At the first meeting of the joint powers authority on Friday, chairman and San Bernardino County chief executive Greg Devereaux said the entity — which was inspired by Mortgage Resolution Partners' proposal — has not decided on a specific course of action.
Timothy Cameron, managing director of the Securities Industry and Financial Markets Association's asset managers group, told the authority that residents of the region would find it harder to get loans and investors — including pensioners — would suffer losses. He also said such a move would invite costly litigation.
"The use of eminent domain will do more harm than good," he said. "We need mortgage investors and lenders to come back to these fragile markets — but this plan will force both groups to avoid them."
Robert Hockett, a Cornell University law professor, said the plan forces the hand of some investment bankers who bundle mortgage loans into securities and sell pieces to investors.
The bankers have sometimes stifled plans to reduce mortgage payments, he said. Their objections to this plan, he said, are "kind of like saying a loan shark objects to anti-predatory lending laws."
Theodore Woodard, a 62-year-old retired air conditioner installer, said he'd welcome the help on his five-bedroom home in Fontana. So far, he and his wife have kept up with monthly $3,100 payments, plus taxes and insurance, but it hasn't been easy, and they have watched several neighbors in the well-manicured neighborhood some 50 miles east of Los Angeles lose their homes to foreclosure.
"We've been making our monthly payments, barely making them, but we just pay them and try to survive off what's left," said Woodard, who estimates his house has lost a third of its value since 2004.
In San Bernardino County, the problem is clear. The median home price has plunged to $150,000 from $370,000 in five years. The combined San Bernardino-Riverside metro area has the highest foreclosure rate of any large metro area in the country, at four times the national average, according to RealtyTrac, which tracks foreclosure properties.
Devereaux, who has seen other plans to fix the housing crisis peter out, is cautious.
"I don't know whether this will work or not," he said. "But we do think we have a responsibility to explore it."
Rexrode reported from New York. AP Business Writer Daniel Wagner contributed to this report from Washington, D.C.
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