California Cities Plan to Seize Homes With Troubled Mortgages
Several California cities have found a creative way to fix the mortgage mess … they’ll condemn your house, crashing its value so you can get a new mortgage at a better rate. But, is that legal?
Judge Andrew Napolitano shared his legal opinion on the matter this morning on Fox and Friends. He explained the legal issue, saying, “When you condemn something, you pay the owner of it the fair market value of it. So, they would have to come in and let’s say you had a house worth $100,000, but you had a $125,000 mortgage
on it because the value of the house went down since you bought it, the municipality would have to come up with that $100,000 to pay the bank. Where are they going to get that cash? And then after they do that, they have to get an investor to pay them the $100,000 and the investor then has the mortgage, so this sounds better than it is.”
Napolitano doesn’t think the government has the money for this type of bailout.
He explained, “[The town] would have to come up with enough cash to pay off the underlying loan and then they'd have to find someone else who is willing to lend that money, even though the value of the house is not going to go up.”
“This is just a political suggestion to make the office sound like they want to help people out,” he concluded. “Bottom line is they have to come up with a lot of cash, and I don’t think they can do it.”