Epstein on "Richmond’s Mortgage Heist"
Right now, Wells Fargo Bank is on a collision course with the City of Richmond, California. Wells Fargo objects to the city’s plan to use its eminent domain power to condemn private mortgages secured by Richmond homes. The proposed program does not target the homes themselves, but only mortgages that are now held by a large number of residential mortgage-backed securitization (“RMBS”) trusts, for which Wells Fargo serves as trustee. Most of the targeted mortgages are “performing assets.” The borrowers are current on their payments, even for mortgages that are technically “underwater” so that the market value of the property is below the amount owed on the mortgage debt.
Wells Fargo filed a major lawsuit last week against Richmond in federal court in the San Francisco Bay Area, challenging the program as a get-rich-quick scheme at the expense of mortgage lenders throughout the United States.
Mayor Gayle McLaughlin, a member of the Green Party, stoutly defends the program in part as payback against those that “sold our community predatory loans,” which have led to threats of foreclosure. So, she warns, if the banks do not agree to voluntary sales of these loans to the city for what she terms fair market value, Richmond’s private partner, Resolution Mortgage Partners (RMP), will defend the litigation in order to execute the plan.