Never let it be said that a little thing like, say, blatant unconstitutionality might stand in the way of the Chicago City Council’s pursuing its objectives:
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.
To his credit Chicago Mayor Rahm Emanuel opposes the plan:
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.”
I wish he had stated that a little more clearly. What’s the referent of “right instrument”? Does he mean eminent domain or the city’s power of eminent domain as opposed to the federal government’s?
More important than it not being the right instrument is that it’s a misuse of eminent domain whether it’s done by the city or the federal government. If it does not fall under the rubric of an unjust taking, what does?
I suspect by “right instrument” he means the Treasury/Fed, which are empowered to make banks do pretty much anything they want.
After Kelo, who’s to say what would prevent government from taking private property for whatever reason?
IIRC there was a “California firm” shopping around a similar proposal in California which was rejected a few months ago because on closer examination the “California firm” was cherry-picking which underwater mortgages to rescue, namely those in which monthly payments were regularly being made and could be expected to continue to be regularly made. It seemed like it was helping those who didn’t need help.
The Illinois legal problem will be Article I, Section 15 of the state Constitution:
“Private property shall not be taken or damaged for public
use without just compensation as provided by law. Such
compensation shall be determined by a jury as provided by
law.”
Is there a “public use” under state law. (There is under federal law according to Kelo, but historically state courts have imposed some restrictions on public use before Kelo was decided)
Is there going to be a jury trial to determine just compensation? (Probably a deal breaker for a systematic approach)
Is there legislative authority for such a taking? (I’m not positive, but I think eminent domain is a state power that must be distributed to local government; Chicago may not have statutory authority even as a home rule unit)
Just some cursory thoughts on what the issues might be.
Pretty much this….
Be sure to vote everyone…it will do oh so much good. Oh, wait people have been voting all along and look where we are now. Hmmmm…..I’m sure Andy and Ice will have cute answers.