Let the lawsuits begin.
I wrote last week about Richmond, CA had been duped by Mortgage Resolution Partners (MRP) into using eminent domain to “help” underwater borrowers refinance their homes through principal reduction. MRP supplied capital to the city so that it could purchase the mortgages from investors. Except MRP refused to pay more than 85% of the value of the home. For borrowers who were current on their mortgages, this was a blatant rip off. The value of those mortgages would likely be worth more than 85% the value of the original loan, significantly more than the value of the home. The question was: Were borrowers who are current on their loan part of Richmond’s plan?
The answer is a resounding yes and now investors have filed suit against the city:
The initiative has targeted mainly the loans of borrowers who are current on their payments, which make up 444 of the initial batch in Richmond, where the city council still hasn’t formally authorized the use of eminent domain. Mayor McLaughlin vowed to take the step on a July 30 call with reporters.
Richmond is going after 624 loans, of which more than 70% are held by borrowers current on their mortgages! This is an absurd rip off for investors, who are claiming they’ll lose $200 million under the plan. I’m not sure if that $200 million figure is right, but investors certainly will lose a huge amount of money. I can’t see how any judge will be fooled into thinking this is the “market value” of the loans. I’m pretty shocked that Richmond fell for MRP’s idea. This is just so blatantly illegal. It’s fraud. Yves Smith has more here, but all you have to know is that MRP is using Richmond to defraud investors and the city will ultimately pay the price.