Seizing Homes Using The Power of Eminent Domain - New York News

Seizing Homes Using The Power of Eminent Domain

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The nationwide housing recovery has not hit the City of El Monte. Some home loan modifications and federal help have scarcely pulled neighborhoods out of financial crisis...with an estimated one thousand homeowners on the brink of foreclosure. And now frustrated city leaders may take an unprecedented step to save homeowners saddled with these underwater mortgages.

The strategy... Seizing those homes using the power of eminent domain. Then city would first condemn home, take it, and then offer to sell it back to the bank for what the city considers "fair market value." The bank's shareholders and investors would essentially absorb any losses. Wall Street groups including a group called SIFMA strongly oppose the tactic and are meeting with city leaders.

But opponents warn eminent domain could do more harm in the end...because banks would become afraid to invest or lend more to these depressed communities.

Critics also say the move is unfair to investors...as many of these loans are bought by 401k and pension plans.

SIFMA released this statement : 

Tim Cameron, Managing Director, Head of SIFMA AMG: 

"We strongly oppose the use of eminent domain to seize mortgage loans, and believe it is a serious mistake to pursue a plan that would harm investors, constrict credit for borrowers and depress housing prices just as the housing recovery is gaining steam. 

"Asset managers have a fiduciary duty to protect their clients, who are the investors—the teachers, firefighters, policemen and other middle-class American savers—who put their money into 401(k)s, pension plans, IRAs and other savings vehicles that invest in mortgage-backed securities. The eminent domain proposal targets MBS and tears mortgage contracts apart, creating a loss for investors and significantly undermining the trust and confidence investors and savers have traditionally had in America's."

San Bernardino County and two of its cities rejected this option to avoid a costly legal battle. The El Monte City Council will vote on whether to employ this strategy tomorrow.   Two dozen other local state governments are also considering it including Seattle, Newark, and North Las Vegas.

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