You may have heard, there is big buzz going around this month about an investment being pitch by a private mortgage company for municipalities to use eminent domain to buy underwater mortgages. The deal they are pitching is to have the government come in and seize mortgages on properties where the homeowner is current on the payments, and that property is underwater.
The proposal is that the county use eminent domain to buy underwater mortgages. The mortgage company, working with the municipality(in this case, San Bernardino County) would then negotiate new mortgages with the homeowners that they could afford. If the proposal worked as planned, the county would get relief from the foreclosure crisis, the mortgage company would make a profit, and the idea would spread to other counties and towns.
The investor is hedge fund Waterfall Asset-Management, and they would step up as the potential investor in the proposal.
What is odd to me, is that most of the controversy between those who support and those who oppose the proposal, is that the controversy is all centered around the effect, and not the principle. By that, I mean supporters are looking for a way to justify the action, and not looking at what it might open the door to(then again, I think we are far past the days of opening the door to “re-interpret”/change the constitution…), but this proposal would, in my opinion, take government control to an even higher level. Supporters are claiming that it would be constitutional because a “fair price” would not be hard to justify, and there is a public benefit, which they claim is the point of eminent domain. With profits to the investor being talked about to be in the 15%-30% range, I find it hard to believe that could be contstrued as “fair price.” Then again, the banks did just simply print the money by an accounting entry..
I’ll be honest, I had never heard of eminent domain until I studied for my real estate license several years ago. When I first heard of eminent domain, I thought the idea was completely ridiculous. I don’t care what the reason is and how great it helps the community, I don’t think there is ever a reason the government should come in and say that they are reclaiming possession of my property because it benefits the public. To me, that pretty much goes against everything that is supposed to be part of being an American. Look, if my front yard every becomes the battlefield of a war I believe in, I will gladly volunteer the use of my property to protect my neighbors. The government shouldn’t have the right to force that. Of course, since we pay property taxes and the government gets priority over all other liens for unpaid property taxes, we really never OWN property at all, but simply lease it from the government.
But let’s face it, the banks have been crooked and played a large part in creating the mess we are now in. Banks are the biggest beneficiaries of the debt system that the global economy they have created(specifically central banks).
Opponents are saying that the proposal is unconstitutional and will harm housing. They also say that returns of 15 to 30% are ridiculous and this goes against the fair price factor of eminent domain.
So my point is this, two wrongs don’t make a right. The system is screwed up. The Fiat dollar is screwed up. Repealing the Glass-Steagall act in the late 90’s which allowed deposit banks to act as an investment banks is screwed up. Bailing out the big insurance companies and banks with tax payer dollars was screwed up.
In a world of creditism, NOT capitalism, it is hard for one to be surprised by much these days that the government or big $ does. After all, they’re all in bed with each other.
So how does this relate to real estate investing investing? Well, the local investor, which greatly benefits the community, is pretty much screwed here. Great opportunities for his investments are robbed by a huge firm which comes in and politically/effortlessly reaps huge returns and profits.
Regardless of what happens here, whether it happens in San Bernardino or not, and whether it spreads to other parts of the country or not – what is important is that, if you want to be wealthy, you mind our own business and increase your financial education. By this I mean, don’t fight the system, but use your knowledge to thrive in spite of the corruption/economy.
Regardless of what the government does, regardless of what Wall Street does, regardless of what your neighbor does, you have a choice. You can increase your financial education and stock up on assets while they are affordable and easy to cash flow. Big hedge funds can’t take all of the deals, and the government offers huge incentives for you to help them provide safe, affordable housing in the marketplace.
If you are interested in investing in real estate or would like more information on how to get started, please check out our site. If you are finding yourself in a market where it is hard to find deals that cash flow, you might considering investing in Arizona.
Written by: Joshua Gayman
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Joshua Gayman is a full time Realtor and Real Estate Investor. He has closed over 125 deals since 2009 and is an expert in the Arizona Real Estate Investment market. Joshua provides coaching and investing options for clients around the world.
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