Earlier today the Joint Power Authority, municipal body constructed by the county of San Bernardino, California voted not to consider using the power of eminent domain to seize residential mortgages held in private label securitizations (PLS).
The proposed move, authored by “Mortgage Resolution Partners”, a private firm out of San Francisco, had long been a controversial measure strongly opposed by private investors. The concept would have used the local “takings” power to write down principal on underwater mortgages and refinance the new loans onto the books at The Federal Housing Administration (FHA).
In a policy brief titled “Can Eminent Domain Help Underwater Homeowners” published on July, 2012, when this plan first began to surface, I argued that eminent domain deserved credit for being creative, but was not in the best interest of homeowners. Please see the memo here.