There is no question that the housing market crash created many problems, for banks, investors and homeowners alike, and it is not bouncing back with the force idealists, realtors, and economists would have hoped. Cities in San Bernardino County, California have decided to be more proactive in their efforts to help homeowners stay in their homes and get through the housing rough patch and have come up with a plan to use eminent domain, not for the actual homes, but for the mortgages.
According to ABC 7 News, the governments of Fontana and Ontario, and unincorporated San Bernardino County, would use the power of eminent domain to seize eligible underwater mortgages that can't be modified from investors and banks and then offering a new loan at, or perhaps even below, current market value. While the goal to keep homeowners in their homes is admirable, there may be legal issues barring such a plan.
The Wall Street Journal states that 18 banking, housing, and securities groups have issued a warning concerning the use of eminent domain to seize underwater mortgages. Investors who own the troubled mortgages in the form of private-label mortgage-backed securities claim that the use of eminent domain in this way would raise very serious constitutional and legal issues. The legal backlash of such a move by the Southern California municipalities is yet to be seen.
The laws surrounding eminent domain are very complex and can have unpredictable legal consequences. If you believe the government's power of eminent domain is being used against you unjustly, experienced eminent domain lawyer John S. Peterson, of Peterson Law Group, P.C., can help you understand your legal rights and options. To discuss your particular situation, call (213) 236-9720 for a consultation today.