The American Securitization Forum urged mortgage servicers and trustees to reject offers from the city of Richmond, Calif. to buy mortgages out of private trusts at deeply discounted prices or face eminent domain proceedings.
“The so-called fair value prices are radically discounted from a reasonable appraisal of the homes in question and from the true value of the mortgages,” said ASF executive director Tom Deutsch in a press release Friday. The group also notes that home prices are rising in many areas.
“While we recognize and appreciate the serious challenges that still remain in the current housing market, Richmond’s offer raises too many constitutional and contractual issues to move forward,” Deutsch said.
“Not only would such a proposal fail to help those most at risk, it would undermine the national market as a whole, making credit less accessible for homeowners and devaluing the investments of pension funds, mutual funds and other entities that hold mortgage-backed securities.”
In a July 31 letter, the city manager’s office offered to “acquire all rights” to certain loans based on appraisals done June 30 “to determine their fair market value.
“The purchase price is the full amount believed by the city to be just compensation for the loans and is not less than the appraisal of the fair market value,” according to the city, which notes that its offer “is subject to the approval of the…city council, including final conditions that the city council requires as part of its program.”
The letter also tells servicers and trustees that they “should be aware that, in the event that negotiations fail to result in agreement, and the city decides to proceed with the acquisition of the loans through eminent domain, the owner will have the right to have the amount of just compensation to the paid by the city for the loans fixed by a court of law.
“Pleased be advised that, in such an event, the terms of this offer and the contents of this letter may be excluded from consideration as an offer of settlement,” the letter adds.
