Recently, the Richmond, California city council became the first city in America to pursue an innovative new strategy to fight foreclosures. With support of the Alliance of Californians for Community Empowerment, the city of Richmond will make offers to buy underwater mortgages. If lenders refuse the offers, the city will take the property by eminent domain, pay the lender the fair market value of the property, and then work with friendly lenders to refinance the loan with the Federal Housing Administration.
Richmond has been hard hit by foreclosures and plummeting house prices. Homeowners lost over $264 million in home equity last year alone. Half of all homeowners in the city are currently underwater.
Richmond expects that if lenders reset underwater mortgages to fair market value, Richmond homeowners will save an average of over $1,000 per month. They estimate those savings will generate about $170 million in economic stimulus and 2,500 jobs.
Wall Street lobbyists have threatened local governments that they will saddle them with endless lawsuits if any city pursues an eminent domain strategy to deal with foreclosure and underwater homes, but Richmond has decided to proceed anyway.
Interestingly, North Las Vegas is considering the same strategy: http://www.
If your home is underwater or you are facing possible foreclosure, contact an attorney who can help you save your home. There are various options outside of eminent domain, including a negotiated settlement, mortgage modification, or short sale. An experienced debt settlement attorney can counsel you on each option and help get you in a position where you are not drowning in negative home equity.