California Group Proposes Eminent Domain Seizure Of Underwater Mortgages

A San Francisco-based housing organization is pushing for California lawmakers to keep distressed homeowners in their residences by using eminent domain laws to condemn their underwater mortgages.

According to a Reuters report, Mortgage Resolution Partners – which describes itself as an organization focused on keeping homeowners in their homes – says an eminent domain-based condemnation of underwater mortgages is ‘the only practical way to modify mortgages on a large enough scale to solve the housing crisis.’ Under this strategy, the state government would take the underwater mortgages away from the private lenders and bondholders that own the mortgages and then pay the original mortgage owner the fair value of the property.

Mortgage Resolution Partners' proposal would be funded by institutional investors, and not by public funds. The condemnation proposal is being reviewed by public officials in San Bernardino County, Calif., where it is being received with interest.

‘We are intrigued,’ says Gregory Devereaux, chief executive of San Bernardino County. ‘Our economy in this county can't be turned around until a large proportion of the mortgage crisis has been addressed.’


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