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.
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.