More than 150,000 homeowners in the county owe more on their homes than they are currently worth.
Mortgage Resolution Partners has proposed targeting underwater loans held in private label securities, loans that are held in trust but bundled and sold to Wall Street instead of being held by a bank or mortgage lender.
Under the proposal, the county would seize the loans using eminent domain, a process traditionally used by government to acquire private property, at fair market value, via a court order for redevelopment purposes.
Once acquired, the underwater loans would be modified to reflect the current market value of the properties, lowering monthly mortgage payments and allowing people to stay in their homes. The loans would then be sold to hedge funds, pension funds or other investors, with the proceeds being used to pay off outside financiers who fund the eminent domain process.
The JPA has also agreed to collaborate with several real estate and mortgage servicers on a campaign to inform and educate both local government and homeowners on existing mortgage assistance programs and promoting their use.
Among the organizations the JPA has agreed to partner with include the Inland Valleys Association of Realtors, the Securities Industry and Financial Markets Association (SIFMA), the Association of Mortgage Investors (AMI), the California Mortgage Bankers Association (CMBA) and the California Bankers Association (CBA). All the organizations joined forces in opposition to the eminent domain proposal.
"All we're trying to do is promote coordination, cooperation and communication between the various interested parties," said Timothy Cameron, managing director of the Securities Industry and Financial Markets Association. "There's no simple solution to the problem because the circumstances surrounding each individual's case is a little different."
Paul Herrera, government affairs director for the Inland Valleys Association of Realtors (IVAR), said his group's biggest concern was eminent domain, if utilized to acquire and renegotiate underwater loans, having a chilling effect on the housing market.
"What happens in six months when someone's trying to buy a home? Trying to get a loan," Herrera said.
He said he was pleased with the JPA's decision to work with the real estate and mortgage groups in finding a middle ground and achieving the same goals.
"We have to creative about how that works -- how we look for things that make a difference without having a negative reaction," Herrera said.
Yucaipa resident Bobby Duncan supports any program or effort to assist him in staying in the home he has lived in for the last 16 years with his wife, which he fears he may lose to foreclosure.
Duncan owned three printing shops and had 12 employees before the economy tanked in 2008, knocking the wind out of him and throwing him into a panic.
Now, like so many Americans, Duncan, who is also a Yucaipa City Councilman, faces losing his home.
"I've been trying to modify my loan and I'm telling you it's been impossible," Duncan told the JPA board Thursday. "There's a good chance I'll lose my house. I will do everything I can to support this initiative and this cause."
Distributed by MCT Information Services
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