Do Friends Of Actor John Cusack Want To Steal Money From Grandma’s Pension?in HPN Blog
He’s Peddling A Plan That Takes Money From Pension Funds And Gives It To His Millionaire Buddies
For over five years now, I have been bombarded with emails and phone calls from people trying to pitch me on various schemes to solve the foreclosure crisis and/or to rescue individual people from foreclosure. As you can imagine, I tell them how their marvelous new concept won’t work by dissecting it piece by piece. Usually, the conversation results with them calling me an arrogant prick or an asshole. Six months later, they are either being sued, prosecuted or are back selling used Kias.
So in June, when I received a call from the Lois Lane of finance journalism, Teri Buhl asking me if I knew any details of how San Bernadino County wanted to use eminent domain as way to resuscitate the housing market in the Inland Empire area of California, I didn’t think anything of it. I heard rumblings about it but I was swamped with investigations and figured if it was like 99% of the other schemes out there that no one will be talking about in 30 days. She advised me I better start paying attention to it because this was big and the company behind it was pitching it to other cities plagued by foreclosures.
There’s a lesson in this for you wannabes out there, if Teri Buhl calls you asking you questions, you better have your homework done and if you don’t, you better hurry up and cram like you did for your Econ classes in college because it’s usually a first warning something big is going to happen in the next 60-90 days.
For those of you that may be unaware of what this controversy is all about, San Bernadino wants to use it’s authority as a government entity to use eminent domain as a way to acquire a homeowner’s mortgages, modify them, re-bundle them in to pools and then sell them to a private hedge fund in San Francisco. There are multiple controversies with this, the most important being that eminent domain is generally used for properties not securitized debt obligations.
Teri Buhl covered the public hearing about this in San Bernadino and wrote about it on her site the next day.
She then appeared on Max Keiser’s show on RT to explain it in more detail where two had a very lively and interesting conversation about it as you can see from the video (Teri Buhl comes on at 13:00).
As Teri Buhl and Max Keiser point out, not only is eminent domain not designed for a scheme like this but it is a government forced redistribution of wealth from one private investor to another. It’s important to remember, the loans that would be put in eminent domain are not non-performing mortgages or abandoned homes but loans where the homeowners are still paying on them and that could conceivably be sold to FHA or another government entity. Thus making hugely profitable for the fund managers. As Keiser points out at the end of the interview, the big losers are investors on both side of this with the biggest hit being taken by the current investors who have money tied directly or indirectly to mortgage backed securities. Current MBS investors would at minimum take a 20% hit of their investment. Investors in mortgage backed securities or MBS are usually pension funds, IRAs and other retirement funds that invested before the market started to collapse in 2007.
Felix Salmon also affirmed what Buhl and Keiser stated in his piece in Reuters on July 9th. He writes,
“The problem, at heart, is that MRP is looking to buy up only seasoned, performing mortgages: precisely the ones which are worth the most money, and which don’t present much of a systemic danger to the San Bernadino housing market. We’re talking here about loans which were made during the height of the bubble, on homes which have since plunged in value — and yet the homeowners have diligently made all of their payments on time. If I’m a mortgage investor holding a portfolio of mortgage loans, these are the ones I love — they’re the ones which help to offset the fact that so many of my other loans are in default.”
The executives at Mortgage Resolution Partners (MRP), the fund pitching this to local governments, must have seen Keiser’s show and read the articles by Teri Buhl and Felix Salmon because MRP stepped up their public relations efforts soon after.
About three weeks later, when the Huffington Post launched their new HuffPost Live video segments with a video feed round table, they oddly enough discussed MRP’s eminent domain scheme. The round table featured Arianna Huffington, the Chief Strategy Officer of Mortgage Resolution Partners, John Vlahoplus and actor John Cusack.
My first reaction to this was, “What the hell is John Cusack doing on this panel?”
Besides looking like he just rolled out of bed, he’s an actor not a finance guy. As you watch the piece you soon learn that he’s friends with both Arianna Huffington and John Vlahoplus. He claims to feel passionate about what MRP is proposing.
What I find interesting about this piece is the fact that both Cusack and Vlahoplus make it sound like their plan calls for eminent domain to be used on distressed or abandoned homes and not for non-distressed performing mortgages as Teri Buhl, Max Keiser, and Felix Salmon have pointed out.
Second, Cusack and Vlahoplus gloss over the legality of such a scheme. As Buhl, Keiser and Salmon have pointed out, this eminent domain scheme if enacted could very well be ruled unconstitutional by the federal courts. As Felix Salmon puts it,
“Firstly, there’s the word “unconstitutional”, which appears very high up. That’s code for “we’re going to appeal this thing all the way to the Supreme Court, so you’d better be willing and able to spend an enormous amount on legal fees.”
Is John Cusack A Paid Pitch Man Or What?
Call me a cynic, but I’m not buying John Cusack’s claim that he’s doing this as an activist and/or helping his buddy John Vlahoplus out of the goodness of his heart. I also find his plea that “something is better than nothing” not only shows a lack of understanding of how mortgage finance works in this country but I find it reckless and irresponsible. It’s bad enough the foreclosure defense industry is filled with no-nothing activists and attorneys creating havoc where ever they go, now we’re getting bored celebrities sticking their nose into the fray acting like experts.
I have had high profile clients in the entertainment industry and I can tell you that they don’t volunteer for a cause unless it will raise their profile or they are getting paid. So is John Cusack getting paid as a spokesperson by MRP? I have no problem if he is, plenty of celebrities have promoted companies in the areas of finance ever since John Houseman did it for Smith Barney back in the 1970s. Robert Wagner, Henry Winkler and Barbara Eden have even peddled Reverse Mortgages for various companies. Where I do have a problem with John Cusack promoting this eminent domain scheme is if he is being paid and is not disclosing it.
This eminent domain plan would be a great idea if MRP were proposing it on distressed or abandoned properties but they’re not. I could also get behind their eminent domain plan if it were a situation where the investors of the affected MBS Trust had already cashed in their insurance policy and the investors had been paid off with the outstanding loans in the mortgage pool were sold in bulk to the servicer at a deeply discounted discounted price (pennies on the dollar). The problem with this is that Trustees and Servicers guard this information as if were the launch codes for America’s nuclear arsenal.
Original linkOriginal author: Steve Dibert