Calif. County's Halted Mortgage Seizure Plan May Deter Others
Nossaman Partner Rick Rayl was quoted in the Law360 article "Calif. County's Halted Mortgage Seizure Plan May Deter Others" regarding San Bernardino County's decision to discontinue a plan to ease the foreclosure crisis by using eminent domain to take over houses with underwater mortgages. The County began considering the plan last year after it was proposed by San Francisco-based Mortgage Resolution Partners.
San Bernardino has been viewed as the focal point for the proposal and Mr. Rayl stated that "its unanimous rejection of the idea could slow down any other municipalities in California or elsewhere that have been contemplating condemnation of underwater mortgages."
He is quoted as saying, "I would not be surprised to see any or all of these other municipalities make statements rejecting the proposal now that San Bernardino has done so." Mr. Rayl continued, "While this decision has no direct impact on any communities other than those involved in the JPA, with the tremendous focus placed on San Bernardino, the decision could have a chilling effect elsewhere in California and across the country."
Although it's not likely that there will be any large-scale implementations of the eminent domain proposal in the near future, experts report that Mortgage Resolution is continuing to present this strategy to other municipalities. According to Mr. Rayl, "In San Bernardino County alone, if the company was able to effectuate the condemnation of the estimated 42,000 eligible loans, it would stand to make nearly $190 million, at a fee of $4,500 per loan."
"I do not think this proposal is dead," Mr. Rayl said. "There is too much money to be made if the plan proceeds."