To get a taste of how despicable mortgage investors find the concept of using eminent domain to restructure mortgages, just take a glimpse at this editorial that ran in the Wall Street Journal.
The editorial is in response to a New York Federal Reserve Bank scholar, who wrote a paper supporting the idea of using eminent domain to restructure underwater mortgages. The writer of the editorial, which received a mention in RealtyTrac’s latest foreclosure report, had this to say about the paper:
“The real problem is that the Fed would lend its credibility to a scheme for governments to seize private mortgages for someone else’s private gain. The central bank used to be known for sensible regulators, not as the venue for every crackpot notion to favor some investors over others.”
The point is clear, and the battle lines are drawn. Eminent domain is now being thrown around as a potential restructuring initiative in cities like North Las Vegas.
San Bernardino County, Calif., previously debated the issue before killing off the idea.
The white paper that caused such a stir was written by Robert Hockett, professor of financial and monetary law at Cornell Law School.
The paper advocates using eminent domain powers to seize blighted property to reduce foreclosures and help underwater borrowers by restructuring mortgages.
The idea has been challenged on numerous grounds for its overreach and intrusion into real estate contracts.