ML-Implode News - The Eminent Domain Mortgage Seizure/Rehab Debate: Experts Weigh In On Both Sides

While arguably the eminent domain Constitutionality is clear after 2005's Kelo v. New London, the following represents an important practical counterpoint:

[John C.] Murphy, whose firm has represented public agencies across Southern California in eminent domain proceedings, said the eminent domain process is not set up for such purposes. He said the proposal by Mortgage Resolution Partners ignores both the high transaction costs involved in eminent domain and the definition of fair market value as interpreted under state law.

He called the proposal constitutionally and politically suspect, one that could potentially trigger disputes over the valuation of the loans and the transfer of wealth from one private investor to another.

For our part, we don't think the objection that Mortgage Resolution Partners' proposal allows them to profit off fees is a substantial impediment to doing something like this. States or municipalities could always create nonprofit programs (at minimum, as a shell) to administer mortgage/loan pool seizure/rehab programs. So in our view, the real issues center around two main questions: (1) is seizing mortgages/loan pools Constitutional, and (2) is it practical (given the real-world transaction costs, will there be net benefit at all)?

Here is a link to the non-paywall in-brief version of this article at MortgageDaily.

Relevant:

The Eminent Domain Mortgage Seizure/Rehab Debate: Experts Weigh In On Both Sides