City of Richmond Plans to Use Eminent Domain to Buy Mortgages

The City of Richmond, California, a working class town of 100,000 located in the east San Francisco Bay, has recently announced that it plans to move forward with a proposal of forcibly purchasing distressed mortgages using its power of eminent domain. Richmond is working with the San Francisco “community advisory firm,” Mortgage Resolution Partners, to purchase loans involving 624 properties.

Basically, the City intends to purchase the loans at a “discounted price” and will then refinance them through the tax-payer backed Federal Housing Administration. Next, the loans will be repackaged into a new security and sold to other private investors. Lastly, the homeowners whose mortgages were purchased will receive a free principal reduction and their monthly mortgage payments will be lowered. But what about the lender and constitutional protections?

Eminent Domain for “Public Use”

The Fifth Amendment of the Constitution states that eminent domain must be used for “public use.” Public use in this context usually comes in the form of a public road or obvious public project. So, how can the City of Richmond claim that they are condemning mortgages for a proper public use, especially considering that the City will benefit financially from each taking?

Richmond is claiming that by allowing the homeowners to refinance their loans, they will be reducing the number of foreclosures, thereby revitalizing the neighborhoods hindered by the housing bust. In other words, Richmond is trying to equate a “public benefit” with the constitutional requirement of public use. Most likely, they are looking to the Supreme Court’s effort to expand the definition of public use through the majority opinion from Kelo vs. City of New London. Richmond’s ideology seems flawed and it is important to note that of the 624 mortgages in question, 444 are current on their payments.

A significant gap in the City’s reasoning, besides the Fifth Amendment concerns, relates to compensation. When considering the fair market value of the loans, which is a vital aspect of any constitutional eminent domain proceeding, what might the damages be to the investment pool that owns the package of mortgages?  The assets of the mortgage pool are being reduced or possibly replaced with lower rate mortgages and decreased asset values. The Constitution requires payment of just compensation to the owner, so the lost value is very likely an element of damage that will have to be paid.

Valuing the Mortgage Loans

If a mortgage loan is seized and that loan is current on its payments, the value of the pool of loans will be decreased for investment purposes. Experts are betting that the Richmond will offer prices below fair market value, even on loans where borrowers are current on payments. That does not address the issue of compensation owed to the holder of the asset pool.

In order for an eminent domain proceeding to be deemed constitutional, the condemning authority must pay the property owner, or in this case the holder of the pool of mortgage loans, “just compensation.” Determining an amount of fair compensation between the condemnor and the owner is often at the forefront of every condemnation lawsuit, and every aspect of the condemned property is evaluated with extreme precision. It remains to be seen whether Richmond or Mortgage Resolution Partners can designate an acceptable formula to establish just compensation in the seizing of loans.

Breaking Down a “Transaction”

According to an article by the Wall Street Journal, Richmond’s proposed plan would break down as follows for one loan seizure:

A home with an existing $300,000 mortgage has a current market value of $150,000. Richmond might argue that the actual market value of the loan is $120,000. If a judge agrees, the City’s private financiers will fund the loan’s seizure and will pay the current loan investors the discounted amount. The next step will be refinancing the homeowner’s mortgage to a $145,000, 30-year government-backed loan. At the conclusion, a $25,000 profit, minus any original costs, will be split amongst Richmond, Mortgage Resolution Partners, and its investors.

What happens next?

A lawsuit has been filed against the city of Richmond and Mortgage Resolution Partners by multiple mortgage-bond trustees, including Fannie Mae and Freddie Mac, alleging that the city’s proposal to use eminent domain in seizing mortgage loans is unconstitutional.  (Wells Fargo Bank, National Association, et. al v. City of Richmond, California, et al (Case No. 13-03663)).

More to come.

If you received notice that your property is being condemned in Arizona, the eminent domain attorneys at JacksonWhite would love to fight for your right to just compensation in court. Call us today to schedule a consultation with experienced JacksonWhite condemnation lawyer, Anthony Misseldine at 480-464-1111.

Arizona Court of Appeals Issues Decision: Highest and Best Use Will Be Part of Proper Analysis

Arizona Court of Appeals Decision Regarding Whether a Trial Court May Properly Admit Evidence of a Tax Protest to Establish Fair Market Value in a Deficiency Action

Division 1 of the Arizona Court of Appeals recently issued a decision in Roofing Wholesale Co., Inc. v. Neil, 2012 WL 1207349 (Ariz.App.Div.1) (2012). The decision was not approved for citing as a legal precedent except under limited conditions. Regardless, the opinion gives insight into how the Court of Appeals views the issue of tax appeal information being offered as evidence in a fair market valuation hearing.

The Court was presented with the issue of whether a trial court may properly admit evidence of a property owner’s “admissions” made in a tax protest in order to establish fair market value under A.R.S. §33-814, Arizona’s deficiency statute. The Court of Appeals declined to follow the decision of the Arizona Supreme Court in Salt River Project Agricultural Improvement and Power District v. Miller Park, L.L.C., 213 Ariz. 246 (2008) because Arizona deed of trust law (A.R.S. §33-814), according to the court, “does not demonstrate a legislative intent to adopt the highest and best use standard in a fair market valuation proceeding under the deficiency statutes.”

This opened the door for use of evidence from the property tax appeal in a fair market value proceeding under the deficiency statute. The Court’s reliance on the lack of an express adoption of the valuation principle, highest and best use, is puzzling. A property’s available uses or reasonably probable uses, at the time, drive its value in the market.

What the Court was possibly trying to reach was a standard that a trial court, which is tasked with determining value as of the date of the trustee’s sale, is not bound by a particular method to determine value. For example, the court explained that a judge may properly consider “various factors appearing in the testimony in any combination which is reasonable.” Whether it realized it or not, highest and best use will inevitably be a part of a proper analysis.

The use of valuation methods in eminent domain proceedings or deficiency actions requires experience with valuation theories and evidence laws. If you or anyone you know may be facing eminent domain or a valuation of real property, I urge you to meet with an experienced Arizona eminent domain attorney that can help you understand your options. Protect your property rights by calling (480)-428-3572 to set up a consultation.

Arizona Property Tax Appeal

Do you know the current fair market value of your home? Unless you have had a professional assessment of your property’s value within the past year, I highly suggest that you schedule one.

It’s common knowledge that real estate values in the United States have dropped dramatically during our country’s recent economic struggles. Ironically, as property values have dropped, property taxes have actually increased. This is a concerning statistic, considering that property taxes are equated using property value.

If you own property, you should receive a Notice of Value card in the mail by March 1. The card will list your property’s assessed Full Cash Value and its Legal Classification (a property’s Legal Classification refers to how the land is being used. Classifications include commercial, residential, agricultural, etc.). If you believe the Full Cash Value or the Legal Classification to be incorrect, you can file an appeal either with the County Assessor’s Office or with the Tax Court.

According to the Official Blog of the National Taxpayers Union, GovernmentBytes, “up to 60 percent of the nation’s taxable property may be over-assessed, leaving property owners to pay thousands of dollars more than they need to.” Prepare yourself to file an appeal if necessary by hiring a professional to correctly appraise your property’s current value. In order to insure that your appeal is successful, it must be filed as quickly as possible upon receiving your Notice of Value.

If you have any interest in preparing yourself to file a property tax appeal, come and see me, an experienced Arizona eminent domain attorney that can give you the expert advice you deserve. Call (480)-428-3572 today to schedule your consultation.

The Maricopa County Assessor’s Office

The Maricopa County Assessor’s Office is responsible for assessing the property values of every property within the county’s boundaries. Their valuation appraisals determine individual and business property taxes, and, in the context of eminent domain, the compensation amount offered by the government. So, who is behind the entity that is deciding the worth of your property?

The County Assessor’s Office consists of the appointed County Assessor, Keith E. Russell, his leadership staff, and other employees, and is authorized to compute the Full Cash Values and Limited Values of all taxable properties. To insure that all properties have been assessed, the Assessor and his staff use aerial photographs, state land maps, GIS mapping, and appraiser canvasses. There are five County Assessor Offices in Maricopa County, two in Phoenix, with the others in Mesa, Sun City, and Sun City West.

While the Mission Statement of the County Assessor’s Office, as stated on their website, proclaims an attempt to “efficiently and effectively administer all laws and regulations to Maricopa County property owners” so that all taxed “property is fairly and equitably valued,” Full Cash Values of properties are often incorrectly estimated. If the Assessor’s Office determines your property value too high, your property tax will follow suit, forcing you to pay more than you should. On the contrary, if your property is valued too low, you would receive unfair ‘just compensation’ if faced with eminent domain.

If you believe that your property’s valuation may be incorrect, an experienced Arizona eminent domain attorney can help you file an appeal. Call (480)-428-3572 today to set up your consultation to discuss any questions or concerns you may have regarding the County Assessor’s Office or to determine your property’s true market value.

What is a Counter-Offer?

If you have been faced with eminent domain and the government has proposed a monetary offer for a property in your ownership, it is crucial that you precisely evaluate their offer before accepting it. If the offer seems even slightly less than you would have expected, making a counter-offer is something to seriously consider. In most cases, property owners will receive greater compensation after filing a claim against the condemning agency’s offer in an eminent domain proceeding. Keep in mind: appraisers often differ in their opinions of a property’s value by thousands or tens of thousands of dollars, so hiring a professional appraiser, such as an eminent domain attorney, is essential to your case.

Applying to the court for an order to increase the amount of the deposit is easier than you might think and will most likely yield you with a much higher cash amount for your property. An experienced Arizona eminent domain attorney can help you draft your claim by considering your property’s true value while comparing it to how much your property may be worth to the government.

Call (480)-428-3572 today for a consultation with me, Anthony Misseldine. Depending on your case, I may be able to get you a much higher compensation for your property than the government is currently offering you.

House of Representatives Passes Anti-Kelo Bill

Early this month, the United States House of Representatives passed the Private Property Rights Protection Act bill, in an effort to “minimize abuses of the government’s condemnation power.” Ever since the  infamously unjust 2005 condemnation involving Susette Kelo’s home in New London, Connecticut, Congress has developed over a dozen anti-Kelo bills to protect private property owners in the United States.

Kelo v. City of New London consisted of a government condemnation of Ms. Kelo’s home and the homes of her neighbors to make way for a multimillion-dollar redevelopment project which promised over 3,100 new jobs and $1.2m in tax revenues annually.  With terrible irony it should be remembered that the redevelopers were unable to receive the necessary financing and finally gave up, and where Kelo’s home once stood is now a waste dump.

Why did five of the nine Supreme Court justices vote for the condemnation of Kelo’s home, agreeing that the redevelopment project showed proof of “public use”? The reasoning behind that decision has prompted much discussion and debate for several years, and has brought attention to eminent domain proceedings across the county as condemning authorities continue to rely upon the decision in Kelo to support scandalous takings for economic development or public benefit, allowing “certain condemners and their developer partners to abuse the power of eminent domain” over and over again.

This new bill will likely bring debate over condemnation as a proper tool in the government’s effort to promote redevelopment to economically challenged areas. Private property owners hope that Kelo won’t happen again in the United States, and that the private individual right to personal property will be further protected. If you believe your property is a target in a proposed condemnation, an experienced Arizona eminent domain attorney can fight to protect your constitutional rights. Call (480) 428-3572 to schedule an appointment with eminent domain attorney, Anthony Misseldine today. Don’t fight the government on your own, get the professional knowledge and expertise you deserve.

Arizona Property Rights

In 1998 in the city of New London, Connecticut, a plant was built by the drug company, Pfizer. Officials of the City attempted to purchase 115 residential homes to turn around and sell to commercial developers. When fifteen residents resisted, the City turned to its power of eminent domain to take the land.  One resident, Susette Kelo, opposed the taking through a legal challenge. The case ended up before the U.S. Supreme Court, which ruled in favor of the taking by the City of New London. The Court’s decision sparked a nationwide debate, fueled in part by disserting comments in the opinion.  Justice Clarence Thomas accused the verdict of violating the Fifth Amendment’s “public use” standard because property was forcibly transferred from one private owner to another.

Many states in the US, including Arizona, reacted strongly to this ruling and amended their property statutes. The Private Property Rights Protection Acts were instituted as an effort to prevent another situation, such as the Kelo vs. New London case, from happening in Arizona. Eminent domain rulings in Arizona require a judicial determination ensuring that the claimed usage of the land will indeed be “public.”

If you think you may be in danger of eminent domain violations against your property, contact an experienced Arizona eminent domain attorney immediately. Call (480)-428-3572 for a consultation, and I can help you with any questions or concerns you have about your Arizona Property Rights.

Bailey’s Brake Shop: Could this Happen Again in Arizona?

As construction on the Mesa light-rail extension project is set to begin in 2013, many private businesses and property owners will be facing efforts by the City to acquire all or part of the impacted properties. The 3.1 mile extension into downtown Mesa is clearly a public project, thus appropriate for using the power of eminent domain to acquire the land needed for the project from private owners. This is in contrast to the City’s attempts several years ago to improve the downtown corridor.

In April of 2002, an Arizona judge’s ruling allowed the City to seize Bailey’s Brake Shop, a family-owned business, operating in the same location for over 30 years. The City wanted to sell Randy Bailey’s property to an Ace Hardware store, failing to acknowledge that it is against the Constitution to take property from one private owner and give it to another private owner. However, the City argued that they were seizing the property for redevelopment on the claim that the property was blighted and that redevelopment of the property was necessary in the interest of public welfare.

The Institute for Justice Arizona Chapter represented Randy Bailey in an appeal, and on October 1, 2003, the Arizona Court of Appeals ruled against the City of Mesa’s use of eminent domain, protecting Bailey’s Brake Shop from seizure. The Arizona Court of Appeals overturned the earlier decision, stating that the taking was not proper. The opinion went on to outline a series of questions to be considered when evaluating if a taking is truly for a public purpose. Accordingly, cases like Bailey’s Brake Shop are not likely, but the potential for abuse still remains.

The use of eminent domain by local governments is becoming more common and less lawful throughout the United States. If you or anyone you know may be facing eminent domain, I urge you to meet with an experienced Arizona eminent domain attorney that can help you understand your options. Protect your property rights as an American citizen by calling (480)-428-3572 to set up a consultation.

An End to Some Local Mesa Favorites

Of the several locations set to undergo partial to full acquisition by the City of Mesa’s light-rail extension project, five of them are auto shops. MCJ’s Tires & Wheels, De Valle Motors, Mesa Muffler, Wilky’s Performance Center, and Gunnell’s Tire & Auto are among the businesses facing partial to full seizure. As the light-rail project in essence implies the promotion of public transportation, is it also strategically displacing downtown Mesa auto shops?

While one could easily argue this position, it’s doubtful that this is more than an unfortunate coincidence. Though it might seem suspicious that more than half of the properties preparing for 100% acquisition are in the automotive repair and service industry, it should be taken into consideration that these stores are all located on Main St. within a three-mile stretch.

Downtown Mesa will surely miss these long-standing businesses. Wilky’s Performance Shop has been in operation for several decades, and Gunnell’s Tire & Auto since 1953. As Theresa S. from Queen Creek writes in her Yelp review, Gunnell’s provides the “quickest service I’ve ever experienced for getting tires rotated and/or balanced.” While the light-rail is projected to bring great economic advancement to some areas of downtown, it signals the end of an era for some local favorites.

If you have been affected, or have received notice that your home or business will be affected by the light-rail extension project, I highly suggest that you contact an experienced Arizona eminent domain attorney. Call (480)-428-3572 to set up a consultation to better understand your rights as a property owner.

The Mesa Metro Business Assistance Program

The 3.1 mile light-rail extension set to begin in 2013 is expected to affect the numerous businesses along its route. The construction is going to make it very difficult, if not occasionally impossible, for consumers to access these businesses. While City officials are focusing on maximizing the economic impact that the extension will bring to downtown Mesa, it’s hard to say what the economic loss for local businesses will be in the meantime.

To help ease the inevitable struggles ahead, Metro Light Rail has developed a Metro Business Assistance Program aimed at keeping the affected businesses alive and thriving during the extension’s construction. The Program includes free signs and banners alerting customers of businesses open during construction, as well as a 24-hour hotline where questions or concerns can be directed. The Assistance Program is offering a variety of free marketing and promotional support to affected business, such as the Metro Max Rewards Program which offers discounts as incentives for customers to frequently visit the businesses along the construction route.

If you have been affected, or have received notice that your home or business will be affected by the light-rail extension project, I highly suggest that you contact an experienced Arizona eminent domain attorney. Call (480)-428-3572 to set up a consultation to better understand your rights as a property owner.