Teaming up with another city in a Joint Powers Authority would allow Richmond, Calif., to invoke eminent domain for underwater mortgages without obtaining approval from a supermajority of its city councilors. The council voted 4-2 -- one vote shy of the needed supermajority -- on Dec. 17 to establish guidelines for the use of eminent domain to seize and restructure underwater mortgages in order to avoid foreclosures and stabilize communities.
The eminent domain plan being considered by the council would focus on neighborhoods struggling with foreclosures, and only homeowners with mortgages under the $729,750 conforming loan limit who opt in would qualify. Banks holding these loans would be asked to voluntarily reduce principal balances so that they are on par with current home values. Realtors and banks call the move unconstitutional, worry that the city's lending costs would rise, and are ready to fight the plan in court if need be.