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.