A hard-hit housing development in San Bernardino County. (Katie Falkenberg / For The…)
The cities of Sacramento and Elk Grove are the latest municipalities to consider a plan that would seize troubled mortgages using eminent domain and restructure them for homeowners, according to a news report.
The plan would adopt a program already under consideration in Southern California that would use private funds to acquire underwater mortgages -- those where the homes wouldn't sell for enough money to pay off the loans. Under the proposal, the condemned loans would be restructured, lowering the amount owed, with the intent of helping the owner keep the property.
The proposal is pushed by a San Francisco investment group called Mortgage Resolution Partners that has close ties to former San Francisco Mayor Willie Brown.
The plan has been denounced by groups representing the securitization industry, as well as the overseer of mortgage titans Fannie Mae and Freddie Mac. Nevertheless, the idea appears to be gaining traction among certain jurisdictions, politicians and even some celebrities.
Sacramento City Councilwoman Angelique Ashby told the Sacramento Bee that she was considering the eminent domain plan because the area she represents, the subdivisions of North Natomas, is suffering from the steep drop in prices brought on by the housing bust.
"The bottom line here is that Natomas is one of the worst-hit communities in the country," Ashby told the Bee. "If there's a plan or proposal that would help my constituents, I definitely want to hear about it."
Lt. Gov. Gavin Newsom recently said the idea of using eminent domain should be given room for consideration. On Monday, the actor John Cusack, speaking on a live chat on the Huffington Post website, also said he backed the plan.
The eminent domain program first gained attention in San Bernardino County. In the Inland Empire, the aggressive plan is titled the Homeownership Protection Program and partners the county with the cities of Ontario and Fontana. The authority is still considering the plan, and will hold its second public meeting on the issue this week.
The Chicago City Council, which is also considering the plan, will hold a hearing on the issue Tuesday.
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