Mayor Rahm Emanuel is opposed to a plan that would use the city’s power of eminent domain to rescue homeowners with underwater mortgages.
Reports Chicago Real Estate Daily:
“The idea of using eminent domain is not one I support ... because I don’t think it’s the right way to address the problem,” Mr. Emanuel said during an unrelated press conference today at the newly renovated Morse Red Line station. “I don’t think it is the power of the city to deal with the housing issue. We have a national issue. I think we have to address the issue. I just don’t think that is the right instrument.”
Under the plan, conceived by San Francisco-based Mortgage Resolution Partners LLC, the city would use money from private investors to buy residential mortgages that are underwater, or exceed the value of the homes they encumber. Using its condemnation powers to seize the mortgages, the city would pay a discounted price for the loans and then refinance them to lower homeowners’ monthly payments.
Ald. Edward Burke (14th) sponsored a resolution to examine the idea last month.
The goal: to keep Chicagoans in their homes and protect the value of not only the properties secured by the loans, but also neighboring properties that would be negatively affected by foreclosures.
The American Securitization Forum, which represents the mortgage industry, is opposed to the plan, saying it is unconstitutional and would discourage lenders from doing business in Chicago.
This raises a question. Which is the greater social ill: allowing people who can no longer afford their mortgages to stay in their houses, thus undermining the credit system by letting people to skip out on their payments; or evicting people from houses for which there is no buyer, thus undermining the property itself, and the surrounding neighborhood?
A good place to find the answer is in a Cleveland neighborhood called Slavic Village, which was the sight of more housing speculation than any other zip code in America during the 2000s. Largely because of foreclosures, the neighborhood’s population dropped 27 percent during that decade. Vacant houses attract criminals.
One homeowner called the cops on a stripper trying to tear the aluminum drainpipe off a house at 11 o’clock in the morning. In a 150-foot radius around a vacant house, property values go down at least $7,000. A vacant house reduces its own value even more, since it’s usually denuded of plumbing fixtures, boilers, carpeting, sinks, toilets, heating pipes and any architectural sconces that can be peddled in a second-hand shop. Yellow foreclosure stickers and plywood windows are not warnings, they’re invitations. After homeowners exhaust the equity, inner-city scavengers salvage the last pennies of value out of a house, until the mortgage lender ends up paying the city for demolition.
Anything we can do to prevent a Chicago neighborhood from becoming like Slavic Village is worthwhile. The mayor should not dismiss Alderman Burke's idea so readily.
This month, Ward Room blogger Edward McClelland’s Young Mr. Obama: Chicago and the Making of a Black President will be available on Kindle for $2.99. Tracing Obama’s career in Chicago from his arrival as a community organizer to his election to the U.S. Senate, Young Mr. Obama tells the story of how a callow, presumptuous young man became a master politician, and of why only Chicago could have produced our first black president.