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Tag Archive: eminent domain


Forbes

 

Bulldozing Free Speech

How people respond to criticism can reveal a lot about their character.  Some might try to debate or reason with those they disagree with.  Others prefer to ignore critics.  City officials in Honolulu take a different approach: They use a bulldozer.

Choon James is a successful real estate broker with over two decades of experience in Hawaii.  But the city of Honolulu is seeking to seize property she’s owned for almost a decade to build what she calls a “super-sized” fire station in rural Hauula.

Since January 2010, she has put up signs to protest Honolulu’s use of eminent domain.  These signs declare “Eminent Domain Abuse: Who’s Next?” and “YouTube Eminent Domain Abuse—Hawaii.”  For more than three years these signs have been up without any incident.

But now the city is showing a callous disregard for Choon’s freedom of speech.  Back in May, Honolulu seized two of her eminent domain protest signs.  Without her consent, city employees went onto the property and seized and impounded her signs before damaging them. Even worse, the city slapped her with a notice for trespassing, for property she is trying to defend in court.

After these signs were torn down, Choon placed three more signs there.  These lasted just a few months before the city once again seized the signs.  This time, Honolulu was much more dramatic.  On October 18, city workers, backed by police officers, squad cars and a bulldozer, came by and literally bulldozed those protest signs.

The city’s actions show a shameful lack of respect for the First and Fourth Amendments.  Citizens have a right to protest government actions.  The First Amendment was enacted precisely to protect citizens who criticize the government from retaliation.  Lawsuits challenging Honolulu’s unreasonable seizures and chilling attacks on free speech are now pending in federal court.

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Underwater Homeowners Press Conference in front of Richmond City Hall (Photo: ACCE)Using the authority of state government to actually help people has Wall Street bankers in a panic, spurring threats of aggressive legal retaliation against the town of Richmond, California simply for trying to help some of its struggling homeowners.

‘Eminent domain’ has long been a dirty term for housing justice advocates who have seen municipalities invoke public seizure laws to displace residents and communities to make way for highways, shopping malls, and other big dollar projects.

But in Richmond, city officials are using eminent domain to force big banks to stop foreclosing on people’s homes in an innovative new strategy known as ‘Principle Reduction’ aimed at addressing California’s burgeoning housing crisis.

Richmond became the first California city last week to move forward on a plan that has been floated by other California municipalities to ask big bank lenders to sell underwater mortgage loans at a discount to the city (if the owner consents), and seize those homes through eminent domain if the banks refuse. The city has committed to refinancing these homes for owners at their current value, not what is owed.

City officials launched this process by sending letters in late July to 32 banks and other mortgage owners offering to buy 624 underwater mortgages at the price the homes are worth, not what the owners owe.

“After years of waiting on the banks to offer up a more comprehensive fix or the federal government, we’re stepping into the void to make it happen ourselves,” Mayor Gayle McLaughlin said in late July.

Wall Street is furious at the plan and has vowed to sue the municipality, a threat that did not stop Richmond but did slow other California cities in adopting the strategy.

Big banks have been slammed for their damaging mortgage loan policies that target poor and working class people and communities of color with high risk loans, policies that have had a profound impact on Richmond, which has large latino, African American, and low-income communities.

Eminent domain laws also have a painful history in Richmond, but housing justice advocates are hopeful about this new twist on the seizure law.

“For years we have seen cases where eminent domain was used in a harmful way, and it really hurts low-income communities of color,” David Sharples, local director for Contra Costa Alliance of Californians for Community Empowerment, told Common Dreams. “People here in Richmond talk about when they built the big 580 Freeway, and people had their houses taken and were displaced.”

“But we see this as a way eminent domain is finally being used to help keep families in their homes,” he added. “It is finally a way for it to be used in a good way.”

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Politics, Legislation and Economy News

 

 

Economic News  :  Mortgage Crisis

 

 

 

Fixing the Mortgage Mess in America

The Game-changing Implications of Bain v. MERS

by Ellen Brown
 

Two landmark developments on August 16th give momentum to the growing interest of cities and counties in addressing the mortgage crisis using eminent domain:

(1) The Washington State Supreme Court held in Bain v. MERS, et al., that an electronic database called Mortgage Electronic Registration Systems (MERS) is not a “beneficiary” entitled to foreclose under a deed of trust; and

(2) San Bernardino County, California, passed a resolution to consider plans to use eminent domain to address the glut of underwater borrowers by purchasing and refinancing their loans. 

MERS is the electronic smokescreen that allowed banks to build their securitization Ponzi scheme without worrying about details like ownership and chain of title.  According to trial attorney Neil Garfield, properties were sold to multiple investors or conveyed to empty trusts, subprime securities were endorsed as triple A, and banks earned up to 40 times what they could earn on a paying loan, using credit default swaps in which they bet the loan would go into default.

As the dust settles from collapse of the scheme, homeowners are left with underwater mortgages with no legitimate owners to negotiate with.  The solution now being considered is for municipalities to simply take ownership of the mortgages through eminent domain.  This would allow them to clear title and start fresh, along with some other lucrative dividends.

A major snag in these proposals has been that to make them economically feasible, the mortgages would have to be purchased at less than fair market value, in violation of eminent domain laws.  But for troubled properties with MERS in the title—which now seems to be the majority of them—this may no longer be a problem.  If MERS is not a beneficiary entitled to foreclose, as held in Bain, it is not entitled to assign that right or to assign title.  Title remains with the original note holder; and in the typical case, the note holder can no longer be located or established, since the property has been used as collateral for multiple investors.  In these cases, counties or cities may be able to obtain the mortgages free and clear.  The county or city would then be in a position to “do the fair thing,” settling with stakeholders in proportion to their legitimate claims, and refinancing or reselling the properties, with proceeds accruing to the city or county.

Bain v. MERS: No Rights Without the Original Note

Although Bain is binding precedent only in Washington State, it is well reasoned and is expected to be followed elsewhere.  The question, said the panel, was “whether MERS and its associated business partners and institutions can both replace the existing recording system established by Washington statutes and still take advantage of legal procedures established in those same statutes.”  The Court held that they could not have it both ways:

Simply put, if MERS does not hold the note, it is not a lawful beneficiary. . . .

MERS suggests that, if we find a violation of the act, “MERS should be required to assign its interest in any deed of trust to the holder of the promissory note, and have that assignment recorded in the land title records, before any non-judicial foreclosure could take place.” But if MERS is not the beneficiary as contemplated by Washington law, it is unclear what rights, if any, it has to convey. Other courts have rejected similar suggestions. [Citations omitted.]

If MERS has no rights that it can assign, the parties are back to square one: the original holder of the promissory note must be found.  The problem is that many of these mortgage companies are no longer in business; and even if they could be located, it is too late in most cases to assign the note to the trusts that are being tossed this hot potato. 

Mortgage-backed securities are sold to investors in packages representing interests in trusts called REMICs (Real Estate Mortgage Investment Conduits), which are designed as tax shelters.  To qualify for that status, however, they must be “static.” Mortgages can’t be transferred in and out once the closing date has occurred. The REMIC Pooling and Servicing Agreement typically states that any transfer after the closing date is invalid. Yet few, if any, properties in foreclosure seem to have been assigned to these REMICs before the closing date, in blatant disregard of legal requirements.

The whole business is quite complicated, but the bottom line is that title has been clouded not only by MERS but because the trusts purporting to foreclose do not own the properties by the terms of their own documents.  Legally, the latter defect may be even more fatal than filing in the name of MERS in establishing a break in the chain of title to securitized properties.

What This Means for Eminent Domain Plans:

Focus on San Bernardino

Under the plans that the San Bernardino County board of supervisors voted to explore, the county would take underwater mortgages by eminent domain and then help the borrowers into mortgages with significantly lower monthly payments. 

Objections voiced at the August 16th hearing included suspicions concerning the role of Mortgage Resolution Partners, the private venture capital firm bringing the proposal (would it make off with the profits and leave the county footing the bills?), and where the county would get the money for the purchases. 

A way around these objections might be to eliminate the private middleman and proceed through a county land bank of the sort set up in other states.  If the land bank focused on properties with MERS in the chain of title (underwater, foreclosed or abandoned), it might obtain a significant inventory of properties free and clear.    

The county would simply need to give notice in the local newspaper of intent to exercise its right of eminent domain. The burden of proof would then transfer to the claimant to establish title in a court proceeding.  If the court followed Bain, title typically could not be proved and would pass free and clear to the county land bank, which could sell or rent the property and work out a fair settlement with the parties.

That would resolve not only the funding question but whether using eminent domain to cure mortgage problems constitutes an unconstitutional taking of private property.  In these cases, there would be no one to take from, since no one would be able to prove title.  The investors would take their place in line as unsecured creditors with claims in equity for actual damages.  In most cases, they would be protected by credit default swaps and could recover from those arrangements. 

The investors, banks and servicers all profited from the smokescreen of MERS, which shielded them from liability.  As noted in Bain:

Critics of the MERS system point out that after bundling many loans together, it is difficult, if not impossible, to identify the current holder of any particular loan, or to negotiate with that holder. . . . Under the MERS system, questions of authority and accountability arise, and determining who has authority to negotiate loan modifications and who is accountable for misrepresentation and fraud becomes extraordinarily difficult.

Like MERS itself, the investors must deal with the consequences of an anonymity so remote that they removed themselves from the chain of title. 

On August 15th, the Federal Housing Finance Agency threatened to take action against municipalities condemning federal property.  But to establish its claim, the FHFA, too, would have to establish that the mortgages were federal property; and under the Bain ruling, this could be difficult. 

Setting Things Right

While banks and investors were busy counting their profits behind the curtain of MERS,  homeowners and counties have been made to bear the losses.  The city of San Bernardino is in such dire straits that on August 1, it filed for bankruptcy. 

San Bernardino and other counties are drowning in debt from a crisis created when Wall Street’s real estate securitization bubble burst.  By using eminent domain, they can clean up the destruction of their land title records and 400 years of real property law.  And by setting up their own banks, counties and other municipalities can use their own capital and revenues to generate credit for local purposes.  

Homeowners who paid much more for a home than it was worth as a result of the securitization bubble have little chance of challenging the legitimacy of their underwater mortgages on their own.  Insisting that their state and local governments follow the lead of Washington State and San Bernardino County may be their best shot at escaping debt peonage to their mortgage lenders.

Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are http://WebofDebt.com and http://EllenBrown.com.

Ellen Brown is a frequent contributor to Global Research.  Global Research Articles by Ellen Brown

Politics / Legislation

Rules Chairman Dreier announces retirement after 16 House terms

By Pete Kasperowicz – 02/29/12 10:13 AM ET

http://thehill.com/blogs/floor-action/house/213273-rep-dreier-announces-retirement-on-house-floor

House votes to overturn Supreme Court decision on eminent domain

By Pete Kasperowicz – 02/28/12 05:19 PM ET

$744,000 Buys Cooperative Guantanamo Captives a New Soccer Field

http://www.nationofchange.org/744000-buys-cooperative-guantanamo-captives-new-soccer-field-1330536310

AIPAC Undermines Democracy at Home and in the Middle East

http://www.nationofchange.org/aipac-undermines-democracy-home-and-middle-east-1330533329

Goodbye, First Amendment: ‘Trespass Bill’ will make protest illegal

http://rt.com/usa/news/348-act-tresspass-buildings-437/

Barack Obama Waives Rule Allowing Indefinite Military Detention Of Americans

http://www.huffingtonpost.com/2012/02/28/indefinite-military-deten_n_1308129.html

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Napolitano defends U.S. drug war in face of legalization debate

http://www.reuters.com/article/2012/02/27/us-mexico-drugs-idUSTRE81Q2CA20120227

Justice on the High Seas

The Supreme Court says corporations have a right to free speech. But can they get away with murder?

http://www.slate.com/articles/news_and_politics/supreme_court_dispatches/2012/02/the_supreme_court_considers_whether_royal_dutch_shell_is_immune_from_liability_for_human_rights_abuses_because_it_is_a_corporation_.html

NDAA Nullification Passes Virginia Senate by a Veto-Proof 39-1 Vote

http://tenthamendmentcenter.com/2012/02/28/ndaa-nullification-passes-virginia-senate-by-a-veto-proof-39-1-vote/

Economy

US deficit a serious threat, says IIF

http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/business/27-Feb-2012/us-deficit-a-serious-threat-says-iif

http://www.democracynow.org/embed/story/2011/8/5/new_expos_tracks_alec_private_prison

Worried Dems pressing Obama on gas prices

By Alexander Bolton – 02/28/12 09:45 PM ET

Clinton: No timeline yet for new Keystone pipeline decision

By Ben Geman – 02/28/12 03:54 PM ET

Banks post most profitable year since 2006

By Vicki Needham – 02/28/12 04:34 PM ET

Bernanke warns lawmakers nation headed for ‘massive fiscal cliff’

By Peter Schroeder – 02/29/12 01:26 PM ET