City eyes eminent domain takeover - Richmond, CA.

Reproduced here for fair use and discussion purposes. My comments in bold.

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Once the camel's nose is under the tent, there's no stopping him. In 2005, the US supreme Court decided in the Kelo decision that the the town of New London, CT. was justified in taking an entire neighborhood because a Pfizer plant would be built, generating more tax revenue than the homes that occupied the site.

The city based its authority to take the property on the 5th amendment: "...nor shall private property be taken for public use, without just compensation." The supreme Court ruled against the property owners and the city took their property. 

Now we have another city pushing the boundaries further. Underwater mortgages are now deemed "property." Stretching even farther, taking the contracts is "public use," and it remains to be seen what the "just compensation" will be. 

Because of the real estate crash, itself caused by government intervention into the housing market, the city of Richmond wants to intervene yet again and go into the mortgage business. They think, without evidence, that people will stay in their worthless homes if they have better mortgage terms. They think, without evidence, that they can make this program work. they think, without evidence, that it is a legitimate duty of a city government to take over peoples' mortgages.

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A San Francisco Bay Area city voted Wednesday to try to expand a first-in-the-nation plan to use its power of eminent domain to seize hundreds of mortgages that exceed the value of homes.

The Richmond City Council voted 4-3 to set up a joint powers authority to bring more cities into the plan, according to reports in local media.

Mayor Gayle McLaughlin says the city of El Monte in Southern California has expressed interest, and she believes other cities will follow.

Under the plan, Richmond would use eminent domain to seize so-called underwater mortgages. It would then offer the bank fair market value for it and give the homeowner a new loan that would lower monthly payments and improve their chances of staying.

Banks have filed lawsuits to stop Richmond from going ahead with the strategy, and investors have shied away from purchasing city bonds since the eminent domain plan began garnering national attention.