Pomona Will Hear Proposal on Eminent Domain

Industry Update: On May 12, the Daily Bulletin published an article titled Pomona to Hear Eminent Domain Proposal.

Pomona to hear eminent domain proposal

POMONA -- A San Francisco-based firm that has proposed using eminent domain in San Bernardino County as a means to address mortgage foreclosures will be advising the city on programs and services residents could use to deal with so-called underwater mortgages.

Among the services Mortgage Resolution Partners would provide under the agreement the City Council approved Monday is identifying and obtaining proposals from institutions that can lend funds to the city for restructuring or refinancing programs; providing legal counsel and research to assess and implement assistance and mortgage acquisition programs; and creating criteria to be used in identifying mortgages that might benefit from relief programs, according to a city staff report.

The agreement is for one year with automatic annual renewals unless those are cancelled by the city or firm, the staff report said.

Some council members expect eminent domain will be part of the options the firm will present and is a tool worth investigating, they said.

Councilwoman Paula Lantz said Friday she hopes to see the firm return with options and strategies that will help Pomona residents stay in their homes rather than facing foreclosure.

"I don't know that anyone is ever comfortable with eminent domain but it is a tool and it may be a responsible way of maintaining neighborhoods," Lantz said.

Pomona has a large number of residents who have faced foreclosure, and this is a concept that would have useful four years ago when weeds were growing in front of vacant foreclosed houses and debris was accumulating in the yards, she said.

At the time the city ran into obstacles as it tried to obtain the cooperation of banks to deal such properties, Lantz said.

Four years later there is still a need for options because although there are some ways of dealing underwater mortgages some homeowners don't qualify for those programs and can't work out solutions with their mortgage institution, Lantz said.

Last year, Mortgage Resolution Partners went before a special agency created by San Bernardino County and the cities of Ontario and Fontana. The firm proposed using eminent domain as a means to address the local foreclosure crisis in those communities.

Generally government has used eminent domain as a means to acquire private property at fair market value through court orders to carry out redevelopment or infrastructure improvements.

Under the firm's concept a local government could use eminent domain to take over mortgage notes that have been bundled into private label mortgage backed securities held by investors.

Mortgage Resolution Partners have contended that if a local government owned the mortgage notes instead of investors, a homeowner would have better odds of being able to modify loan terms and lower monthly payments.

The modified loans would then be sold to investors and the money from those sales would be used to pay the investors who provided funding for the eminent domain process.

Mortgage Resolution Partners would receive a flat fee for each loan taken over.

The concept ran into objections from interests such as the real estate industry which said using the plan was not only an illegal use of eminent domain but would freeze lending activity in areas where government declared the authority to seize mortgage notes.

San Bernardino County spokesman David Wert said the special agency created by the county failed to hear from people with a background in areas such as real estate, housing or banking that supported the concept.

Those who spoke on the concept opposed the idea.

"All of them said it would be disastrous," Wert said.

If another concept is presented and has support, the special agency "will take a serious look" at it, he said.

Under Pomona's agreement if city leaders chose to pursue any options presented by Mortgage Resolution Partners the proposal will go through a separate approval process, said Mark Lazzaretto, Pomona's community development director.

Councilman John Nolte said should the City Council decide to pursue the use of eminent domain home owners identified who would benefit from the program would have the option to pass on the program or participate.

The foreclosure crisis has had an effect on communities creating stress in homeowners, displacing families and destabilizing neighborhoods.

"All that affects the quality of life in our neighborhoods," Nolte said. "If we can stabilize communities that would be a huge benefit to Pomona."

Nolte said he expects to hear from people opposing eminent domain, including those who might have engaged in predatory lending practices, and he is prepared to listen to their ideas and concerns.

However, if a concept presented by Mortgage Resolution Partners is good for city residents then it should be pursued, he said.

"I'm not going to be bullied," Nolte said.

Councilwoman Cristina Carrizosa said whatever ideas the firm presents she expects them to be presented in a manner that is clear to the City Council and to residents who might benefit.

"I expect them to present their information in a detailed and very direct manner," Carrizosa said.

It should be made very clear that any program will involve Mortgage Resolution Partners and individual homeowners not the city, she said.

"That is why I asked for an indemnity clause," Carrizosa said.

The clause requires the firm "to indemnify and defend the city against any legal claim arising from services performed by" Mortgage Resolution Partners, according to the city staff report.

To view the online article, please click here.

About Safeguard 
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders,  and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.

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