- - Tuesday, August 6, 2013

A company run by prominent Democratic supporters is colluding with local governments to enact sweeping home mortgage reforms at the expense of taxpayers and lenders, according to a U.S. congressman.

Rep. John Campbell (R., Calif.) has introduced legislation that aims to prevent municipalities from using eminent domain to seize properties as a means to address mortgage foreclosures crises.

The proposal, he said in an interview, was spurred by schemes in his home state and elsewhere to use the government’s power to seize property to address high foreclosure rates and large numbers of underwater mortgages.

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Richmond, Calif., is the latest city to attempt the plan. Officials in the city plan to use eminent domain to seize mortgages, paying lenders 80 percent of the current value of the homes, according to the New York Times.

The city will then allow borrowers to refinance at a slightly higher price and will split the difference with Mortgage Resolution Partners (MRP)—the company that is providing much of the capital for the effort—and other investors in the plan.

“There are many things I despise about this proposal, but one of them is that I don’t think there’s any legitimacy in public policy,” Campbell told the Washington Free Beacon.

“It’s entirely an effort of a private entity [MRP] to say, ‘If we can get local government to go along with us and basically rip off the taxpayers and financial institutions, and we share in the spoils, wouldn’t this be a great deal?’” Campbell said.

MRP’s role in similar schemes has come under scrutiny due to the company’s deep ties to Democratic politicians at the state and national level.

Steven Gluckstern, MRP’s chairman, bundled between $200,000 and $500,000 for President Barack Obama’s 2008 campaign. He has also personally donated more than $260,000 to Democratic candidates, committees, and interest groups, according to the Center for Responsive Politics.

MRP’s former executive chairman, Phil Angelides, was appointed by then-Speaker of the House Nancy Pelosi (D., Calif.) to a federal commission to investigate the causes of the financial crisis. According to other members of the panel, he attempted to downplay the role of federal backing for home loans in the 2008 financial crisis.

“As a result [of Angelides’ influence on the panel], the report’s discussion of the GSEs’ role in the financial crisis was almost completely perfunctory, and the whole report was a sad whitewash,” wrote Peter J. Wallison, a fellow in financial studies at the American Enterprise Institute and a member of the panel.

Angelides’ closeness with Pelosi and other political leaders in California raised eyebrows in 2012 as MRP attempted to lead a plan in San Bernardino, Calif., similar to the one being undertaken in Richmond.

As of mid-2012, according to the Bay Citizen, one of MRP’s top investors was former San Francisco mayor and California Assembly Speaker Willie Brown.

In a letter issued by the company in January of last year, MRP explained its strategy to use “legal and political leverage” to acquire distressed mortgages. The efforts, according to the letter, “just might do a good thing for America, and along the way get a great return on investment” for MRP.

According to Reuters, which first revealed the letter, the “secret formula” it described depended on “its leverage in ‘California politics’ and an executive chairman in Angelides, ‘who will be front-line center stage nationally.’”

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