Too Outrageous, Even for Me!

  • Homeowner has a mortgage for $400k
  • State considers fair value to be $200k
  • State condemns mortgage and pays bondholders of mortgage backed security “fair” value of $160k
  • State charges it off as bad debt at a value of $190k
  • Homeowner is offered a “refinance” of $190k
  • State profits $30k
  • Bondholders who took the risk on the original note are out on their ass
  • Homeowner gets “$10k equity” in their home

Update:

  • Homeowner gets $65,000 federal and state income tax bill

Oh, and P.S. in addition to being morally repugnant, it is also clearly against the law in California.  Not that illegality is enough to stop a bureaucrat in California, apparently.  Now I have to go take a shower after reading about this plan.  Here’s hoping the City of Richmond, California ends up in bankruptcy after thoroughly bungling this horrible idea.

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