City Ponders Eminent Domain To Justify Mass Buy Of Underwater Home Mortgages

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In a bizarre interpretation of State eminent domain law, a California Bay-Area city is considering the power of eminent domain to rescue more than 600 homeowners from delinquent mortgages.

The city would accomplish this new brand of government-subsidized housing by seizing the properties from secondary lenders, many of whom have cheaply bought off the underwater mortgages from major banks resigned to offload the original homeowners’ loans at a loss. The city would then pay the secondary lenders “a fair market value” and resell the homes back to their original occupants at current market prices, which in 2013 are far below the homes’ market values at the time of their pre-housing-bubble financing and construction.

Among the many things that aren’t clear is whether the “fair market value” the city intends to pay the lenders directly corresponds to the current market price the city would charge (with interest, no doubt) the delinquent occupants to remain in their homes.

If the plan is successful, Richmond, a city long controlled by a succession of Democratic mayors and council members, would become the first municipality in the United States to use the power of eminent domain in such fashion. But other cities are expressing interest in the idea.

Nearly half of Richmond’s home mortgages are underwater. Many of the houses are now valued at less than half what their owners, who financed their homes at the height of California’s easy-lending housing craze, are having to pay.

The eminent domain move has infuriated banks and secondary lenders, with many industry advocates warning that no bank on Earth would re-enter the housing market in a city with leaders willing to pull the trigger and force lenders to take a financial hit on properties whose owners stopped paying.

Personal Liberty

Ben Bullard

Reconciling the concept of individual sovereignty with conscientious participation in the modern American political process is a continuing preoccupation for staff writer Ben Bullard. A former community newspaper writer, Bullard has closely observed the manner in which well-meaning small-town politicians and policy makers often accept, unthinkingly, their increasingly marginal role in shaping the quality of their own lives, as well as those of the people whom they serve. He argues that American public policy is plagued by inscrutable and corrupt motives on a national scale, a fundamental problem which individuals, families and communities must strive to solve. This, he argues, can be achieved only as Americans rediscover the principal role each citizen plays in enriching the welfare of our Republic.

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  • Combat Veteran Seabee

    Can we say, Ca. taxes, frank-dodd, and a failure in the W.H. to allow for the increase in the private jobs sector through increased taxation and useless, unfounded, “because we can,” regulations ?

  • vicki

    If Richmond does this and I were a mortgage institution I would not fund another California mortgage. Ever.

  • wandamurline

    I smell a really big law suit here.

  • Chester

    Why worry about whether or not banks will RE-ENTER when they have walked away from all lending in these areas already? They won’t lend, they won’t follow approved methods of allowing refinancing, and they OWN a good part of the city, paying zip in taxes because the properties are in the process of being “repossessed.”

    • Vis Fac

      Sure the banks will lend again just as long as the fed (taxpayers) GUARANTEES the loan as they did before.
      Semper-Fi

  • Jake Thomas

    That’s right, take care of the irresponsible and screw the responsible. Something is wrong with this picture. I wonder when the homes go back up in value if the owners will have to come up with the original amount or will it just be Christmas for these 600.

    • RAND PAUL IN 2016

      This is socialism in clear manifestation in the real world!! BTW, Obummer’s partner in crime, Holder, is still threatening banks to give out mortgages to people who cannot afford them. Poisonous ideologies die hard!

  • Vigilant

    Here’s another one for the Supreme Court, and it doesn’t bode well for the Constitution. Kelo vs. New London, Connecticut already resulted in a raping of the Fifth Amendment regarding seizures of property by the government. In that case, the activist judges on the left succeeded in finding for the city when it wanted to condemn local, privately owned property purely for the reason to allow a developer to build new residences.

    Might as well get used to the death of private property, the protection of which is ostensibly the primary mission of government. The existence of property taxes points out that we don’t own property any more, the government does. As long as we pay “rent” on that property, it won’t be seized from us.

    • dan

      meh,….like property taxes !

      • Vigilant

        ???????

        • dan

          sorry…as in : if you don’t pay your property taxes they seize and sell it at auction on the steps of the court house….so I refer to my taxes as rent and break them down to monthly payments….it’s what puts the liability into owning real-estate and what breaks up many family farms.

          • v

            The right to own it tax is more like it.

  • Bill

    They are going to shoot themselves in the foot. Anyone in that town trying to get a loan in the future will have a very difficult time and will pay through the nose.
    It is like having Daddy and Mommy bail you out when you make stupid mistakes
    People need to learn from their mistakes or they will make them again

    • Vis Fac

      The people of the PRC (People’s republic of Commiefornia) have the memory span of a fly. They keep complaining of over taxation and regulation but continue to elect the same vermin over and over. So what if the state is broke so what if they can’t pay for pensions and schools, for there is always another business or the “rich’ to levy more tax on right. So goes it for the state that uses imminent domain more than all (57) states combined using tax payers dollars to do so. If you cannot tax them out you use imminent domain to “legally” steal from them. Communism at its best. People who availed themselves of “Slick” Willies legacy were not forced to buy property they could not afford or enter into any “creative financing scam” which (if you aren’t aware) artificially inflated property values mortgage with the hopes of making a small profit. These 600 families were victimized by the PRC though. Live from their mistakes? Who are you trying to kid? The government will provide more assistance on our dime, and the cyle will repeat again and again..
      Semper-Fi

      • Bill

        The only thing holding California together is Silicone Valley. They are starting to wise up as evidenced by Apple looking to move it’s corporate offices to Nevada. When the first pickle is out of the pickle jar, the rest will follow. The old saying rings true “The problem with socialism is that you eventually run out of money to steal”

        • Vis Fac

          I Built MY engineering firm near Riverside CA in the late 70’s Carter’s economics made it difficult if not impossible to start any kind of business. Reagan was
          responsible for me to be able to expand and hire nearly 100 quality people.
          Through the Bush administration and Clinton’s first we had some ups and downs mostly due to the PRC (People’s Republic of Commiefornia) taxes and EPA regulations. I tried to save the business by relocating out of state but finally closed because I still had to pay the PRC through higher licensing and permit fees as well as a “special tax” for the “privilege” of conducting business in the PRC. Instead of being happy with the taxes business my personal as well as employee income, worker’s comp, and EED etc., they got greedy and lost it all because I refused to work for nothing.
          The feds lost out on income and taxes generated from the business as well. A parasite will always kill the host will then and look for another to kill.
          Semper-Fi

          • Bill

            Hi Force,
            Your story is what is happening to the US economy. The liberals cry about outsourcing jobs to other countries but the business climate in the US is not conducive to earning a dreaded profit. So the business moves to where it can earn a profit, and the liberals whine like little girls

          • Vis Fac

            I’ve been preaching to a deaf audience for years and no one would listen. Now if I could only convince people that buy foreign knockoffs (especially the Asian products) that when they do they are supporting a foreign country’s economy and not ours. They will spend good money on inferior junk made in China that breaks then continue to buy the same item have it break and they would if they had bought a “domestically” produced product would have contributed to the US economy and had a quality item that still worked. Being an engineer I hold a few patents and know for fact that Asians in particular do not pay royalties on anything. Asians believe technology is “free market” and free to copy produce and sell worldwide.
            Semper-Fi

  • BHR

    Get use to it—this is the government plan for every part of America, COMPLETE GOVERNMENT CONTROL.Freedom of speech, property rights, freedom of privacy, and all freedoms are disappearing.

  • Defender

    Richmond is close to Berkeley, one of the centers of the radical counter culture/Hippie movement of the 60’s. Doesn’t surprise me that these communists would try such a stunt. Resist these nuts with all you’ve got or we will lose the country!