Foreclosure Assistance Through Eminent Domain?by Tim Manni
The National Community Reinvestment Coalition (NCRC) testified before the U.S. House Financial Services Committee yesterday, urging lawmakers to invest a significant portion of the remaining TARP funds in a large-scale loan mod program. Here’s the twist: the coalition is urging lawmakers to do so via eminent domain.
Built upon the argument that current federal loan mod programs have proven ineffective, the NCRC believes that by utilizing the government’s power of eminent domain, “legal impediments regarding the complexity of selling loans held in securitized pools” can be avoided. Under the plan, eminent domain eliminates an investor’s say in the loan mod process, since the government would purchase the property directly.
“The current economic crisis justifies the government’s use of eminent domain laws for a compelling public purpose, and would overcome noted legal barriers to loan modification. Through compulsory purchases of troubled loans, reluctant servicers, investors and lenders would not need to be persuaded to participate. Utilizing the federal government’s power of eminent domain avoids lawsuits from disgruntled investors,” said yesterday’s NCRC press release.
Just last week, we said one of the key issues missing from the foreclosure/loan mod crisis is the need for investors to receive some form of loss mitigation. The NCRC’s program, along with many of the Federal programs it denounces, fails to provide that.
“It’s another program that falls squarely on the side of the borrower, assuming that all the losses should go to the lender/investor, not to mention the U.S. taxpayer,” writes Diana Olick of CNBC.
(Story Courtesy of CNBC)