Could Eminent Domain Offer a Life Raft for 'Underwater' Mortgage Owners?

Amanda Erickson explains how communities could wield the power of eminent domain to rescue residents with "underwater" mortgages, by condemning homes and allowing owners to refinance their mortgages and pay a new, lower rate.

While U.S. homeowners continue to struggle through the economic recession and maintain their mortgage payments, 14 million of them are making payments on mortgages that are worth more than their home. California-based community advisory company Mortgage Resolution Partners believes they have the answer for these "underwater" homeowners.

Erickson outlines MRP's streamlined process, stating that cities could "condemn 'underwater' homes that meet this criteria. Under the law, they would then pay mortgage holders (the trusts) only the 'market value' of the home, or the value the house is worth today. Then, instead of booting the residents, the city would allow them to refinance their mortgage and pay a new, lower rate."

Questions of legality come into play, but, Erickson writes, the 2005 case of Kelo vs. New London made the utilization of eminent domain for economic development an acceptable action. "At this point, I guess you'd have to say all bets are off in terms of what is and isn't eminent domain," says Columbia University law professor Thomas W. Merrill.

Full Story: Can Eminent Domain Solve Our Mortgage Woes?

Comments

building block set

NEW! Build the world you want to see

Irresistible block set for adults when placed on a coffee table or desk, and great fun for kids.
$25

Prepare for the AICP* Exam

Join the thousands of students who have utilized the Planetizen AICP* Exam Preparation Class to prepare for the American Planning Association's AICP* exam.
Starting at $245

NEW! Get the "Green Bible"

Understand the complexities of planning at the local level while preparing for the AICP* exam. Find out why this edition is included in the APA's recommended reading list.
$105
Book cover of the Guide to Graduate Planning Programs 4th Edition

Thinking about Grad School?

The Planetizen Guide to Graduate Urban Planning Programs is the only comprehensive ranking and listing of graduate urban planning programs available.
Starting at $24.95