Industry Questions Legality of California City’s Eminent Domain Plan

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Is this a proper function of government and is it a correct use of eminent domain? Please read the article below and let me know what you think.

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The city of Richmond, California, announced an unconventional plan to ward off foreclosures among underwater homeowners, instantly sparking debate and criticism throughout the mortgage industry. In fact, several industry groups have called into question the constitutionality of the plan and have voiced concerns for its long-term consequences.

“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,” Richmond Mayor Gayle McLaughlin told the San Francisco Chronicle Tuesday.

The plan, which “is fraught with negative economic consequences for the community,” according to the Association of Mortgage Investors (AMI), is for the city to obtain the mortgage loans of underwater properties and help homeowners refinance at their homes’ current value.

The Mortgage Bankers Association president and CEO, David H. Stevens, boils the plan down to “a short-term solution for a few underwater borrowers that will have severe negative long-term costs for every homeowner in the city.”

Richmond will rely on Mortgage Resolution Partners to carry out the refinances.

The city sent 32 banks letters requesting to purchase more than 600 underwater mortgages, according to reports. If the banks do not agree to sell the mortgages, the city plans to seize them under its right to eminent domain.

To read the complete article – please use the link below.

Eminent Domain Plan

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