A California city is moving forward with a controversial plan to save underwater homes using eminent domain, according to an NBC News report.
The Richmond, Calif., City Council voted Wednesday to set up a system to bring more cities into the plan, in which the city, in partnership with the private firm Mortgage Resolution Partners, would buy underwater mortgages, seizing the properties through eminent domain should the note-holders refuse to sell.
The plan has drawn fire from industry groups and government regulators, however. A group of investors including PIMCO and BlackRock last month sought a court order to block the plan. Mortgage bond trustees, including Wells Fargo and Deutsche Bank, filed a complaint questioning the plan’s constitutionality. And the Federal Housing Finance Administration has said it would pressure Fannie Mae and Freddie Mac to curtail or cease business anywhere such a plan was approved.
Legal concerns prompted the city of North Las Vegas, Nev., to kill a similar proposal earlier this month.
Richmond Mayor Gayle McLaughlin, however, said Wednesday she believes other cities will follow Richmond’s lead, NBC News reported. McLaughlin said that the Southern California city of El Monte has expressed interest in the proposal, and she believes other cities will follow suit.