Lt. Gov. Newsom threatens mortgage eminent domain threateners

Sept. 10, 2012

By Wayne Lusvardi

You read the headline right.  California Lt. Governor Gavin Newsom is threatening those who “threaten” to “boycott” any entity of government in California that wants to use eminent domain to seize “underwater” mortgages.  Huh?

Newsom is threatening to call in the U.S. Department of Justice against any banks, Wall Street investment firms, bond rating agencies or others who may consider “boycotting” any county or joint powers authority that wants to use eminent domain to acquire mortgages that exceed the market value of homes.

According to Reuters, Newsom sent a letter to U.S. Attorney General Eric Holder seeking the investigation and prosecution of any attempts by Wall Street investors or government agencies to “boycott” local California governments seeking to use eminent domain to seize mortgages.

The Lt. Governor’s website had a summary of the letter as follows:

09-10-2012 

Lt. Gov. Gavin Newsom Calls Upon Attorney General Eric Holder to Review Threats of Retaliatory Actions by Mortgage Industry.

September 10, 2012

Today Lt. Gov. Gavin Newsom called on Attorney General Eric Holder and members of the Antitrust Division of the Attorney General’s Office to review the actions of some members of the mortgage industry, as well as federal agencies, who have coercively urged local governments to reject consideration of any proposal that would exercise the powers constitutionally granted local governments to use eminent domain to help stem the mortgage crisis.

“Communities have been ravaged by the housing crisis and now members financial sector, who has had long enough to fix the problem, are threatening to redline communities in California that are looking for unique solutions that may save thousands of families their homes. I am asking the Attorney General to investigate and protect homeowners and their communities that simply want to find their way out of this mortgage crisis.”

The full letter can be viewed by clicking here.

On its face, this letter seems premature. No court has thus far even validated that seizing mortgages is a legitimate use of the “public purpose” provision of the eminent domain law.  Nor has a court upheld the use of eminent domain by local governments to “cherry pick” only performing loans out of a lender’s loan portfolio and leave those loans that are in arrears or in default to the lender.  Neither has there been any legal ruling on the legitimacy of homeowners “applying” for eminent domain, as recently proposed in San Bernardino County.

And it is totally unclear how any actions that banks, Wall Street investment firms or bond rating agencies take in reaction to any use of eminent domain to seize mortgages is an “antitrust” violation.

“The Washington, DC special interest groups needs to back off,” said Newsom. “We owe it to homeowners everywhere to see if the solutions being discussed in San Bernardino will work.”

Vocal opponents of the proposal include the Association of Mortgage Investors, a lobbying group in Washington, D.C., and the Inland Valley Association of Realtors.

California is now becoming a “bully” state.  Voters should take note before the November elections.

28 comments

Write a comment
  1. CalWatchdog
    CalWatchdog Author 10 September, 2012, 15:37

    Although he’s just a lt. gov. now, Newsom could become governor in two or six years. So this will discourage people from investing in California real estate, making our economy even worse.

    — John Seiler, Managing Editor

    Reply this comment
  2. Edward Steele, Chief Investigator
    Edward Steele, Chief Investigator 10 September, 2012, 16:18

    Newsome seems like a good man. Arcane antitrust violations are still important to watch for— good on ya Lt.!

    Reply this comment
  3. Wayne Lusvardi
    Wayne Lusvardi 10 September, 2012, 16:33

    I wonder what Lt. Governor Newsome is going to threaten buyers with who will disinvest in San Bernardino and look elsewhere for housing? I guess the next step will be to take housing choice away from people like they do in Europe. Choice is the central social value of a modern society (i.e., marital choice, school choice, divorce choice, choice of church or no religion, etc.). It is not a Progressive value to start taking choice away from people.

    Oh whoops! I forgot. Newsome wants to give the the “choice” of eminent domain.

    Reply this comment
  4. Rex the Wonder Dog!
    Rex the Wonder Dog! 10 September, 2012, 17:07

    NewDork has NO CHNACE of ever becoming gov, not with his “cheat with your best friends wife” backsground. He is a pretty boy who was gifted his SF Supervisor role by Slick Willie Brown, and became Mayor because of that Gift. As he found out recently, becoming gov will not be a gift. He got spanked once, and it will happen again.

    Reply this comment
  5. Rex the Wonder Dog!
    Rex the Wonder Dog! 10 September, 2012, 17:08

    Newsome seems like a good man.
    =

    Teddy, you and NewDork have similar values 😉

    Reply this comment
  6. Rex the Wonder Dog!
    Rex the Wonder Dog! 10 September, 2012, 17:08

    BTW, Justice won’t do JACK to Wall STreet. Wall Street OWNS Obama, and Obama runs justice.

    Reply this comment
  7. Paul
    Paul 10 September, 2012, 17:39

    People are moving from California because of people like Brown, Newsom, Boxer, Feinstein, Pelosi and so on. So why would anyone move here to live in the first place. The laws, regulations and taxes all suck and are getting worse under the current liberal administration or any liberal administration that’s been in power. The Californian citizen has been under attack from liberal democrats for over 20 years now. This is the reason California is BANKRUPT! Plain and simple………..

    Reply this comment
  8. us citizen
    us citizen 10 September, 2012, 18:35

    CA is the laughing stock of the US. Now you know one of the reasons why.

    Reply this comment
  9. Ted Steele, The Decider
    Ted Steele, The Decider 10 September, 2012, 18:57

    Wayner— You sound a bit more paranoid today.

    Poodle— Another famous prediction?? Newsome will NEVER be Gov??? LOL Soon it will come to pass that lo and behold, you are 0 for 11!

    The score— today: Poodle is still 0 for 9 ™ !

    God Bless Our Troops!!!!!!!!!!!!

    Reply this comment
  10. Rex the Wonder Dog!
    Rex the Wonder Dog! 10 September, 2012, 19:15

    10-0 baby 🙂

    11-0 on Nov 6!!!!!!!!!!!

    Reply this comment
  11. Bruce
    Bruce 10 September, 2012, 19:39

    Another voice in the wreck California front heard from. The people should wake up and FIRE POLITICANS like Newsome and Moonbeam Brown a twice failed governor and political hack

    Reply this comment
  12. larry 62
    larry 62 10 September, 2012, 19:55

    Kimberly was smart to get away from that creep!

    Reply this comment
  13. Ted Steele, The Decider
    Ted Steele, The Decider 10 September, 2012, 19:58

    True that Larry-o!

    0 for 9 ™ everywhere but in your skull!
    Want more archives???? hehhehehe

    Reply this comment
  14. Rex the Wonder Dog!
    Rex the Wonder Dog! 10 September, 2012, 20:29

    11-0 nov 6 baby 🙂

    Reply this comment
  15. Rex the Wonder Dog!
    Rex the Wonder Dog! 10 September, 2012, 22:25

    Teddy, why am I so smart, and you’re so dumb???? Why can I post on CP and you can’t 🙂

    Reply this comment
  16. Ulysses Uhaul
    Ulysses Uhaul 10 September, 2012, 22:38

    Most disturbing…..do you see the Calif mortgage and bond markets clog up……no free market. Will spread to autos, factoring, equity loans, equipment leasing, etc.

    Reply this comment
  17. Rex the Wonder Dog!
    Rex the Wonder Dog! 10 September, 2012, 23:10

    Teddy, now an expert on the “bond market”….LOL 😉

    Reply this comment
  18. Ulysses Uhaul
    Ulysses Uhaul 10 September, 2012, 23:18

    Poodle we are vastly above your pay grade-

    Reply this comment
  19. Ted Steele, The Decider
    Ted Steele, The Decider 11 September, 2012, 06:45

    U Haul– you remain the King!

    Zero remains 0 for 9 ™
    it bugs him!

    Reply this comment
  20. Wayne Lusvardi
    Wayne Lusvardi 11 September, 2012, 07:44

    Lt. Gov. Newsome won’t get away with bullying an eminent domain judge. And surely whatever gets approved in court on the first round will be appealed by either side.

    Can mortgages be condemned or can only the underwater portion of a loan? And if so this would be a logistic nightmare to condemn only the portion of a loan that exceeds a home’s market value.

    And what if the real estate market takes another dive? Or say that rampant inflation starts up that would provide homeowners with a rapid windfall while all other property owners in S.B. County are stuck paying off old mortgages for them. How would this work? This would violate State Constitution that forbids a gift of public funds. If those homeowners who participate in such a bailout are forbidden from any gain or appreciation in their home, what homeowner in their right mind would want to participate in this scheme?

    Can they be condemned by cherry picking the best ones and leaving the worst one? Under eminent domain law, you have to also value the lenders’ WHOLE loan portfolio, not each individual home or mortgage. That would involve thousands of mortgages in a loan pool.

    Can underwater homeowners “apply” for eminent domain? If so, the administrative cost for filing separate eminent domain cases for each underwater mortgage would be about $50,000 per case — totally economically infeasible.

    How are they going to get all the other property owners in S.B. County to approve a bond to pay off bad mortgages for those who have underwater mortgages?

    Even if underwater homeowners are allowed to apply for eminent domain, who is going to pay damages to the remainder of a lender’s portfolio as required by law?

    There are so many unanswered and complex legal questions involved that it is unlikely that the proposal to buy out bad mortgages using eminent domain would work without creating even worse problems.

    An eminent domain program for underwater mortgages may also create an even worse stigma on S.B. County real estate. Who would want to invest there knowing that a seller can now re-sell his home but a buyer would have to buy such a home and also pay a share of the county-wide cost of all the bad mortgages in the form of increased property taxes.

    The lenders, brokers, and property owners without underwater mortgages all have good reason to “threaten” lawsuits to protect their interests. There will be no “backing off” from that.

    Reply this comment
  21. Edward Steele, Chief Investigator
    Edward Steele, Chief Investigator 11 September, 2012, 08:55

    Wayner— How do you interpret the Lt.’s conduct as “bullying” a judge?

    Reply this comment
  22. Rex the Wonder Dog!
    Rex the Wonder Dog! 11 September, 2012, 09:31

    Teddy, NewDork is being a Bully-FACT, sort of like how WE bully you here 😉

    Reply this comment
  23. Wayne Lusvardi
    Wayne Lusvardi 11 September, 2012, 09:47

    Mr Steele
    When did you last beat your wife? Same question as you asked.

    Reply this comment
  24. Rex the Wonder Dog!
    Rex the Wonder Dog! 11 September, 2012, 10:01

    Wayne, you do not have to use the prefix “Mr.” when refering to Teddy or his gimmicks.

    Reply this comment
  25. Edward Steele, Chief Investigator
    Edward Steele, Chief Investigator 11 September, 2012, 10:35

    Wayenisimo!

    You still have failed to connect the bully dots amigo. These are merely 2 discreet branches of gov. engaging in the give and take of democracy. Exactly how is he “bullying” a judge? Or is that just hyperbole?

    Reply this comment
  26. SeeSaw
    SeeSaw 11 September, 2012, 12:12

    Eminent Domain should not be used in this manner. I’m all for helping underwater borrowers modify their mortgages, so that they can handle the payments. They are still responsible for the principal, unless they walk away. Newsome is smart, but wrong on this–he will probably be Governor in the future.

    Reply this comment
  27. Ulysses Uhaul
    Ulysses Uhaul 11 September, 2012, 12:58

    Mr. Ulysses sounds fine to me Poodle..where is Donkey and the Ragwus gang? We wore them down and out?

    Reply this comment
  28. Edward Steele, Chief Investigator
    Edward Steele, Chief Investigator 11 September, 2012, 13:18

    HEY SEE SAW !!!!!!!!!!!!!! Nice to see you out here!

    Reply this comment

Write a Comment

Your e-mail address will not be published.
Required fields are marked*



Related Articles

'Surviving California' Blog

My friend Bob Pace has a blog called “Surviving California.” Great name. I wish I’d thought of it. It makes

On Wisconsin! On to CA!

John Seiler: The best part about the turmoil in Wisconsin is that the government there is jammed up. AP reports:

Some crucial context on Brown’s new energy policy and AB 32

Gov. Jerry Brown’s decision to seek to extend the state of California’s push against global warming to 2030 with a