San Bernardino Shelves Eminent Domain Mortgage Plan
Late last week, the County of San Bernardino and two of its cities abandoned a proposal to use eminent domain (the power to condemn) to seize troubled mortgages and write down debt for homeowners. San Bernardino was among the hardest hit by the housing bust with tens of thousands of homeowners in underwater mortgages. The decision strikes a blow to an idea that garnered national attention as a potential, if controversial and some argue unconstitutional, solution to the mortgage crisis. Criticism of the plan came from the mortgage industry, Wall Street groups and bankers, who argued that it would spark lawsuits, higher interest rates and a tightened market for borrowers. Eminent domain is used to seize land for public projects and public use – such as roads, utilities and transit systems. The San Bernardino County effort would have been the first widespread attempt at using eminent domain to seize residential mortgages. The City of Chicago rejected a similar idea last year. The idea was proposed by the firm of Mortgage Resolution Partners in San Francisco. The group is still talking with more than 30 other jurisdictions across the country. Representatives of homeowners in need were disappointed in the County’s decision noting a creative solution to the mortgage crisis must be found soon.