Excerpted from Robert Shiller’s editorial in thenytimes.com:
Traditionally, we think of eminent domain law as applying to land and buildings. For example, a government can use eminent domain to seize real estate along a proposed new highway route so the highway can be built in a nice straight line. It would be absurd to expect the government to bargain with each property owner to buy a strip of land along the proposed highway route and to have to redirect the highway around a farm whose owner refused to sell. That is common sense.
But eminent domain law needn’t be restricted to real estate.
It could be applied to mortgages as well. Governments could seize underwater mortgages, paying investors fair market value for them. This is common sense too. The true fair market value for these mortgages is arguably far below their face value, given the likelihood of default, with its attendant costs.
Professor Hockett argues that a government, whether federal, state or local, can start doing just this right now, using large databases of information about mortgage pools and homeowner credit scores. After a market analysis, it seizes the mortgages. Then it can pay them off at fair value, or a little over that, with money from new investors, issuing new mortgages with smaller balances to the homeowners. Taxpayers are not involved, and no government deficit is incurred. Since homeowners are no longer underwater and have good credit, they are unlikely to default, so the new investors can expect to be repaid.
The original mortgage holders, the investors in the new mortgages, the homeowners and the nation as a whole will generally be better off. There will surely be some who may not agree, like the holdout farmer opposing the highway, but eminent domain ought to be able to push ahead anyway.
San Bernardino County in California is working with a private company, Mortgage Resolution Partners, on the possibility of putting such a plan into action. We must hope this effort succeeds. If it works, it can be replicated all over the country.
But first we have to realize that much of our economic suffering takes the form of a collective action problem. We have to stop the wishful thinking that the problem will solve itself through a spontaneous rally in home prices. We need to summon our resources to exercise the authority that allows collective action.
Professor Koniak says the solution to this problem has been so slow in coming for a simple reason: “It’s the will that’s lacking! The will!”
Hat tip to DOB for sending this in, fromtelegram.com:
As David vs. Goliath struggles go, they don’t get much more lopsided than a lone muscle-car enthusiast going up against a mega-bank with more than $2 trillion in assets.
But that’s exactly what Aaron Dahrooge of Worcester has been doing for three months now in an effort to get back his beloved 1973 Dodge Challenger.
The distinctive muscle car, which is painted “plum crazy” purple and has a burly V-8 engine with a chrome air scoop popping up through the hood, was taken from the garage of his deceased mother’s home in Burncoat in late March.
Bank of America has vital information, but won’t tell him, Mr. Dahrooge claims.
His mother, April Dahrooge, died last year. Her mortgage lender, Bank of America Corp., had an ongoing foreclosure proceeding against the house at the time of her death. The foreclosure proceeding has not been completed, according to city property tax and state land records.
Mr. Dahrooge said he stored the Challenger in the garage of his mother’s house over the winter as he typically did because he was the executor of her estate.
In late March, Mr. Dahrooge went to the house at 78 Uncatena Ave. with his teenage son to retrieve the purple Challenger, which he had found years before rusting in a field and fully restored into an attention-grabbing hot rod.
When he pulled into the driveway, he immediately noticed the garage door had been padlocked from the outside.
“I thought that was weird, so I went around to the back to look through the window and saw the car was gone. My heart just dropped,” Mr. Dahrooge recalled.
It sold for $1,348,000 when new in 2005, but after the bank foreclosed in 2009, they listed it for $891,000 – which sparked a bidding war and it eventually closed at $990,000 on 11/5/09.
It just sold again yesterday…..for $1,300,000 cash.
Surprisingly, both NAR and Diana at cnbc.com got it right when they blamed the low supply for declining sales. Inventory is reported down 20% from last year nationwide.
But when you look at our sub-market of La Jolla-to-Carlsbad, sales aren’t declining – in fact, they’ve improved. Here are closed sales and average cost-per-sf between Jan. 1st and May 31st:
Year
$0-$700K
$701-$1.1M
$1.1M+
Total Sales & Avg. Cost-per-sf
2009
279/$300
215/$340
202/$599
696/$399
2010
322/$312
379/$346
274/$514
975/$382
2011
361/$289
339/$345
330/$498
1,030/$374
2012
422/$277
393/$329
321/$531
1,136/$367
Interesting that pricing seems to be firming up in the higher-end range first, and that there have already been 321 closings over $1,100,000 this year!
Landlords and property owners aren’t allowed to throw away TVs, clothes and other unwanted items tenants routinely leave behind in rental units after they move out.
The steps property owners and managers are required to take under California law are time consuming and costly, which is why the San Diego County Apartment Association, or SDCAA, is co-sponsoring legislation that would revise the law.
AB 2521 – the bill SDCAA is sponsoring with several other local apartment associations – is currently making its way through the State Legislature. Since its first hearing in May, the measure has progressed with strong, bi-partisan support. The current law, which has gone unchanged for 30 years, is overly prescriptive and maintains a woefully outdated threshold for determining whether the property is valuable or not.
“When residents leave behind their belongings, landlords and property owners have to shoulder the burden of storing, and possibly selling, that property,” said Joe Greenblatt, CEO of Sunrise Management. “This law has long-needed revisions. If the proposed legislation is approved, moving will be easier on residents and landlords.”
We have an unusually low amount of homes for sale (blue line) during the prime selling season – last year we had almost twice as many houses for sale, then we have currently.
I think it is part of the precision in the marketplace. Any seller who prices reasonably – which is easier than ever to accomplish in tract-happy Carmel Valley – sells right away.
But the low inventory is causing sellers to add more mustard to their list prices. There are more houses for sale that are listed over $1,000,000, than are listed under a million. But the average cost of closed sales is struggling to get back to the $330/sf trend, after the recent downswing:
The Federal Reserve and the Treasury Department are considering a program that would lend to banks at very low rates so long as those firms will re-lend the money in the form of consumer loans such as mortgages.
“We’re very interested in it,” said Fed Chairman Ben Bernanke during a press conference Wednesday.
The Bank of England said in June it would begin such a program, but concerns remain over the details, specifically how banks would take further risks and lend in such a low-interest, low-yield environment. The English Treasury said it will back the initiative to further reduce rates by banks that lend in the country. Because of Treasury involvement, Bernanke said the Federal Reserve is working on what type of role Congress would have to play in such a program stateside.
“It’s not just the Bank of England,” Bernanke said, “but it’s joint with the Treasury. So, the question here is, How much of a fiscal component is there? Throughout the crisis, we’ve been looking for new programs, new ways to stimulate lending.”
When trying to price a new listing in a hotter area these days, it helps to have experience from the frenzy era. We gave extra credit to the most recent sales, and hope to feed off the two new pendings that occured this month. We slipped this into the thin group of active listings with what looks like a decent price on paper:
Around San Elijo Hills, there have been numerous bidding wars lately, and of the 16 sales that closed in the last 45 days, 5 closed at or above list price, and the average SP/LP ratio was 98.4%.
Traditionally, we think of eminent domain law as applying to land and buildings. For example, a government can use eminent domain to seize real estate along a proposed new highway route so the highway can be built in a nice straight line. It would be absurd to expect the government to bargain with each property owner to buy a strip of land along the proposed highway route and to have to redirect the highway around a farm whose owner refused to sell. That is common sense.
