For immediate release
Contact: 202-327-8100
Tuesday, July 30th, 2013
Press release
AMI Condemns Richmond, California’s Actions and
The Use of Eminent Domain in General
Washington, D.C. – The Association of Mortgage Investors (AMI) condemns the use of eminent domain as a foreclosure mitigation tool. We further deplore the unconstitutional application of an eminent domain tax on all responsible U.S. homeowners and savers. The mortgages in Richmond, and other communities, represent the investments for the pensions of teachers, firefighters, first-responders’ retirement systems, and private 401K savers.
The U.S. housing market, including Northern California, is experiencing a steady, but fragile recovery. The use of eminent domain in this context is untested, untried, and unconstitutional. Its use is fraught with negative economic consequences for the community.
The scheme is designed around benefiting a private investment firm, which is registered with the S.E.C.[1] Mortgage Resolution Partners (MRP) is not Robin Hood. MRP is a for-profit business that runs an investment fund. However, this fund does not make investments in the free market. Its business model depends on persuading local governments to use the blunt instrument of eminent domain to take money away from the investments of seniors, unions, and others in the mortgage market, give that money to MRP, and, as a result, lower property values across communities as rates on new mortgages go up.
Recent housing and economic data underscores that the housing recovery is real and underway, including in communities such as Richmond, CA;
- Homeownership rate for households age 25-34 is now increasing year-over-year;
- The number of foreclosures recorded in the U.S. fell 20% year-over-year in June, with 55,000 homes completing the process. (source: CoreLogic);
- We are seeing the fastest monthly home price increases, particularly in the West: San Diego (+2.6%), Las Vegas (+2.4%), and San Francisco (+2.0%); and,
- We are seeing significant yearly home price increases: San Diego (17.3%), Las Vegas (23.3%), and San Francisco (24.5%). (source: S&P Dow Jones; Case-Schiller)
AMI’s analysis shows the overall impact of eminent domain’s use in Richmond will be vastly negative. Eminent domain limits credit availability by increasing risk and thereby raising the cost of mortgage borrowing. The data shows it only helps 198 Richmond homeowners or 0.5% of all households, while harming everyone else. The net effects of the program include a reduction in value of mortgage holdings by tax-payers supported Fannie Mae and Freddie Mac and a related wealth transfer to the MRP.
“The Mayor of Richmond claims she is fighting Wall Street, but she is really harming the public pensions of teachers, firemen, and first-responders – as well as raising uncertainty as to the true cost of future mortgage lending. By doing so and approving the MRP plan, the community has added an additional credit cost and limited housing finance availability,” noted AMI Board President Vincent A. Fiorillo.
In sum, mortgage investors support long-term, effective, sustainable solutions. Eminent domain used solely for private gains is an unwise policy that will just prolong the distress and the U.S. housing market’s ultimate recovery.
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The Association of Mortgage Investors represents private investors, public and private pension funds, and endowments, all of whom support the efforts of Congress and the Administration to help responsible, though distressed homeowners avoid foreclosure. For more information, visit the-ami.org.
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