California City Sets Ultimatum For Eminent Domain Action

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On July 29, the California city of Richmond reportedly sent letters to the owners and servicers of the mortgages on 626 homes in the city, informing those entities that if they do not accept the city’s offer to purchase the mortgages, the city will employ its eminent domain powers to seize the mortgages. The city is demanding to buy both current and delinquent loans, and the first pool of 626 loans does not include any homes with large second mortgages. It intends to write down the principal of the purchased mortgages in an effort to avoid additional foreclosures, and then sell the loans to new investors. If the city follows through on its ultimatum, it would be the first locality to use eminent domain in this way. Several other localities have considered or are considering such action, including North Las Vegas, Nevada, which recently announced its intent to assess the potential use of eminent domain.