THIS IS A MUST READ FOR LANDOWNERS:
Those of you facing eminent domain, fighting hard for those measly dollars
that utilities will cough up, well, what many people are finding is that the
mortgage companies are grabbing it, leaving them with nothing.
If you are a landowner and if CapX 2020 is threatening to take some of your
land, QUICK, get out your mortgage and see what it says about landowner
compensation for eminent domain takings or eminent domain settlements.
One thing this article doesn’t address is whether there’s a pattern based on
percentage of equity, i.e., are they taking the cash when someone’s upside down,
but if the mortgage balance is 20% of the value they don’t, if it’s a new
mortgage or one regularly behind do the take it, and if it’s one with a
substantial down payment and prompt payments they don’t… What’s the pattern
here?
From Friday’s STrib:
Government
takes land, banks take cash
In
tough economic times, more homeowners who lose ground to eminent domain are
finding that stressed mortgage holders are pocketing the proceeds.
By
MARIA ELENA BACA, Star Tribune
Harold
and Sharon Tieden were unhappy from the outset that they would lose a 12-foot
swath of their Blaine back yard and a row of mature pines to an expansion of
Radisson Road. Still, they began negotiations with Anoka County, planning to
use the settlement to rebuild a berm, move trees and rocks, and maybe build a
fence. ¶ But like many other homeowners losing ground to eminent domain this
year, they have found that they can’t even count on the cold comfort of a
settlement check.
When
they sign the papers, the check, it turns out, will likely go instead to their
mortgage holder.
In
an unusual twist brought about by stressed lenders and highly leveraged real
estate, homeowners across the metro who are facing the loss of land due to
eminent domain projects are increasingly getting notices from banks claiming
rights to the proceeds. In the past, such notices were sent so rarely that
county officials never saw a need to keep track of how often it
happened.
The
trend is emerging across the metro area as government agencies take advantage
of relatively low construction costs to prep their roads for future
development. In Anoka County, right-of-way staff have seen a noticeable uptick
in the number of checks going straight to lienholders. Ditto for Washington
County, down the length of an expansion of S. 40th Street. In Dakota County,
where Cedar Avenue is being expanded, transportation officials plan to give
residents notices of the trend when they send out notifications early next
year.
The
Tiedens’ yard is part of a planned expansion of Radisson Road, also known as
County Road 52, from two lanes to four, with turning lanes and a walking
trail. Officials say the expansion is needed to accommodate a predicted
traffic flow of 25,000 daily trips by 2030. The county hopes to persuade 61
homeowners to surrender swaths of their yards and driveways.
As
of Thursday, the county had signed agreements with 26 households; the Blaine
City Council postponed to July 9 a vote on a joint powers agreement on the
project. The plan is to vote after getting agreement on a $100,000 city-county
matching grant for trees, fences and other projects for residents, and on a
speed study to submit to the state in hopes of reducing the speed limit along
the residential stretch to 45 miles per hour.
Lenders
guard their interests
Most
homeowners’ mortgage contracts include language that allows lienholders the
option to claim proceeds from a condemnation process. In an economic
environment of stressed banks and highly leveraged real estate, people are
finding that the banks are exercising that option.
Minnesota
statute defines owner broadly, as anybody considered to have a financial
interest in a property. All are entitled to notice of an eminent domain claim,
and all are entitled to compensation if there’s a settlement. And depending on
the fine print in homeowners’ mortgage contracts, sometimes the mortgage
company has first dibs to part or all of a settlement intended to compensate
owners for lost property values.
The
trend of mortgage companies claiming settlement payments has everything to do
with the economy, said real estate attorney Mark Savin, a partner at the
Minneapolis law firm Faegre & Benson, adding that he’s seen the same trend
in commercial real estate.
“In
the current environment, every lender is paying attention to every nickel,” he
said. “In an environment where housing prices were soaring and land prices
were soaring, a bank wasn’t concerned about whether its collateral was at
risk. But now if you take 10,000 feet from a property that raises real concern
with the banks. The banks are careful to guard their interests.”
Depending
on the terms of the contract, the settlement sometimes is applied to the
mortgage principle, but that’s scant consolation to folks who agreed to a
settlement with plans for the money.
“I
kind of blew a gasket, because how are you supposed to fix the existing
problem?” Tieden said. “We need money to fix whatever they’re going to damage
because they’re not going to fix it. … They’re just going to come in and
destroy everything we’ve done.”
The
Tiedens’ mortgage holder, Wells Fargo, said in a written statement that it
could not comment on “financial information related to an individual
customer’s loan or property.”
But
Savin offers disgruntled homeowners some hope: Sometimes in commercial cases,
owners have prevailed by promising to use the settlement to try to offset the
loss.
“If
there’s one thing the bank hates is that you’re going to take the money from
the condemnation and use it as a windfall and use it for a trip to Florida,”
Savin said. “If you have the ability to negotiate with them, you want to make
the argument that you’ll restore the property because that restores the value
of the collateral.”
Maria
Elena Baca • 612-673-4409