Californian city to use "eminent domain" to seize mortgages

Richmond in California has approved a plan for the city to become the first in the country to forcibly acquire underwater mortgages using the power of "eminent domain," which enables governments to seize private property for a public purpose.

The idea is for the council to work with investor group Mortgage Resolution Partners to buy delinquent mortgages at deep discounts to the associated properties' market valuations, make the loans more affordable for home owners and avert foreclosure.

However, critics fear that the program could hurt the market for mortgage-backed securities, provoke lawsuits and endanger Richmond's finances.

The FHFA has said it will press Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) to limit or cease business where eminent domain is approved, a move that would shut off most mortgage financing in the affected areas.


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Comments (8)
  • Joe Springer
    , contributor
    Comments (2650) | Send Message



    "it harms investors in Residential Mortgage Backed Securities (RMBS). Although Richmond Mayor Gayle McLaughlin has portrayed this issue as a conflict between homeowners and banks, the fact is that banks do not own most of these securities."
    11 Sep 2013, 08:18 AM Reply Like
  • The Geoffster
    , contributor
    Comments (4296) | Send Message
    Get your money for nothing and your house for free.
    11 Sep 2013, 08:48 AM Reply Like
  • jamesingram32
    , contributor
    Comments (578) | Send Message
    ha! good 80's reference
    12 Sep 2013, 12:11 PM Reply Like
  • Mobywhite
    , contributor
    Comments (409) | Send Message
    What else would you expect from a city known as the arm pit of the bay area.
    11 Sep 2013, 10:51 AM Reply Like
  • Squeeky Wheel
    , contributor
    Comments (350) | Send Message
    An explanation for why this helps everyone - Paying Paul and Robbing No One: An Eminent Domain Solution for Underwater Mortgage Debt -


    The basic idea is that underwater mortgages create housing blight, squatters, fire sale foreclosures and other problems. Underwater mortgages hurt investors as they are likely to default, causing foreclosures (usually a money loser for the MBS), which leads to blight, which reduces the value of the surrounding mortgages. With eminent domain, investors get an exit from non-performing loans which raises the value of the rest of the portfolio. That's the idea at least.
    11 Sep 2013, 12:00 PM Reply Like
  • Clayton Rulli
    , contributor
    Comments (3411) | Send Message
    Or you can do what the government by me is doing: Offer grants for first time home buyers that are forgivable over time.
    11 Sep 2013, 12:10 PM Reply Like
  • jaginger
    , contributor
    Comments (812) | Send Message
    I guess law and property rights don't really matter when someone's palm is to be greased.
    11 Sep 2013, 12:10 PM Reply Like
  • bhartman7
    , contributor
    Comments (2) | Send Message
    how is this better than FNMA
    24 Sep 2013, 02:40 PM Reply Like
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