Remarks By Mayor Emanuel Regarding Eminent Domain

In a recent article, the Chicago Tribune discusses remarks made by Mayor Rahm Emanuel regarding eminent domain as it was being discussed in City Council.

Emanuel: Eminent domain not 'the right instrument' to address underwater mortgages
Actor John Cusack on hand to support a friend pushing for use of eminent domain

Mayor Rahm Emanuel said Tuesday that he does not support the idea of using eminent domain to seize underwater homes and then refinance those mortgages to more affordable terms.

He made the statement as Chicago aldermen were in a committee hearing trying to understand the proposal floated by a California firm.

"I don't think it's the right way to address the problem," Emanuel told reporters when asked about the idea during an unrelated news conference. "I think there are other places to do it. I don't think it's the power of the city to do, to deal with the housing issue. We have a national issue. I think we have to address the issue. I just don't think that's the right instrument."

The concept of using eminent domain to help solve the nation's housing crisis surfaced in San Bernardino County, Calif., and has since been taken up for discussion in several municipalities. Chicago Ald. Edward Burke, 14th, called for a hearing of the Joint Committee on Finance and the Committee on Housing and Real Estate to consider whether Chicago should delve deeper into the idea

Last week, the Federal Housing Finance Agency, the conservator of Fannie Mae and Freddie Mac, said it had "significant concerns" about any use of eminent domain to help underwater homeowners.

Despite assurances from Mortgage Resolution Partners, the investment company behind the proposal, that any eminent domain proposal could be tailored to the municipality, aldermen at Tuesday's hearing voiced several concerns about whether this was the best way to tackle the city's ongoing housing crisis.

"We can't let the frustration get the better of us," said Ald. Bob Fioretti.

Under the proposal, Chicago would use its power of eminent domain to seize the mortgages of underwater homeowners who are current on their loans and, with Mortgage Resolution Partners' help and investor funds, acquire the loans at a discount.

The mortgage would be written down to close to fair market value, and the homeowner would be offered a refinancing at a slightly higher amount than the loan was purchased for; the new mortgage would contain lower payments, and the homeowner would retain at least 5 percent equity in their home. Mortgage Resolution Partners would receive $4,500 for every mortgage resolved, and the city would only have administrative costs.

Executives of the firm said they would provide Chicago with a list of homeowners eligible for such a program. "We're talking about 16,000 to 20,000 families in Chicago that can benefit from this program," said Steven Gluckstern, a co-funder of Mortgage Resolution Partners, San Francisco.

According to the Woodstock Institute, one out of every four homes in Cook County is underwater, meaning the homeowner owes more on the loan than the property is worth. In Chicago, 100,000 borrowers are underwater, including 40 percent of homes in primarily African-American neighborhoods and 38 percent in primarily Latino neighborhoods. Twelve percent of mortgages in primarily white communities are underwater.

"The concept doesn't solve the citywide foreclosure program," Brian Bernardoni, senior director of governmental affairs and public policy for the Chicago Association of Realtors told aldermen.

The hearing did attract a little star power.

Actor John Cusack attended, telling the Tribune he was there to support a friend, Kevin McCabe, of Community Partnerships, which McCabe identified as a "independent ally" of Mortgage Resolution Partners.

Cusack met McCabe, a former New York City Council aide, while he was filming "City Hall."

However, by the time McCabe testified, three hours into the hearing, Cusack had donned a baseball cap and slipped out.

After the hearing, Burke deflected questions whether discussion about the idea was dead as a result of the mayor's comments. "This is an informational hearing to be made aware of what is happening not only in California but around the country," Burke responded.

 

To view the online article, please click here.

 

About Safeguard
Safeguard Properties is the largest privately held field services company in the country. Located in Cleveland, Ohio and founded in 1990 by Robert Klein, Safeguard has grown from a regional preservation company with a few employees  and a handful of contractors performing services in the Midwest, to a national company with nearly 1,000 employees. Safeguard is supported by a nationwide network of subcontractors able to perform any requested superintendence, preservation, and maintenance functions, as well as numerous ancillary services in the U.S., the Virgin Islands, and Puerto Rico.

OneCommunity

Stay informed about the latest industry news and events with our All Client Alert email newsfeed.

Ask The CEO

Got a question about Safeguard in the industry? Let us know in our Ask the CEO online Q&A section.