By Tommy A. Purvis
San Bernardino County’s sketchy plan to help homeowners will involve seizing mortgage loans using eminent domain
A trial run of the use of eminent domain law in the Inland Empire will soon allow at least two municipalities to offer a worn lifeline to underwater homeowners. For the first time a controversial program will allow government agencies to condemn and seize a loan instead of the traditional blighted property. The new program comes after a hard sale from Bay Area firm Mortgage Resolution Partners to San Bernardino County Chief Executive Officer Gregory Devereaux. The back room proposal led to a swift series of meetings and votes to form a Joint Powers Authority (JPA) between the county and the cities of Ontario and Fontana. The Hesperia City Council voted the resolution down.
The bold move was spurred by a study from real estate website Zillow that found more than half of the homeowners—at least 150,000 single-family home residential properties—with a mortgage in San Bernardino County had negative equity at the end of last quarter. A newly found urgency to help homeowners drowning in an ocean of debt was led by a Fontana City Council resolution early last month to “take actions and make decisions to assist in preserving home ownership and occupancy for homeowners with negative equity . . . to avoid the negative impacts of underwater loans and further foreclosures and enhance the economic vitality and the health of these respective communities.”
In an effort to display a hint of pragmatism Fontana Mayor Acquanetta Warren told the city council to move forward with caution as details of the newly formed “program” were put into place.
In order to break mortgage contracts the San Francisco-based venture capitalist firm will use the legally upheld eminent domain condemnation maneuver to separate individual mortgages sold in bundles to private investors. Two investment banks—Evercore Partners, Inc. and Westwood Capital—are floating the big government racket to bond fund mangers, hedge funds and insurers to raise the necessary cash for the condemnation process. The municipality will then take title to the seized loan and pay the original mortgage owner the fair market value for the real estate at a loss with money from the investors. The homeowner in need of relief is promised a fresh loan with a restructured lower monthly payment through the services of Mortgage Resolution Partners.
The firm will receive a negotiated fee for each modification. Loans that are restructured will go back into a new bundle to be sold to hedge and pension funds to pay back the investors.
The shell game scheme uses the same players that contributed to the subprime real estate debacle. Worse for residents in the core of Fontana is the JPA between the city council and the county Board of Supervisors which is similar to the template that previously allowed the Fontana Redevelopment Agency to raid funds for low income housing. In 2007 the Fourth District Court of Appeals found that Fontana had failed to meet affordable housing obligations for over 20 years. But the court ruling that ordered the Fontana Redevelopment Agency to return $53 million to a low-income housing fund was unable to stop the stop the cash flow to developers’ pet projects.
Instead, City Manager Ken Hunt continued the “Outside/In” investment strategy to channel taxpayer cash for blighted communities to the master planned communities around Heritage and Sierra Lakes in the north side of the city’s increasingly gentrified neighborhoods. The Fontana Redevelopment Agency wrote a check to Rock Honda for $950,0000 in July of 2010 to entice the dealer to move from Sierra to the expanding auto mall off the 210. Another $450,000 was spent for a loop road near the 10-acre property.
It was not until Gov. Jerry Brown defunded redevelopment agencies statewide to help balance the budget shortly after taking office that the Fontana Redevelopment Agency was left to scramble for the $33 million it had stockpiled to build the I-15/Duncan Canyon Interchange.
Developers that gave campaign contributions to Warren—the first female and African American to serve as mayor of Fontana—need the interchange to build luxury homes and warehouses, among other things. Former Fontana Mayor and current Yucca Valley City Manager Mark Nuaimi appointed Warren to the city council. One of her duties had been to serve as an ombudsman to the black community that was forced out north of Baseline for future developments. Multiple campaign mailers disguised as correspondence from the Democratic Party sent to residents in the core of the city falsely identified Warren as a progressive candidate in the 2010 election.
An underwater homeowner in Fontana that reads the fine print of the contract drawn up by Mortgage Resolution Partners and the newly formed JPA is sure to find that the devil is in the details.