Abstract

http://ssrn.com/abstract=2173358
 


 



Paying Paul and Robbing No One: An Eminent Domain Solution for Underwater Mortgage Debt


Robert C. Hockett


Cornell University - Law School

June 1, 2013

Current Issues in Economics and Finance, Vol. 19, No. 5, 2013
Cornell Legal Studies Research Paper No. 12-64

Abstract:     
In the view of many analysts, the best way to assist “underwater” homeowners — those who owe more on their mortgages than their houses are worth — is to reduce the principal on their home loans. Yet in the case of privately securitized mortgages, such write-downs are almost impossible to carry out, since loan modifications on the scale necessitated by the housing market crash would require collective action by a multitude of geographically dispersed security holders. The solution, this study suggests, is for state and municipal governments to use their eminent domain powers to buy up and restructure underwater mortgages, thereby sidestepping the need to coordinate action across large numbers of security holders.

Number of Pages in PDF File: 12

Keywords: underwater mortgage, housing market crisis, negative equity, principal write-down

JEL Classification: G18, G21, R31

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Date posted: November 9, 2012  

Suggested Citation

Hockett, Robert C., Paying Paul and Robbing No One: An Eminent Domain Solution for Underwater Mortgage Debt (June 1, 2013). Current Issues in Economics and Finance, Vol. 19, No. 5, 2013; Cornell Legal Studies Research Paper No. 12-64. Available at SSRN: http://ssrn.com/abstract=2173358 or http://dx.doi.org/10.2139/ssrn.2173358

Contact Information

Robert C. Hockett (Contact Author)
Cornell University - Law School ( email )
524 College Ave
Myron Taylor Hall
Ithaca, NY 14853
United States
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