US housing plan aims to woo bondholders - FT.com

US housing plan aims to woo bondholders - FT.com

Proponents of a controversial US housing plan that would use local governments’ compulsory purchase powers to seize distressed home loans are wooing bondholders with improved financial terms.
The plan involves using government powers known as “eminent domain” that are commonly used to force homeowners to sell their property to make room for public projects such as new roads.

Mortgage Resolution Partners, advised by Evercore Partners and Westwood Capital, has proposed that governments should instead use that authority to seize mortgages worth more than the underlying property and write down borrowers’ excess housing debt in hopes of averting default. The owners of the loans would receive compensation at fair market value.
MRP is initially targeting 5,000 home loans, at a potential cost of about $750m, owned in private label securities. The company is attempting to raise hundreds of millions of dollars from institutional investors, with the money to be used by local authorities to buy loans. The new mortgages would be sold and the proceeds divided between the local government and the investors.