Eminent Domain for Mortgages: Part 2

You may recall that a few weeks ago I reported that the city of Richmond, CA is considering using eminent domain to cure problems where homes are 'under water' in regards to their mortgages. Yesterday, the city council voted, 4-3, to proceed with the program. The idea is that if a lender wouldn't negotiate a modification to the loan on a particular property, the city would the use eminent domain to take over the mortgage and negotiate a lower rate and payments for it with another lender. Understandably, this has the lenders up in arms, and both Wells Fargo and Deutsche Bank have filed suit seeking a preliminary injunction to stop it. Meanwhile, even the city's vote is of questionable effect in terms of beginning the plan's operation. This is because in situations where city funds are involved, a majority of at least 5 votes is required, so the Council's vote yesterday is short. Opponents in Richmond are leery of the plan for fear of expensive lawsuits against the city from the lenders affected. Stay tuned--this may prove to be very interesting.