San Bernardino County to seize mortgages under eminent domain rules. Episode #232

Hello. Welcome to Todd Miller TV. I wanna talk today about what’s going on in San Bernardino County California and something that the local Government there is decided to potentially do. They’ve actually taken steps to do it. They formed a committee and they’re being advised to sort of to do this by some other parties. And there’s a huge debate going how this is probably the worst thing they could do, it’s probably a terrible decision. They’re doing it obviously in their self interest. And we’re gonna go through the details of it. Explain it and why I think it’s really bad idea. Okay so, actually what it involves is something called Imminent Domain. And Imminent Domain is the ability for a Government to basically seize an asset of some kind for the public good. So for example, in public domain they can take your because they need to build a park there. Or they wanna build a freeway. They can physically come in and say “We think your/it’s worth this or we’re gonna give you this much money, move out.” And they do this all the time, there’s a lot of debate when they do it but usually they win, they have the legal right for public good. Okay? So what they’re doing this time is for the public good but they’re gonna go ahead and throw some banks out of the mortgage or actually gonna seize the mortgage based on the public good. This is how they’re gonna do it, okay? So, Imagine a person a bunch a years ago, bought a house for $300,000. That was the market value. So that’s what the mortgage was based on. And they have a monthly payment of $2,000 a month. Okay? And current value’s only $100,000. Well what would a lot of people have done is they’ve gone and got Loan Mods, or Refi’s, or they’ve tried to sort of work this out. But it some cases they haven’t. So what the government has decided is they want to prevent foreclosure so what they’re gonna do, and they’re saying “Well these people probably gonna get foreclosed on.” And not only that, they’re paying $2,000 every month but someone else who just bought the house is making a much lower payment. So they’re taking all this money, that could be spent in a local economy and their throwing it at the bank. So what we’re gonna do is we’re gonna force a refinance here. So one of the things is they have to be current on their payments. Okay? So what they’re gonna do is they’re gonna go in and they’re gonna provide a new mortgage. So they’re gonna go and say “Hey, the house is probably only worth $100,000, we’re gonna issue a mortgage for $100,000, we’re gonna send $100,000 to the bank and say “The debt is relieved, this is all it’s worth, this is what you’re getting. So basically we’re gonna force the bank to take a $200,000 loss, they’re gonna put new financing in place, and tell the new/the owners of the house; they’re gonna say “Hey guess what, we just did you a great favor. Since your house is only worth $100,000, you only owe $100,000, and you’ve got this now new mortgage payment of $700. And what their logic is, they prevented a foreclosure, ’cause the house won’t get foreclosed. and instead of paying $2,00 a month, they’re only paying $700 a month. So what this allows is $1,300 more a month, that they’re gonna hope will get spent in their market. So basically what their whole plan is, to divert money going outside their market to the bank, and basically screw the bank, and then take $1,300 more a month to be spent in the market place. Okay. So that’s the/just what they’re doing. They’ve been told this is all legal. And who knows, this is obviously/this will ge litigated. But there are some problems with this. I’m gonna go through the problems first. So, you might need a home owner if you can “Hey, this is a great idea.”
Okay? But there are some problems. First problem is Who says the house is only worth $100,000? I mean, they’re obviously gonna/or maybe get an appraisal or something like that. So there’s gonna be an issue in determining actual value. ‘Cause this is someones getting a windfall here. Okay? Someone’s gonna/maybe it’s the home owner getting out of $200,000 worth of debt. That’s gonna be a problem. The second problem is, it’s gonna be an economic problem in the market place. Here’s the problem, if they’re doing this in a market, and you’re a lender, would you loan in this market? I mean if you were originating alone in San Bernardino County and this policy showed up, why would you originate alone? What would happen if the values drop short5 term and the government just said “Forget it! We’re gonna throw you a loan out and give you/pay you $0.30 on the dollar and throw you out of the deal.” You’re just out. Remember these people are current are their payments. The banks is getting $2,000 a month, and they’re just gonna throw them out of the deal? The bank’s not gonna have to write off all that value and take the loss. So what do you think is gonna happen? 1 of 2 things; either 1, banks will stop lensing in that market place, and if they do that, it’s become a cash market and all the values are gonna drop. Okay? So that means current people who have mortgages, their values are gonna drop, they’re gonna be even more under water; the 2nd problem is, that anytime you have a cash market like that, and values drop, people who own houses are pretty clear now are gonna get hurt. Because say somebody just bought a house for $100,000 and now the lending stops in there, values continue to drop, now houses are worth even less, the people who actually pay cash for houses are gonna get hurt. So you’re gonna punish/this is not a freebie. There are no freebies in life. There’s an old saying “There’s no such thing as a free lunch.” Well this isn’t gonna be a free lunch. It’s gonna get paid for somehow. Okay? Another problem is, this is actually gonna hurt banks, and some banks and lenders will go away and interest rates are gonna go up. It’s gonna happen. Okay? Another thing, the bank will find a way to pass on the loss to you. So you maybe a/you have car loans and other things at this bank, adjustable rate loans or things like that, and because they’re taking a loss in California of $200,00 being forced to by the government. When the home owner is current on the payment, they’re gonna say “Fine! Next month when we adjust the rates on Auto Loans, they’re gonna go up .05%” So you’re gonna start, you’re gonna pay for it. You’re either gonna pay/ You’re either gonna get paid less money on your savings which is probably very little right now. You’re gonna pay more for consumer and other debt. The bank is gonna find a way to make you the consumer pay for what the government is doing in San Bernardino County. Another problem is the bank might come out to the borrower and say “Hey Mr. Borrower, you owe us the difference. You got a loan for $300,000, we only got $100,000 you still owe us $200,000.” So imagine this, that the government gets some judgment against you, and everytime you tried to get a tax return, they have a lean on you, personal lean; they get it maybe from the I.R.S. or somebody else or, they go to your employer and go “This person owes us money.” We never foreclosed on the house so we can take an action against them; and the action is, that they put 25% against all your earnings and force you to pay this back. That could happen. The other thing is, they could go after your credit. Now remember, some of these people are current on their payments even though they’re upside down because they want their credit to be good. So what will happen is the bank will go in and will go “they stop making the mortgage payment to us, we don’t recognize the $100,000 as full re-payment so they’ll start hammering your credit.” And you know it’s very difficult to dispute that because they’re gonna come back and say “Wait, we have a thing saying you’re supposed to pay your mortgage you’re not paying it.” So, this all around, this is a bad idea. I’m gonna put a link to the actual/to some of the articles underneath this blog post. You’re gonna have to go to ’cause I’m not gonna/it probably won’t work if I put the link in YouTube. For some articles. But this is a new development. The big problem with this is you’re saying “Yeah but Todd, this is San Bernardino County, you’re in Vegas, I mean how could this potentially affect us in Las Vegas or another parts of the country?” And this is how, usually, when a municipality does something, other ones adopt it. They sort orf “Hey, they’re doing that let’s do that too. ‘Cause if they’re benefiting from it maybe, the local government is benefiting maybe we’ll benefit from it too.” So if this comes over to Vegas, this is gonna be terrible! ‘Cause all the same reasons, Loans would stop. Prices would drop. It would just be terrible. Terrible policy! Anytime the government gets involved, it’s usually not good. We saw that a little bit with AB-284 which potentially is gonna cause problems here. Worst more so than it is now. The government’s stepping in here to interfere with the free market and the mortgage lending is gonna be very bad for San Bernardino County. If you live in a county, that last thing you want is to let your government start taking over things. ‘Cause next thing, what’s stops them from just taking your house and paying you off and say ” We’re gonna throw you out of the house because we’re gonna put somebody else in it whatever.” So anyway, I think this is a terrible idea, it’s probably one of the worst ones I’ve heard yet for a government solution to foreclosure. And here’s the biggest thing of all, they’re not preventing a foreclosure, because these people are current on their payments. People who are behind on their payments who stopped paying, they’re not gonna go in and do anything to those people. They don’t want those houses to be foreclosed. This really doesn’t prevent foreclosures, this is just a way for them to put in a new bank or a new private lender in there to have those payments diverted to them. It’s government interference, I think it’s a terrible idea. And I thought you should be aware of what’s going on here. Anyway, that is my update for today and I hope to see you on another video. Thanks!
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