After a dramatic meeting that stretched into the early morning hours, city councilors in Richmond, Calif., voted in favor of using eminent domain to seize underwater mortgages -- a plan the mayor supports. New investors would be assigned to purchase the loans, the terms of which would be adjusted to make them more affordable to borrowers.
Opponents, including real estate agents, said that adopting the plan would set a precedent that could make home loans more difficult and more costly to obtain nationwide; but backers of the controversial proposal won out in the end. They argue that the strategy will help people avoid foreclosure, at a minimal cost to taxpayers.
The battle is far from over, however. City Manager Bill Lindsay said during the meeting that a creative solution to help people avoid foreclosure is needed but that eminent domain would not be used if there were alternative, viable options available. Richmond already has spent $7 million to line up new investors to take over the loans from banks once eminent domain is used, but it is still facing a lawsuit filed by banks.