Could Eminent Domain Be a Solution to Help Stop Foreclosures?
Eminent domain occurs when the government takes private property for public use. The owner of the property must be compensated but cannot refuse the sale to the government of the property. Eminent domain was traditionally used when a city or state needed land to build a highway or accomplish another similar goal to help the public. Now, however, our Miami foreclosure lawyers know that cities have begun exploring the possibility of using eminent domain to stop foreclosures and help people to keep their homes.
Many cities have considered the use of eminent domain as a solution to foreclosure problems plaguing homeowners, but no plan has yet gone into effect. Threats from real estate interests and Wall Street have largely caused cities that have considered eminent domain to back away, in part due to concerns that residents of areas that embrace this solution will find it difficult or impossible to get mortgages. However, the New York Times reports that interest in the use of eminent domain is growing and that while cities are still in the early stages of forming plans, this could end up being a solution, especially in the hardest hit areas where something needs to be done to protect property values and reduce blight.
Eminent Domain as a Foreclosure Solution
The city of Richmond, California was one of the first to consider eminent domain. Richmond identified homes that were worth much less than the homeowner’s owed and offered to buy the mortgages so that the city could reduce the debt balance and prevent foreclosures. Letters indicating the city’s intent to buy the debt were sent to banks and investors, and within the letters, the city warned that it could use eminent domain to condemn and buy the buildings if the lenders did not cooperate.
This gave rise to fierce opposition and, in fact, while the city hasn’t actually used its power of eminent domain yet, two lawsuits have already been filed in federal court. Other cities, however, haven’t been deterred by this threat from evaluating their own plans.
Yonkers, for example, is going to take up a resolution soon to study the use of eminent domain to reduce mortgage debt. Both Pomona and Oakland in California are moving forward to study the use of eminent domain, and support is building in the Newark New Jersey area to seriously consider this as a possible solution. A Cornell University law professor who was one of the architects behind the strategy has also indicated that two cities in Pennsylvania have contacted him about the idea.
The American Civil Liberties Union has spoken out in favor of the efforts to use eminent domain in this way, indicating that opponents are largely using threats to stop cities from exercising their legal right to eminent domain.
The threats have been effective at causing many to back away, including not just Richmond but also North Las Vegas and San Bernardino County. The opposition comes from powerful stakeholders including the Mortgage Bankers Association and many big banks and investors who are concerned about investors’ rights and about the impact on the mortgage market. The Federal Housing Financing Agency, which is in charge of overseeing Fannie Mae and Freddie Mac, has also described the eminent domain plan as “clear threat to the safe and sound operations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.”
This opposition will be tough to overcome, but the cities that are now in the planning states of an eminent domain solution may find ways around the opponents in order to help their citizens who are struggling.
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.
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