As reported in a recent story in the Los Angeles Times, San Bernardino County (California) is contemplating an innovative approach to fighting foreclosures among its residential housing. The approach involves using governmental eminent domain authority to seize, in this case, the “underwater” mortgages. From the article:
At this point in the planning, only homeowners who are current on their mortgage payments would be allowed to participate in the program, which would target mortgages that have been securitized and sold to private investors. That would exclude loans owned or backed by mortgage titans Fannie Mae and Freddie Mac. The acquired loans would be restructured, lowering the amount owed, with the intent of helping the owner keep the home.
The article details efforts taken by jurisdictions in California and elsewhere to combat the difficult situation facing many communities, where home values have still not rebounded from the recent economic and financial market downturns.