UPDATE ON PROPOSAL TO TAKE DISTRESSED MORTGAGES

Several months ago we posted about a radical proposal calling for local governments to sue in eminent domain to seize distress mortgages. Following up in the new year, it still remains to be seen whether the proposal has reached a dead end in California, or has simply hit “a bump in the road”?  A Joint Powers Authority (“JPA”) comprised of San Bernardino County and the Cities of Fontana and Ontario, which formed to explore using eminent domain in this context, voted in January to reject the plan.  But Mortgage Resolution Partners (“MRP”), the San Francisco-based investment firm peddling the mortgage seizure scheme is in talks elsewhere in the State, and it does not appear to be deterred. MRP is rumored to have approached at least 30 cities in the past year in an attempt to secure a partnership. Among them is Salinas, whose City Council is reported to be in discussions with MRP now.

MRP’s efforts have not been limited to California, but the firm has gained little traction elsewhere.  The San Bernardino JPA’s rejection is significant because the agency’s consideration of MRP’s proposal was widely reported by national news outlets. Whether other local governments in the State follow its lead is an unknown.