Eminent Domain Mulled by Municipalities to Cope With Foreclosure Glut
A glut of foreclosures in communities from Miami to San Francisco has become a source of blight and decreased property values.
Banks have not shown ambition in addressing this problem, sometimes evicting residents and then not actually putting the case through foreclosure in order to avoid having to catch up on taxes and liens and a responsibility to clean up the property.
That’s why our Miami foreclosure defense lawyers understand a number of cities have weighed the possibility of seizing these properties through eminent domain. Eminent domain is the right of the government to expropriate private property for public use, with payment of compensation.
San Bernadino County in California was one of the first to seriously consider this option. The plan was that the county would seize underwater homes where the borrower was in danger of foreclosure. The county would then pay the banks what the home was worth and in turn negotiate new mortgages with the homeowners at rates they would actually be able to afford.
Those plans were torpedoed by Wall Street banks, which threatened a lending boycott and ruinously expensive litigation.
But in many ways, as the Wall Street Journal recently pointed out, eminent domain may be one of our last best hopes to mitigate the housing crisis. It’s what allows us to build straight roads, extend sewer and water lines to new houses and put schools near the neighborhoods where kids live.
Banks know that it takes more work to negotiate a reasonable loan modification than to foreclose, and further that they make more money if they foreclose than if they modify. They have little incentive to work with homeowners.
But cities and counties have great incentive to step in and improve the quality of neighborhoods left decimated by the foreclosure crisis.
That’s why cities like North Las Vegas and El Monte (outside of Los Angeles) have also weighed the possibility.
Now, the city of Richmond, California is braving bank repercussions to do just that. The New York Times reports that city leaders are tired of waiting for banks to fix the problem.
The banks have not changed their vigorous opposition to these actions, so many cities are closely watching how this scenario unfolds. As the mayor of Richmond was quoted as saying, “They can put forward as much pressure as they would like… But I’m very committed to the well-being of our neighborhoods.”
Although home prices are rising in Richmond, and elsewhere across the country, about half of all homes there are underwater. In some cases, people owe three or four times as much as the home is worth.
The city has sent more than 625 letters to loan servicers and owners, offering to buy those loans. In a number of cases, the homeowners are already backed up on their payments. Many others are at risk of falling behind, primarily because home values have spiraled to the point that borrowers have little incentive to keep on paying.
We see this a lot, particularly in cities where the majority of the population is minorities because these groups were purposely steered by banks into predatory loan agreements.
If Richmond is successful, we suspect – and hope – we’ll be seeing similar action taken nationwide.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call 305-358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.