Experts debate legality of plan to apply eminent domain to mortgages - Real Estate - The Sacramento Bee: A plan to use eminent domain to seize underwater mortgages has raised hopes of homeowner bailouts in cities stricken by the housing crisis, including Sacramento, Rancho Cordova and Elk Grove.
But would such a novel plan even be legal?
Experts say the proposal being shopped around by San Francisco's Mortgage Resolution Partners may well meet the U.S. Supreme Court's broad definition of a public use under eminent domain law. The investor group is encouraging cities and counties to condemn mortgages and cut the amount borrowers owe to prevent blight and boost local economies.
The sticking point, legal experts say, will be when it comes to paying the "just compensation" required under the U.S. and California constitutions.
Problem is by the time the U.S. Supreme Court rules on the question -- where the issue will mostly likely end up -- years will have elapsed and the current market will have changed such that fewer homes will be underwater.