highest point since June 2006.
“One of the central arguments that (Mortgage Resolution Partners) and the county have made is that some kind of intervention will change the game here. Clearly that is untrue,” said Paul Herrera, government affairs director for the Inland Valley Association of Realtors. “We’re now at about five months of solid year-over-year increases in median home prices. We’re clearly over the hill on this thing and we’re finally approaching the light.”
Hockett said the housing industry typically sees a seasonal spike in home prices and sales in the spring and in the late summer/early fall. Realtors tend to show and sell more properties in the spring, and families tend to buy more homes in late summer or early fall before the new school year begins.
“Every spring and every autumn we get a bunch of reports, like we’re getting now, saying housing prices are getting better. What you don’t hear is that three or four months later the prices are getting lower again,” Hockett said. “I believe that it’s a false hope. We’ve heard this so many times now that it’s getting old.”
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