Posted Aug 07, 2013 08:10 pm CDT
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.