Don’t Buy Investor-Government Scheme

by Debra J. Saunders
Town Hall

There are some ideas so convoluted that only an expert (or wannabe expert) could love them.
For example: collateralized debt obligations, which seemed like a good idea until the mortgage meltdown swamped the U.S. economy.
Into this hallowed territory comes a new instrument, playing its siren song.
San Francisco startup Mortgage Resolution Partners has come up with the brilliant idea of getting local governments to use the power of eminent domain to seize underwater mortgages and pay the mortgage holders something less than the market value of the home. That allows the homeowner to get a new, lower-balance mortgage that better reflects the home’s worth and generates enough cash to allow the local government and Mortgage Resolution Partners to benefit.
The startup is trying to sell the scheme as a win-win for practically everyone harmed by the housing slump.
Underwater homeowners will enjoy lower mortgage payments. (Caveat emptor: Mortgage Resolution Partners doesn’t want any mortgages in default.)

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