Eminent Domain and the Housing Crisis
A plan to address the housing crisis by having local governments use their power of eminent domain is garnering lots of attention from coast to coast, and one of its architects is Washington and Lee alumnus John Vlahoplus.
A 1983 W&L graduate and Rhodes Scholar, John is a founder and chief strategy officer of Mortgage Resolution Partners L.L.C., a San Francisco-based firm that promotes Community Action to Restore Equity and Stability (CARES™).
Here’s how Reuters described the plan in a story in June:
A mortgage firm backed by a number of prominent West Coast financiers is pushing local politicians in California and a handful of other states hardest hit by the housing crisis to use eminent domain to restructure mortgages that borrowers owe more money on than their homes are actually worth.
San Francisco-based Mortgage Resolution Partners, in a presentation reviewed by Reuters, says condemning so-called underwater mortgages and taking them out of the hands of private lenders and bondholders is “the only practical way to modify mortgages on a large enough scale to solve the housing crisis.”
Under the ambitious proposal, Mortgage Resolution Partners would work with local governments to find institutional investors willing to provide tens of billions of dollars to finance the condemnation process to avoid using taxpayer dollars to acquire millions of distressed mortgages.
A recent Huffington Post story reported that San Bernardino County in California, where as many as half of all homeowners are underwater on their mortgages, is giving careful consideration to the plan “under which Mortgage Resolution Partners fund would front money to allow local governments to purchase underwater mortgages at market value in exchange for a fixed fee of $4,500 per loan. Homeowners could then refinance at the lower value, potentially saving hundreds of thousands of dollars each month in mortgage payments — while also injecting a shot of adrenaline into moribund local economies.”
In that Huffington Post piece, John Vlahoplus said: “Unnecessary foreclosures are crushing the revenue of these local communities. It is important to realize how frustrated and hurt economically they are.”
The plan has its share of critics as well as proponents, one of whom happens to be actor John Cusack. On a recent HuffPost Live with Ariana Huffington, Cusack joined John Vlahoplus and others to discuss the proposal. In that forum, John Vlahoplus noted that “the cities are at the point where they need to take action themselves. They’re tired of waiting for Washington. . . . People have been beaten up, they’re fed up, they’re tired, and this is an opportunity to work directly in their own cities.”
You can get a good sense of the plan by watching the HuffPost Live video.
After receiving a law degree at Harvard and a D. Phil. in jurisprudence from Oxford, John was an attorney at Sullivan & Cromwell in New York City and has since worked in new business development for the Zurich Financial Services Group, BNP Paribas and Credit Suisse.