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?
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