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Real Estate & Property Law

City moves forward with controversial mortgage rescue plan, backed by eminent domain power

Posted Aug 7, 2013 3:10 PM CDT
By Martha Neil

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A city in the San Francisco Bay area is the first in California to move ahead with a controversial approach to the problem of struggling homeowners having trouble paying mortgages on their upside-down homes.

Richmond has asked the holders of more than 620 underwater mortgages—mortages in which the principal balance exceeds the fair-market value of the home—to sell them to the city at a discount, the Los Angeles Times (sub. req.) reports.

If that doesn't happen, the city could potentially use its eminent domain power to force the lenders to do so, a move that likely would result in litigation.

The idea is for Richmond to partner with a venture capital firm, Mortgage Resolution Partners of San Francisco, to offer homeowners new Fair Housing Administration-backed mortgage on favorable terms, based on the actual value of their homes.

An earlier ABAJournal.com post about other cities then considering the approach provides additional details.

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