By Alejandro Lazo | Los Angeles Times
Cities in the Golden State are once again testing a controversial mortgage relief plan that could use local eminent domain powers to help residents stung by the last housing crisis.
El Monte is the latest city to weigh the plan — opposed by the financial industry but embraced by some housing advocates and city councils.
California became the center of the national debate over the idea last year when San Bernardino County and two of its cities, Ontario and Fontana, toyed with adopting the strategy. But the Inland Empire communities ultimately shelved the plan, marketed by San Francisco firm Mortgage Resolution Partners, after Wall Street groups voiced strong opposition and little public support materialized.
Now the idea is gaining traction again, with the city of Richmond, Calif., last week becoming the first to press forward. The hardscrabble Bay Area city announced that it had asked the holders of more than 620 underwater mortgages — on which the borrower owes more than the home is worth — to sell the loans to the city at a discount. The city would then write down the debt and refinance the loans for amounts in line with current home values.
If lenders refuse, the city could use eminent domain powers to force the transaction, a move widely expected to bring lawsuits from the financial industry.
