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FHFA Publishes Loan Value Group’s Response To Using Eminent Domain To Seize Mortgages

Forcing a sale of a mortgage at severely discounted prices is the wrong approach 

Rumson, N.J., October 16, 2012 – Loan Value Group LLC’s response to a recent proposal by Mortgage Resolution Partners (“MRP”) on the use of eminent domain to help homeowners with negative equity has been posted on the Federal Housing Finance Agency’s (FHFA) website. In its comments, LVG argues that MRP’s proposal is the wrong approach and that both the mortgage industry and homeowners need an alternative solution that does not require re-writing contract law or burdening the fragile infrastructure of the mortgage industry. Click here to see LVG’s response.

“The implementation of eminent domain on current, underwater mortgages will cause severe, immediate, and unnecessary losses to the financial institutions that hold those mortgage securities,” explains Frank Pallotta, Managing Partner of Loan Value Group. “A viable solution needs to address the problem of widespread negative equity without altering the terms of the mortgage note, without violating contract law and without any additional cost to the homeowner.”

Below is a comparison between MRP’s proposal promoting the use of eminent domain and Loan Value Group’s incentive-based Responsible Homeowner Reward® (RH Reward®) program:

RH Reward MRP’s Use of Eminent Domain
Mortgage note unchanged Immediately writes down the value of the note by 20% - 70% in most cases
Does not burden the Servicer Structure ensures there will be many hurdles both operationally and legally
Existing program with proven results having lowered delinquency rates by more than 50% Has not yet been tested
Strategy is currently being used on active securitizations without legal, operational or accounting issues Has not yet been tested
Will not harm future lending in affected areas as mortgage contracts are not compromised Experts contend that future lending could be affected for years to come
Program can structured, designed and launched in under 60 days Individual campaigns can take many months or longer as there are sure to be expensive and lengthy legal disputes

About Loan Value Group LLC

Founded in 2008, Loan Value Group LLC is a large scale, turn-key provider of private label, residential mortgage incentive strategies that positively influence consumer payment behavior on behalf of residential mortgage risk owners and servicers. Based in Rumson, New Jersey, LVG is the creator and exclusive provider of the Responsible Homeowner Reward® program, named one of the "50 Best Inventions" by TIME Magazine.