Want a Feisty Way to Fight Foreclosures?

[eridani]

http://www.thenation.com/blog/178540/want-feisty-way-fight-foreclosures?utm_source=Sailthru&utm_medium=email&utm_term=email_nation&utm_campaign=Email%20Nation%20-%2020140227&newsletter=email_nation_thursday

Local Principal Reduction provides a local solution for underwater homeowners facing foreclosure. The CARES program (Community Action to Restore Equity and Stability), developed by Professor Bob Hockett at Cornell Law School, empowers a municipality to work with private investors to acquire the worst private-label securities (PLS) mortgages in town. These are the notorious loans (often predatory) that have been sliced and diced and securitized into investment vehicles by Wall Street, and they are not backed by the federal government via Fannie, Freddie, or Ginnie Mae. Private-label securities are owned by investment trusts, not banks, and as such are not eligible for federal assistance programs. And because the original mortgages have been cut into so many pieces, it’s difficult—and sometimes impossible—to determine who has the authority to refinance them. In other words, underwater homeowners have no one to ask for a life preserver.

But under CARES, a city acquires these underwater mortgages, with the help of San Francisco–based Mortgage Resolution Partners, a law firm with the financial and legal expertise necessary to advise the municipalities and arrange for the private capital that’s necessary to buy the loans. After acquiring the loans, the city then works to refinance these mortgages at current market value, thereby offering a financial life raft—and four walls and a roof—to homeowners facing foreclosure.

But here’s the best part: If creditors refuse to sell, then the city can use the power of eminent domain to seize the properties and refinance them anyway. This saves neighborhoods and prevents the blight and decreasing property values that naturally accompany abandoned homes and empty neighborhoods.

[Guy Whitey Corngood]

1. K&R nt

[eridani]

2. Just sent this to a couple of Seattle City council members n/t