A plan is in the works in California’s San Bernadino County to seize mortgages from homeowners on the verge of foreclosure and restructure them, implementing eminent domain to help those with underwater mortgages keep their homes.
Despite only being in the early planning stages, San Bernadino County’s aggressive response to the foreclosure crisis has already attracted controversy. The California Mortgage Bankers Association and the American Bankers Association, as well as a number of other financial groups, contended in an open letter that the practice would be unconstitutional and increase lending rates in the affected cities, negatively affecting the overall housing market.
But some experts say this solution is not only legal, it’s pro-market. Underwater mortgages that have been securitized often cannot be sold at market value due to contractual obligations, and as a result they languish at face-value while the property falls into neglect.
Guests:
John Vogel, professor at Dartmouth’s Tuck School of Business
Curdina Hill, executive director of City Life Vida Urbana
