Last night, Richmond, California’s city council approved the plan to use eminent domain to help underwater borrowers by a vote of 4-3. The plan is pure fraud. Mortgage Resolution Partners (MRP), an advisory firm, rounded up investors to supply capital to Richmond so that it could purchase the mortgages of underwater borrowers in the area. The city would then right down the value of the loan so that the borrowers could refinance at a lower rate. However, MRP wasn’t just helping out the city. It was looking to make a profit. And how was it doing that? By paying investors well below fair market value for the loans.
I’ve said repeatedly that I have no idea how Richmond fell for this plan. These two tweets from Wonkblog’s Lydia DePillis, who was at the meeting, may explain it a bit:
A dysfunctional city council that doesn’t understand what they’re voting on is about the best explanation I’ve heard for why the city is implementing MRP’s plan. Still, I was hoping someone would talk some sense into the council members and explain to them why this is such a bad idea. Unfortunately, that hasn’t happened.