Richmond, CA might use Eminent Domain to Seize Underwater Mortgages
A lot of city and county governments have been debating this idea, but Richmond, CA might be the first to actually go through with it.
Here’s how it works: If the City of Richmond offers to purchase an underwater loan at market value, and the bank rejects that offer, the City will go ahead and seize the loan using the power of Eminent Domain. The city government will then pay the bank the previously-rejected market-value amount, and will refinance the homeowner’s loan with lower monthly payments. The homeowner now has a better chance of keeping his/her home.
Everybody wins — unless you’re a bank executive. And that’s a big “Unless.” That’s why so many local governments have been debating this idea but are afraid to implement it. The local government might get sued. By whom? On what legal grounds?
The other main scare tactic is fear of a “boycott” by Wall Street: No aspiring homeowner in this town will ever get a mortgage loan if the city goes through with this Communist power grab.
[sigh]
This is just another variation on the endless rightwing blathering about “Businesses will leave if (insert name of environmental/consumer protection law) gets passed!” If ONE employer actually left every time somebody yelled “businesses will leave if ________________,” there wouldn’t be a single American worker still employed.
If there are actually any teeth in that vague threat of being boycotted by Wall Street, that’ll be an incentive to get your home loan through a credit union or local bank instead of a Wall Street conglomerate.
Again, everybody wins.
Let’s hope Richmond actually puts this Eminent Domain idea into action, and that hundreds of other localities will follow suit. Enough with the endless debating and hand-wringing. Grow a pair. Do It.
Labels: Eminent Domain, Richmond California, underwater mortgages
posted by Tom Harper @ 1:33 PM
5 Comments:
This idea has been floated before. Use eminent domain to seize the property from the banks and then basically give it to anyone who will live in it and fix it up. Doesn't seem so far fetched to me.
If this works, other cities should take note and do the same thing. Not as if the banks are helping people out with all the wrong houses being foreclosed on, or old 90 something yr men who have lived in their homes for decades, being forced out over a 134 dollar tax lien or anything. Wait...yeah that last thing did happen so screw the banks, work for the regular Joe instead. It's about past time we do something like this.
Mr. C: Me either.
Jess: Other cities definitely need to jump on this bandwagon ASAP. Whatever actual danger there is of being sued or boycotted/redlined by Wall Street, there'll be safety in numbers if dozens or even hundreds of local governments are doing this.
It's an interesting use of eminent domain but I do suspect it may have legal problems. And can cities really provide mortgage loans to individuals? That may be another legal problem. Do you really want your city government loaning your tax dollars to your neighbor? Well, it might be better than giving it to some big developer to knock down your neighbors house and put up a multi use building.
Jerry: I agree it's an imperfect solution, but the local government has an incentive to minimize the number of foreclosed/vacant homes. Banks have no such incentive.
I'm no legal expert, but I can't see any legal standing for banks suing governments over this, other than the intimidation factor -- a cash-strapped local government being afraid to go to court against the finance industry's army of $500-an-hour lawyers.
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