Eminent Domain question

[Rick Bradd]

Greetings, I have been lurking on BP for some time now trying to absorb as much knowledge as I can, I am primarily interested in learning to invest in notes. That said I have been following any news, forum updates and blogs and I came across this article that disturbs me, and I would like to know if anyone with more experience has any thoughts on how this might effect an investor who owns a note. Basically some So. California County's are considering using Eminent Domain laws to seize mortgages on under water properties, pay off the mortgages at a discount to the current homes value, and refinance the property at the new home value.

My concern and question is, if I were the note holder on a property and this were to happen, could (would) I lose my a chunk of my investment?

http://realestate.msn.com/can-your-city-seize-your-mortgage

Thanks everyone for for sharing your knowledge, i have really learned a lot.
Rick

[Bill Gulley]

Yes, they do take personal property, never heard of a note being taken and yes the value is almost always higher in the eyes of the owner and they get less. But won't they have to value the note, it's a requirement for the ED proceedure, I thought it was the property held, sorry, I may have read another article and thinking these had been foreclosed upon or in the process.

My point is that I don't see a municipality taking a note held by an individual just because it's going to foreclosure or in default, there is no public purpose in that, there may be for a bulk of defaulted mtgs.

What would be next, taking a mom and pop resturant and selling it to a chain resturant and saying the chain could make it more profitable?

If you make a cash loan, yes you can take a loss, if you make a loan based on equity, it's an opportunity lost, not really a monetary loss, although as Jon pointed out, you may need to put more money in to get less on the next sale and end up with a cash loss.