California Lt. Gov. Gavin Newsom believes a plan under consideration by… (Brian van der Brug / Los Angeles…)
One of California’s highest-ranking politicians, Lt. Gov. Gavin Newsom, has told an investor group to "back off" and allow San Bernardino County to explore a controversial plan that would employ its eminent domain powers to seize and restructure troubled mortgages.
The cities of Ontario and Fontana, in partnership with the county, are exploring using private funds to acquire mortgages that are "underwater" -- that is, where the homes wouldn't sell for enough money to pay off the loans. Under the proposed Homeownership Protection Program, the loans acquired by government authority would be restructured, lowering the amount owed, with the intent of helping the owner keep the home.
Newsom appears to be the highest-ranking California politician to speak out on the plan under consideration by the Southland communities. In an interview with The Times, he did not explicitly endorse the idea, although he said that releasing consumers from underwater mortgages would go far to help the state and national economies.
“We have got to be as bold as the problem is big,” Newsom said. Underwater homeowners are often "barely holding on and increasingly entering foreclosure.”
“This idea is bold. This idea is meaningful,” Newsom said.
Newsom told The Times that for more than a year, he has been familiar with the idea of using government power to condemn troubled mortgages and has been weighing its merits.
The plan was pitched to San Bernardino County officials by Mortgage Resolution Partners, a San Francisco firm. One of that company’s consultants, Peter Ragone, served as a spokesman for Newsom when the lieutenant governor was mayor of San Francisco.
Newsom, in his interview with The Times, said that he was "leaning in," but that "the devil is in the details" and that the plan needed a fair public hearing.
The influential Securities Industry and Financial Markets Assn. has called the plan potentially unconstitutional and has warned that it could be costly to future homeowners. Here is a link to some of the group's arguments in detail.
In related news, the cities of Berkeley and Chicago are reportedly also considering the eminent domain plan, as is Suffolk County in New York.
Drop in foreclosure sales is boosting Southland prices
June U.S. housing starts up 6.9% to highest level in four years
Number of California homes entering foreclosure falls to 2007 levels