California Eminent Domain Report

Along with my colleagues Brad Kuhn, Ben Rubin, and Katherine Contreras, I'm here in Hartford at the IRWA Annual Education Conference.  It's been an interesting few days as we discuss eminent domain issues in the shadow of New London, Connecticut, battle ground of the infamous Kelo decision.  

I spoke yesterday on a panel moderated by Orell Anderson, alongside attorneys Jim Ray and Jeff Pollack.  Our topic involved how contamination issues are handled in litigation.  It was a great session, even though it did not go at all as we planned it.  The extremely engaged audience consumed nearly the ...

On October 2, my partner Brad Kuhn and I will be speaking at the International Right of Way Association, Chapter 57, lunch meeting.  The meeting takes place at the Old Spaghetti Factory in Riverside -- and who doesn't like old spaghetti? 

We're going to talk about a little of everything, updating people on a few of the more interesting eminent domain cases decided recently, talking about the progress in the dissolution of California's redevelopment agencies, and taking a look at Richmond, California's plan to condemn underwater mortgages. 

If you're in the area -- or just want to hear ...

OK, I'll admit it.  A year ago I thought this whole condemnation-of-underwater-mortgages thing would die off pretty quickly.  I predicted we'd never see any large-scale condemnation effort.  So far, I've missed badly on the first prediction -- but it remains to be seen whether I'm right on the second one.

To date (unless I've missed something), not a single condemnation action has been filed anywhere in the U.S. to condemn an underwater mortgage.  But the concept certainly has not disappeared quietly into the night.  Instead, some cities continue to pursue the idea.

One in particular ...

Yesterday, the City of Richmond caught a small reprieve with respect to its plan to condemn underwater mortgages.  As reported by Reuters, the federal district court ruled that the lawsuit filed by lenders Wells Fargo, Deutsche Bank and The Bank of New York Mellon is unripe. The judge denied the lenders' request for an injunction to halt the City's plan to condemn underwater mortgages even though the lenders argued that the City's use of eminent domain in this context is unconstitutional.  Next Monday, the judge will decide whether to dismiss the action or leave it pending.

Despite three major banks filing federal lawsuits against the City of Richmond last month related to its plan to condemn underwater mortgages, the City continues to press on.  On Tuesday, the City voted 4-3 to continue its partnership with Mortgage Resolution Partners (MRP), the mastermind behind the scheme. (See articles from The Press Enterprise and Contra Costa Times.)   The council and MRP will form a Joint Powers Authority to administer the plan and will attempt to attract more cities to join the effort. 

While the City is still moving forward, there continues to be ...

We all knew this was coming (see my post from July 23).  If you poke a sleeping giant, it's going to file a lawsuit against you in federal court.  Yesterday, in response to the City of Richmond's preliminary actions to condemn underwater mortgages, three heavy-hitting banks fired back by filing lawsuits in California federal court to block the condemnations. 

According to multiple news sources (here, here and here), Wells Fargo Bank, Deutsche Bank and Bank of New York Mellon Corp. have asked the court to find the City's plan unconstitutional and block its implementation.  The banks argue ...

It's been a while since we focused on the whole condemnation of underwater mortgages scheme but that doesn't mean the idea has died off.  To the contrary, apparently at least four California cities have now signed advisory agreements with Mortgage Resolution Partners.  According to the Las Vegas Sun and various other news outlets (see here and here), the cities of Richmond, San Joaquin, Orange Cove, El Monte, and perhaps a few others, have entered into an agreement with Mortgage Resolution Partners and are looking to pursue the condemnation of underwater mortgages. 

The first ...

After two years of negotiating with residential property owners, the Stanislaus County Board of Supervisors approved acquisition of the property by eminent domain.  The Modesto Bee reports that the board approved the acquisition of a single-family residence at its meeting on Tuesday in order to construct its Claribel Road project, which will cost the county $15.2 million.  The project will widen Claribel Road from two lanes to a four-lane separated highway relieving congestion and reducing the safety concerns of the current configuration, which causes an estimated 16 accidents ...

Given how much publicity the proposal to condemn underwater mortgages received when it first appeared last summer, I suppose it's not surprising that San Bernardino's decision last week not to move forward has also garnered a lot of attention.  Still, it's been hard to keep up with the many articles on the subject these past few days.

If you're trying to keep up as well, here are a number of pieces published over the last few days:

• A January 25 article by Erin Coe on Law360 entitled Calif. County's Halted Mortgage Seizure Plan May Deter Others, that focuses on the question of whether San ...

For the better part of a year, we've been writing about the controversial proposal to use the power of eminent domain to condemn underwater mortgages, allowing homeowners to have a new loan that better reflects the underlying value of the property. 

While the proposal originates from a private company, Mortgage Resolution Partners, much of the media attention focused on a single geographic location:  San Bernardino County, where (at least according to the Wall Street Journal) Mortgage Resolution Partners claims 42,000 of the County's 59,000 privately held mortgages are ...

As the summer months come to an end, it means the International Right of Way Association monthly luncheons are set to resume -- at least in Orange County and the Inland Empire (those crazy right of way folks in Los Angeles go year-around).  Chapter 67's lunch is scheduled for September 11 at the Marriott in Santa Ana, and Chapter 57's lunch is set for September 12 at the Old Spaghetti Factory in Riverside.  So what's on tap?

In Orange County, my partner Rick Rayl will be presenting on the use of eminent domain for underwater mortgages.  We've covered this topic in detail here on the blog, but please ...

This underwater mortgage / eminent domain issue does not appear to be going away any time soon.  Along with eminent domain attorneys Robert Thomas from Hawaii, Casey Pipes from Alabama, and Tom Olsen from New Jersey, I spoke last Friday at the ABA Annual Meeting in Chicago -- one of the cities apparently considering the plan.  The presentation itself did not focus on the underwater mortgage plan, but many of the questions at the end did.  Indeed, the issue generated more buzz in the room, by far, than any other.

This week, the news is that the Federal Housing Finance Agency ("FHFA") has ...

Over the past few days, I've had several conversations and have received a number of emails concerning the underwater mortgage series I posted recently.

Rick Friess, one of my former colleagues, commented on the series and provided two additional sources of concern.  Because I suspect many people missed his comment, I'm copying it here:

I agree with your analysis, and I see at least two other reasons this plan will not work. First, many, if not most, of the loans are likely refiances, not purchase-money loans, so the lenders will have recourse against the borrower. Thus, if the lender is ...

In two previous posts, I've discussed the proposed plan to condemn underwater mortgages and have analyzed the plan's legality.

Today, I want to talk briefly about whether the plan makes sense -- and whether it would work.  To assist those who don't want to spend much more time on this issue, I'll start with the bottom line:  I think this is a bad idea and that it will not accomplish its intended goal.  I also think the plan carries some potentially harmful baggage.

So why do I think the plan will fail?  Pretty simple, really.  The entire premise behind the plan is to acquire loans at less than their ...

Today I want to focus on whether the plan to seize underwater mortgages through eminent domain is legal. Getting into this topic, in my view the debate should not focus on whether this plan passes constitutional muster at the federal level.  I've seen much written on this subject, but I really think this is a red herring, and that the answer is pretty easy.   While others disagree, I believe the plan passes constitutional muster at the federal level.

The U.S. Supreme Court has issued a long line of cases that all make pretty clear that the government could constitutionally condemn ...

Anyone who follows eminent domain issues no doubt by now has heard about the plan of some government agencies to condemn underwater mortgages -- essentially as a mechanism to refinance those loans to give borrowers loans that better reflect the current fair market value of their homes.

There has been much debate on the issue, and it has included a whole lot of rhetoric that has started to look a bit like an election campaign. I've heard extreme arguments both in favor and against the plan.

My intention here is not to advocate for or against the plan. Rather, I hope to help better -- and more ...