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- Title
Redemption and Return on Investment: Using Eminent Domain in the Underwater Mortgage Fight.
- Authors
Harris, Alec
- Abstract
Recently, proponents of a plan to refinance underwater mortgages using eminent domain published their argument in the Harvard Law & Policy Review. The plan mixes populist perspective with capitalistic problem solving: It offers both salvation for the disproportionately poor and minority communities hit hard during the financial crash and profits for funders of the operation. The plan is quickly becoming more than just a thought experiment: Richmond, California has formally adopted (but not yet executed) the plan, and ten other cities are currently considering it. This Article seeks to provide additional legal perspective and financial insight to the ensuing debate. Legally and culturally, the plan inverts the nasty legal heritage of eminent domain for economic redevelopment and doles a touch of symbolic retribution to Wall Street. Financially, proponents insist that the plan is not only profitable for funders, but also a fair deal for security holders. Using a simple financial model and information about the kinds of loans targeted, this Article charts the profitability of the plan and concludes that it could indeed offer substantial returns on investment without cheating Wall Street. However, pressure from banks and the federal government may keep the plan on the shelf.
- Subjects
RICHMOND (Calif.); UNITED States; REDEMPTION (Law); RATE of return; EMINENT domain; MORTGAGE-backed securities; MORTGAGE Resolution Partners (Company); MORTGAGE loans
- Publication
Harvard Law & Policy Review, 2014, Vol 8, Issue 2, p437
- ISSN
1935-2077
- Publication type
Article