RICHMOND (KCBS) – Richmond city leaders were moving ahead with a plan to head off the foreclosure crisis, a plan that is not without controversy.
The city has offered to buy more than 600 underwater mortgages at below the homes’ current value.
“If they are unwilling to negotiate a sale of the loans, which we want them to do, then we will consider using eminent domain as another option to purchase these loans at fair market value,” said Richmond Mayor Gayle McLaughlin.
Richmond is the first city in the country to take the controversial step of threatening to use eminent domain, the power to take private property for public use. But other cities have also explored the idea.
Banks, the real estate industry and Wall Street are vehemently opposed to the idea, calling it “unconstitutional” and a violation or property rights, and something that will likely cause a flurry of lawsuits.
Richmond has partnered with San Francisco-based Mortgage Resolution Partners on the plan. Letters have been sent to 32 servicers and trustees who hold the underwater loans. If they refuse the city’s offer, officials will condemn and seize the mortgages, then help homeowners to refinance.
Richmond resident Morris LeGrande, who is currently underwater on his mortgage, said the foreclosure crisis continues to have a big impact on the city.
“We have a large percentage of homes here that are underwater and the effect that it’s having on the community is kind of devastating in the fact that we are always behind in what we need in terms of revenues for our city,” he said.
Mortgage Resolutions Partner will receive a flat fee per mortgage and has said it will handle all legal costs.
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