RICHMOND, Calif, Sept 11 (Reuters) - Richmond, California’s leaders approved on Wednesday a plan for the city to become the first in the nation to use eminent domain to acquire mortgages with negative equity.
Eminent domain allows governments to seize private property for a public purpose. Critics say the plan threatens the market for private-label mortgage-backed securities.
The 4-3 vote by Richmond’s city council allows the city invoke eminent domain if trusts for more than 620 delinquent and performing “underwater” mortgages reject offers by the city to buy the loans at deep discounts pegged to their properties’ current appraised prices to refinance them and reduce their principal. (Reporting by Jim Christie; Editing by John Stonestreet)