The city council in Richmond, California, is forging ahead with their reverse eminent domain plans. Richmond formed a committee to approve condemnation actions and seize mortgages, thumbing their noses at pending lawsuits from lending heavyweights.
Richmond’s decision to move forward with the plan comes after lenders rejected the city’s August 2013 offer to purchase the mortgages at fair market value. Instead of selling the mortgages, lenders united to file suit against the city for violating constitutional protections for private contracts.
Richmond also faces opposition from several government and trade organizations, including the Federal Housing Finance Agency (FHFA) and the Securities Industry and Financial Markets Association (SIFMA).
first tuesday insight
Richmond is the only city to carry the proposal so far as to actually face a lender’s anticipatory lawsuit. It looks like Richmond’s determined to heal their negative equity blight — and lenders be damned.
For Richmond, a public welfare issue is involved, as well as an economic one for owners unable to sell or be solvent. Fair market value is all the mortgages are worth. Everyone knows this, and the courts will enforce it as the price to be paid by the city for taking the mortgages.
A financial crisis always results in changes which level the playing field, correcting distortions on both ends of the issues and restricting future chaos. Lenders, however, only see change as a public issue when they suffer losses (at which point they socialize their losses and we, the taxpayers, pay).
first tuesday has reported on this saga from its beginning last year. Follow the story as we continue to report new developments in Richmond’s battle against negative-equity homeownership as a known blight on their community.
Re: “Richmond, California, Advances Mortgage Reduction Plan” from Bloomberg, “Why Wall Street Is Very, Very Angry at Richmond, California, Right Now” from The Atlantic Cities and “Why a Small California City Could Be Wall Street’s Worst Nightmare” from Mother Jones.