This is about the hundredth diary I have started, but the first one I’m publishing. I think I have found a community of like-minded folks here at Kos, so I put forth these ideas for the community’s comment, question, consideration and/or condemnation. If there is an attorney amongst us, I’d love your thoughts on this.
Foreclosure, Eminent Domain and the Principle of Unintended Consequences
I have always been intrigued by the theory of unintended consequences. Call it the butterfly effect or what you will, but I am intrigued by the interrelations between all entities/activities and ideas of the world.
I’ve also been intrigued by the concept of eminent domain, the taking of private property for public benefit. Its basis is Old English Common Law, and has been used often over the years in this country to take the land of private citizens for projects that benefit the public good. Here in NJ, that property does not have to be blighted or abandoned, it just has to be in the location, or in the way, of something else someone else (with deeper pockets) wants to build. This holds true even if you pay your mortgage and property taxes.
Each state has its own eminent domain rules. The Fifth Amendment states that the government CAN take any private property for public use, as long as they provide “just compensation” to the owner. The various courts in our land have held that “just compensation” is fair market value. FMV is defined as the price a willing buyer without pressure will pay to a willing seller without pressure. Public auction is the only true way to determine this value.
Recently, many Americans have been forced from their homes because of: balloon payments, loss of income, change in loan terms, disability, unaffordability, take your pick. At the end of the day, about 10% of the homes in this country are in some state of foreclosure and another 15% or so are underwater, owners owe more than the current value of the home. Every day, it seems, there is a new story about a city, town or neighborhood hit particularly hard by foreclosure, and the problems faced by the communities after the evictions take place. Houses are abandoned to the effect of time and weather. Vandals, drug users and dealers, vagrants and other undesirables move in. Buildings are ruined, grounds and property are neglected, and all the surrounding property values suffer accordingly. Large vacancy rates destroy neighborhoods and the very communities in which they are located, tax revenues plunge and services suffer.
Many municipalities have local regulations and ordinances that detail the condition to which properties must be maintained. It appears that many of these bank-owned foreclosure properties are allowed to fall into disrepair, what we in NJ call demolition through neglect. In many towns, this would be against local zoning and the owner can be forced to keep up their property or suffer fines and penalties for failure.
Here’s where the unintended consequences comes into play.
Corporations have recently been granted citizenship status under Citizens United for the purpose of the exercise of their First Amendment right to free speech. Citizenship is not without its costs though. I propose that any claim of corporate, hence public ownership, of property has been compromised by the citizenship granted by Citizens United, and any corporate holding must now be considered “private” property. So becomes any house that has been repossessed, it is the privately held object of whatever mortgage holder claims ownership.
Accordingly, those houses should be subject to eminent domain takings.
So what I propose is local government takings via eminent domain of foreclosed houses that have been abandoned, unkempt, or otherwise prove a negative impact on their communities. What greater public benefit can there be than the restoration of families to homes, the eviction of the criminal element, the saving of neighborhoods suffering the blight of vacancy?
These houses taken by local government can be sold by auction or other public offering by the towns after the taking. Towns can regulate the requirements for purchase (low income, family size, etc.) to try to keep out the vultures. The towns, with minimal investment recouped at the time of sale, becomes the owner of record and a willing seller. Although vultures and other bottom feeding investors will storm the auctions, every buyer wants to pay the least they can. So even with a flood of speculators, prices should remain reasonable. Whoever purchases does so willingly, knowing title may be muddied or delayed by what I sure will be court cases to follow.
This becomes the unintended consequence of corporate personhood, the subjection of corporate property to loss for the public good.
I’m certain that a Bank of America would never stand for losing “assets” without a fight, but what do they have to fight with. Are they going to argue “just compensation”? BoA posted a few weeks ago that they hold about $52 trillion in mortgage backed securities. That’s amazing, especially considering that according to the Fed Reserve, there is a total of about $13 trillion in outstanding mortgage obligations in the entire USA. So BoA has written paper they value at 4 times the total value of all mortgages, and that’s just BoA. $52 trillion does not include Chase, Wells Fargo or anyone else, just BoA.
NO just compensation (short of selling every foreclosed house for 4 times its value or selling it to 4 different buyers at once) is going to make them whole.
If we can get past that eerie American indoctrination that the bankers must be made whole first at all possible costs, there is significant public benefit to what I propose here. Houses again becomes homes filled with families, this time who can afford the homes they’re in. Property values of non-foreclosed homes stabilize as their communities no longer deteriorate. Towns add blighted and abandoned properties to the tax rolls again. The criminal element is forced out because the neighbors won’t stand for them.
The only loser is the banksters who gambled that prices and costs would keep going up.
If I gamble and lose, I suffer the loss. Since the US Supremes have granted corporations citizenship, that same possibility of loss should burden them as well!