Richmond, California Moves Ahead With Plan to Seize Underwater Mortgages

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The city council of Richmond, Calif., has voted 4-3 to proceed with a plan to use eminent domain to buy up underwater mortgages at deep discounts and give homeowners a new, cheaper loan that would have lower monthly payments and decrease the chance that the home will be foreclosed upon.

In addition, Richmond has agreed to help other cities follow its lead in using eminent domain to help heal the foreclosure crisis blighting many parts of the country. Mortgage lenders — including federally owned Fannie Mae and Freddie Mac — have announced their opposition to such plans and have threatened that any towns utilizing eminent domain to extract unfair concessions from investors would face a shortage of mortgage lending in the future.