Wednesday, September 18, 2013

Eminent Domain Solution for the Mortgage Crisis

Here is an interesting approach to the mortgage crisis.  What if your city was severely affected by the mortgage crisis with many homes going into foreclosure and the resulting property tax revenues plummet, putting your entire city into a downward cycle?  And what if your city determined that the mortgage crisis was a major threat to survival of the city?

If an earthquake, a flood, a hurricane, or some other natural disaster struck this same city, the city could make a disaster declaration and apply for low cost loans, a Stafford Act request could be made for support, and the city might be able to recover.  The Stafford Act applies to natural disasters.

“It is the intent of the Congress, by this Act, to provide an orderly and continuing means of assistance by the Federal Government to State and local governments in carrying out their responsibilities to alleviate the suffering and damage which result from such disasters.  “Emergency” means any occasion or instance for which, in the determination of the President, Federal assistance is needed to supplement State and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States” 

Richmond California is taking another approach and have adopted a plan to invoke the powers of eminent domain to acquire mortgages that are under water and then to find lower priced options for the homeowners to keep them in their homes, to keep the real estate tax payments stable, and to stop the downslide.   The Federal Housing Finance Agency is opposed to this approach and has stated it would suspend Fannie Mae and Freddie mac business in the city if this were invoked.  (

A lawsuit by mortgage companies to stop the city from executing its plan has “not ripened” according to a U.S. District Court.

There was a nice National Public Radio (NPR) piece on this issue on September 17, 2013.  (  The organizing for and against is particularly interesting. Opponents of the eminent domain plan rounded up local college kids, gave them red “a bad deal for Richmond” T-shirts, and had them wave “stop investor greed” placards, while supporters handed out yellow T-shirts with “yes on Richmond CARES” stickers. But the opposition is also lined up in court. For the last few months, Wall Street has traipsed into federal court threatening all kinds of problems for the city, led by filings by Wells Fargo and Deutsche Bank, and they have been joined by a surprising ally: the Federal Housing Finance Agency, which oversees and regulates Fannie and Freddie. MRP is willing to foot Richmond’s legal bills, but won’t indemnify the city if the courts rule against it and exact costly penalties. A small coalition of nonprofits, however, including the California Reinvestment Coalition, the National Housing Law Project, Housing and Economic Rights Advocates, Bay Area Legal Aid, and the Law Foundation of Silicon Valley, has filed an amicus against Richmond’s Wall Street adversaries.

The mortgage crisis and approaches to solutions drive home the importance of parcel information, the real estate tax systems, being able to monitor and perform analysis on the economy of parcel data in any jurisdiction.  Regardless of how this is settled or resolved, parcel data will be essential to track the conditions, monitor progress, and provide measurable indicators for success.

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