Deep Politics Forum

'Eminent Domain for the People' Leaves Wall Street Furious

Housing justice advocates hopeful about innovative Richmond plan to use public seizure laws to save underwater homes from foreclosure

- Sarah Lazare, staff writer
Underwater Homeowners Press Conference in front of Richmond City Hall (Photo: ACCE)Using the authority of state government to actually help people has Wall Street bankers in a panic, spurring threats of aggressive legal retaliation against the town of Richmond, California simply for trying to help some of its struggling homeowners.

'Eminent domain' has long been a dirty term for housing justice advocates who have seen municipalities invoke public seizure laws to displace residents and communities to make way for highways, shopping malls, and other big dollar projects.
But in Richmond, city officials are using eminent domain to force big banks to stop foreclosing on people's homes in an innovative new strategy known as 'Principle Reduction' aimed at addressing California's burgeoning housing crisis.
Richmond became the first California city last week to move forward on a plan that has been floated by other California municipalities to ask big bank lenders to sell underwater mortgage loans at a discount to the city (if the owner consents), and seize those homes through eminent domain if the banks refuse. The city has committed to refinancing these homes for owners at their current value, not what is owed.
City officials launched this process by sending letters in late July to 32 banks and other mortgage owners offering to buy 624 underwater mortgages at the price the homes are worth, not what the owners owe.
"After years of waiting on the banks to offer up a more comprehensive fix or the federal government, we're stepping into the void to make it happen ourselves," Mayor Gayle McLaughlin said in late July.
Wall Street is furious at the plan and has vowed to sue the municipality, a threat that did not stop Richmond but did slow other California cities in adopting the strategy.
Big banks have been slammed for their damaging mortgage loan policies that target poor and working class people and communities of color with high risk loans, policies that have had a profound impact on Richmond, which has large latino, African American, and low-income communities.
Eminent domain laws also have a painful history in Richmond, but housing justice advocates are hopeful about this new twist on the seizure law.
"For years we have seen cases where eminent domain was used in a harmful way, and it really hurts low-income communities of color," David Sharples, local director for Contra Costa Alliance of Californians for Community Empowerment, told Common Dreams. "People here in Richmond talk about when they built the big 580 Freeway, and people had their houses taken and were displaced."
"But we see this as a way eminent domain is finally being used to help keep families in their homes," he added. "It is finally a way for it to be used in a good way."
https://www.commondreams.org/headline/2013/08/07-4

:thumbsup:What a wonderful twist on a heretofore oppressive concept. Hope this catches on.

Dawn

Quote:Wall Street is furious at the plan and has vowed to sue the municipality, a threat that did not stop Richmond but did slow other California cities in adopting the strategy.

:rocker: :poketongue:

Published on Thursday, August 8, 2013 by Common Dreams

In a Tizzy, Wall Street Banks File Suit over 'Eminent Domain for the People'

City consultant: "The financial institutions that brought us this crisis are yet again part of the problem rather than part of the solution"

- Sarah Lazare, staff writer

Richmond has been slammed by a severe housing crisis that has forced many from their homes (Photo: Justin Sullivan/Getty Images)

As threatened, Wall Street banks have now slammed the city of Richmond, California with a federal lawsuit in an attempt to block an innovative plan which would use local governmental authority of eminent domain to force banks not to foreclose on people's homes.

Housing justice advocates and government consultants say that banks are scared of a hopeful new strategy to curb the ongoing U.S. housing crisis, a solution they hope will spread beyond this poor and working class city of 100,000.

Filed by banking giants Wells Fargo & Co. and Deutsche Bank, and with the help of Fannie Mae and Freddie Mac, the suit followed a tizzy of public legal threats from big banks aimed at intimidating Richmond and other municipalities from pursuing such plans in the first place.

Richmond became the first California city last week to lay out the strategy of asking big bank lenders to sell underwater mortgage loans at a discount to the city (if the owner consents), and seize those homes through eminent domain if the banks refuse. Then, according to the plan, the city would refinance these homes for owners at their current value, not what is owed, thus reducing the mortgage burden for its citizens and helping to stabilize the housing market.

As previously reported by Common Dreams, the plan marks a new twist on eminent domain laws, which have been traditionally used by cities to displace poor and working class people and communities of color from their homes to make way for big money projects like stadiums and highways.

"If it happens and happens successfully, it will spread like a wildfire," Steven Gluckstern, chairman of Mortgage Resolution Partners which helped design the plan, told the Sacramento Bee. "That's one of the reasons the opposition is working so hard to prevent us from being successful."

"Sadly," he added, "the financial institutions that brought us this crisis are yet again part of the problem rather than part of the solution."

The Richmond initiative, which was won through sustained community organizing urging the government to address the severe housing crisis, appears to be gaining traction across the United States, with at least four other California municipalities considering the plan.