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Is the Much Maligned Eminent Domain an Underwater Mortgage Holder’s Friend?

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Eminent domain often gets a bad rap, sometimes for good reasons, but … would you consider this creative idea?

“Housing’s Last Chance?” by Joe Nocera, New York Times, July 9, 2012

“.… It has also been clear for some time that the best way to keep troubled homeowners in their homes is by reducing the principal on their mortgages, thus lowering their debt burden and more closely aligning their mortgage with the actual value of the home.

Which is why Greg Devereaux, the county’s chief executive officer, found himself listening intently when the folks from Mortgage Resolution Partners came knocking on his door. They had spent the previous year kicking around an intriguing idea: have localities buy underwater mortgages using their power of eminent domain — and then write the homeowner a new, reduced mortgage. It’s principal reduction using a stick instead of a carrot….” [Link to full article.] [Reprinted in the print Oregonian, Sunday, July 11, 2012.]

(You can read more about how this works at the MRP website and FAQ pages.

Mortgage Resolution Partners (MRP) is a Community Advisory firm working to stabilize local housing markets and economies by keeping as many homeowners with underwater mortgages in their homes as possible.”)

Compare with, “Why you can’t use eminent domain to buy performing mortgages,” by Felix Salmon and the article at Reason dot org and others (search eminent domain foreclosure).