Joe Nelson, Staff Writer
Posted: 12/01/2012 06:13:41 AM PST
A proposal to use eminent domain to seize underwater mortgages in San Bernardino County appears to have quieted in recent months, but the proposed program is expected to make major headway in 2013.
“In 2013 we will clean up this mess, and we’ll fix this problem,” said John Vlahoplus, a founder and chief strategy officer for the San Francisco- based venture fund Mortgage Resolution Partners, which pitched the idea to San Bernardino County, where roughly 150,000 homeowners in the county owe more on their homes than they are worth, and municipalities across the country hardest hit by the subprime mortgage crisis.
“We’re going to have strong success . . . in 2013,” Vlahoplus said.
He said Mortgage Resolution Partners, or MRP, has been getting a lot of positive response from the cities and counties where it has proposed the idea, including San Bernardino County and the Northern California cities of Berkeley and Sacramento, as well as Suffolk County in New York.
“There’s very strong interest on all fronts,” Vlahoplus said.
MRP has proposed that the county use eminent domain, typically used by government to acquire, via court order, private property for redevelopment or capital improvement projects, to seize underwater mortgages. The loans would then be modified to current market value so people could afford their monthly mortgage payments and establish equity.
The loans would then be sold to hedge funds, pension funds or other investors, with the proceeds being used to pay off outside financiers, secured by MRP, who are funding the eminent domain process. MRP would take a $4,500 fee for each loan seized and modified, and the original bondholder would be left eating the difference between what was owed on the original mortgage and the renegotiated loan at current market value. The county would retain the mortgage notes.
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