Richmond, California is considering using eminent domain to protect homeowners from banks. When eminent domain is in the news, it’s usually when the government takes private property and uses it for public purposes. In this case, however, Richmond officials hope to use their power to prevent foreclosures and stabilize the housing market.
From Carolyn Said:
On Monday the city sent letters to 32 banks and other mortgage holders offering to buy 624 underwater mortgages at discounts to the homes’ current value. If the offers are spurned, the letter said Richmond may use the power of eminent domain to condemn the mortgages and seize them, paying court-determined fair market value.
The city would then help the underwater homeowners refinance into mortgages in line with their homes’ current worth. City leaders said the goal is to stabilize the community and prevent foreclosures.
“After years of waiting on the banks to offer up a more comprehensive fix or the federal government, we’re stepping into the void to make it happen ourselves,” said Mayor Gayle McLaughlin.
In the past, banks and finance companies have stopped other cities from exploring this option by threatening lawsuits. In fact, today, Freddie Mac threatened the city with legal action. Richmond officials insist they are ready for a fight and will not back down.
“Our local electeds can’t do this alone, they need the backup support from their constituents. That’s what’s been the game changer in this effort,” said Amy Schur of the Home Defenders League.
- Home prices have fallen 58% from their peak in 2007.
- About half the mortgages in town are under water.
To learn more, check out ABC News’ Q&A about the proposed plan.
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