Ellen Brown at Truthout:
The legal tide is turning against MERS and the banks, giving rise to some interesting possibilities for relief at the county level. Local governments have the power of eminent domain: they can seize real or personal property if (a) they can show that doing so is in the public interest, and (b) the owner is compensated at fair market value.
The public interest part is easy to show. In a 20-page booklet titled "Revitalizing Foreclosed Properties with Land Banks," the US Department of Housing and Urban Development (HUD) observes:The volume of foreclosures has become a significant problem, not only to local economies, but also to the aesthetics of neighborhoods and property values therein. At the same time, middle- to low-income families continue to be priced out of the housing market while suitable housing units remain vacant.
The booklet goes on to describe an alternative being pursued by some communities:To ameliorate the negative effects of foreclosures, some communities are creating public entities - known as land banks - to return these properties to productive reuse while simultaneously addressing the need for affordable housing.
States named as adopting land bank legislation include Michigan, Ohio, Missouri, Georgia, Indiana, Texas, Kentucky and Maryland. HUD notes that the federal government encourages and supports these efforts. But states can still face obstacles to acquiring and restoring the properties, including a lack of funds and difficulties clearing title.
Both of these obstacles might be overcome by focusing on abandoned and foreclosed properties for which the chain of title has been broken, either by MERS or by failure to transfer the promissory note according to the terms of the trust indenture. These homes could be acquired by eminent domain both free of cost and free of adverse claims to title. The county would simply need to give notice in the local newspaper of an intent to exercise its right of eminent domain. The burden of proof would then transfer to the bank or trust claiming title. If the claimant could not prove title, the county would take the property, clear title and either work out a fair settlement with the occupants or restore the home for rent or sale.
Even if the properties were acquired without charge, counties might lack the funds to restore them. Additional funds could be had by establishing a public bank that serves more functions than just those of a land bank. In a series titled "A Solution to the Foreclosure Crisis," Michael Sauvante of the National Commonwealth Group suggests that properties obtained by eminent domain can be used as part of the capital base for a chartered, publicly owned bank, on the model of the state-owned Bank of North Dakota. The county could deposit its revenues into this bank and use its capital and deposits to generate credit, as all chartered banks are empowered to do. This credit could then be used not just to finance property redevelopment, but for other county needs, again on the model of the Bank of North Dakota. For a fuller discussion of publicly owned banks, see http://PublicBankingInstitute.org.
Sauvante adds that the use of eminent domain is often viewed negatively by homeowners. To overcome this prejudice, the county could exercise eminent domain on the mortgage contract rather than on title to the property. (The power of eminent domain applies both to real and to personal property rights.) Title would then remain with the homeowner. The county would just have a secured interest in the property, putting it in the shoes of the bank. It could renegotiate reasonable terms with the homeowner, something banks have been either unwilling or unable to do, since they have to get all the investor-owners to agree, a difficult task; and they have little incentive to negotiate when they can make more money on fees and credit-default-swaps on contracts that go into default.
Read the whole thing.
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