In the eyes of the state’s second in command, using eminent domain to combat underwater mortgages may not work, but it is a noble experiment.
While visitng Cal Poly Pomona, Lt. Governor Gavin Newsom commended San Bernardino, Fontana, and Ontario for joining together to try to make a positive impact in their communities by bring local ideas to bear on a depressed local real estate market. The plan, which has sparked controversy on Wall Street, calls for a Joint Powers Authority to purchase underwater mortgages via eminent domain, and then refinance them into market rate mortgages.
Wall Street banks have threatened to cut off access to credit not only for the cities involved, but residents in those cities. It’s a move that Newsom described as bullying and offensive. He joined other elected officials in asking US Attorney General Eric Holder to investigate such threats.
San Bernardino is one of the hardest hit areas in the country when it comes to home foreclosure and underwater mortgages. Many have expressed their opinions that by bailing out homeowners, more capital will be freed up for economic spending and boost the local economy.
The use of eminent domain may not work, says Newsom, but it’s worth a try.
Read the full story at the San Bernardino Sun.