Richmond could be the first city to use eminent domain to address its housing crisis. (Justin Sullivan/Getty Images)
Richmond could be the first city to use eminent domain to address its housing crisis. (Justin Sullivan/Getty Images)

The City of Richmond is preparing to fight a lawsuit over its plans to save more than 600 homes with troubled mortgages by taking them through eminent domain.

The law firm Ropes & Gray filed the suit in federal court in San Francisco Wednesday on behalf of Wells Fargo and Deutsche Bank, calling the city’s move unprecedented and unconstitutional. The banks represent the bond investors, including government-backed  mortgage agencies Fannie  Mae and Freddie Mac,  holding the mortgages.

Richmond wants to refinance the loans under terms that the homeowners can afford. Mayor Gail McLaughlin says the city is acting on behalf of its struggling residents.

“We think that what the banks are doing is without merit,” McLaughlin says. “We do not fear the public courtroom, and we believe our legal reasoning will prevail outside the courtroom and inside the courtroom.”

The plantiffs say the move will benefit only a small group of Richmond locals and the San Francisco investment firm that’s helping the city.

If Richmond is successful, it will be the first city to use eminent domain to address its housing crisis. Eminent domain is a municipal power usually reserved for purchasing land for public use, such as sidewalks or parks.

About half of homeowners with mortgages in Richmond are underwater, some owing three to four times as much as they paid for their homes. City officials already have sent letters to homeowners offering to buy loans at a portion of their market value.

For example, a home purchased for $400,000 but valued at $200,000 would have its loan bought for $160,000 by the city. Other cities, including Seattle and San Bernardino, also have considered the strategy, which is opposed by bankers and realtor associations.

  • JWR

    Good for Richmond!

  • Russell Spears

    Somehow sociopathic righties think it is just great to use eminent
    domain to build a Second Walmart Store or a big new stadium over the
    land of homeowners….. I can’t
    wait to see this eminent domain being
    used to take back the 20% of the means of production that the
    capitalists have left empty for years now and hand it over to the
    community as Democratic Worker Ownerships.

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