San Fran Considers Using Eminent Domain to Help Underwater Homeowners
Eminent domain is a legal action that allows the State to forcibly purchase a citizens property at a fair price. The policy is in place to prevent obstinate homeowners from derailing government plans.
Eminent domain must be executed for a purpose of public use. It is typically used when building highways, parks or railroads, but a group of mortgage experts from San Francisco, California are exploring the legal implications of using eminent domain to seize underwater mortgages. Obviously, if it where to work, this would be a huge helping hand to many, many homeowners who are still struggling through tough mortgages in high-foreclosure areas.
The San Fransisco-based Mortgage Resolution Partners are pitching their idea as a way to boost local economies.
The tick in the plan might be the "just compensation" clause that outlines how much the government is required to pay a citizen when seizing their property.
The plan would have local governments buy homes at less than market value from homeowners who are still current on payments for mortgages that are backed by private investment trusts. The homes would have to be bought at under market price so the government makes a profit in order to finance the program.
The idea of local governments buying up the best underwater mortgages at discounted prices might not sit well with the Supreme Court, but despite considerable criticism (mostly from lawyers and interested parties associated with the Securities industry, who are interested in preserving the status quo), many experts believe that the prospect of helping many struggling homeowners will eventually lead the Court to uphold the plan's constitutionality.
The issue of just compensation seems to be more of a barrier than the constitutional grounds of seizing a person's mortgage loan because they are underwater. Throughout American history, the central government has consistently held that eminent domain was a matter of the states, and after what is sure to be a carefully articulated debate, they should do so again.
By: Javi Calderon
