Plan to Save Underwater Homes– Eminent Domain
In the last 7 days a considerable amount of chatter has been moving across the blogosphere about a policy proposal being floated in San Bernadino County, California to prevent the foreclosure of thousands of underwater homes in the county. In conjunction with private lender, San Bernardino county is considering using its powers of Eminent Domain to take possession of underwater homes and sell them back to the homeowners at the present market value. The repurchase would be financed by the private mortgage lender.
This proposal is apparently driving the bankers nuts and they have threatened to cut off lending to citizens of the county due the financial risk. The banking industry prospective was reported today by American Banker.
Eminent Domain, the government taking private property for a public purpose in this context became a possibility as a result of the decision of the Supreme Court in Kelo v. City of New London, 545 U.S. 469 (2005). Whether or not this approach becomes a practical option for consumers facing foreclosure and bankruptcy is to be decided in the future.
What is certain is that the desperation of the Foreclosure crisis is a catalyst for innovative thinking.