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San Bernardino County Abandons Plan to Use Eminent Domain to Reduce Loan Principals

January 28, 2013

A panel formed by the County of San Bernardino has rejected the county's plan to reduce foreclosures by taking possession of homes through eminent domain. Vincent Howard and our Redlands foreclosure defense lawyers were interested to see that the plan has been abandoned, especially since it had attracted national attention. The county is in the Inland Empire, an area that has been especially hard-hit by foreclosures and the negative results of foreclosures, such as blight. It had been joined by the cities of Ontario and Fontana in considering the idea, but the Joint Powers Authority formed by the three local governments found that the plan was not popular enough in the community to justify the risks it could have introduced into the market. Fontana mayor Acquanetta Warren said she would continue to consider it.

The municipalities' eminent domain powers would have been used to seize the loans themselves, rather than the land they lay on. After taking control of the loans "for the public good," the municipalities would have written down the principal, likely to the current value of the homes. In the Inland Empire, where home prices have fallen substantially from the peak of the housing bubble, this could reduce many homeowners' monthly payments significantly. The idea came from Mortgage Resolution Partners of San Francisco, which continues to promote it to municipalities across the country. The rejection from San Bernardino County is a blow to the plan because the county was considered a good candidate, with tens of thousands of residents "underwater."

The chief executive of the county, Greg Devereaux, said the Joint Powers Authority felt that it should have more public support before making this move, because it could have created a lot of new risks that they weren't sure they could predict. This echoed criticisms from the financial industry, which said taking loans through eminent domain would create litigation, force them to make it harder to get a loan and raise interest rates. Not surprisingly, the financial industry praised the rejection of the eminent domain plan, saying it would have hurt the housing market and was likely unconstitutional. A spokesperson for the California Mortgage Bankers Association said it would work with communities to find "win-win solutions."

Vincent Howard and our Riverside foreclosure defense attorneys would like to see such cooperation, but our experience suggests that it's not common. We've worked with underwater borrowers since the beginning of the housing crisis, and we have not found loan servicers and lenders to be helpful in reducing foreclosures. In fact, we often file predatory lending lawsuits against lenders who broke the law when they originated the loan, and we deal regularly with people who were misled by loan servicers when their loans got into trouble. The financial industry does not like ideas like the eminent domain proposal because lenders stand to lose money. At Howard Law, P.C., our Chino Hills foreclosure defense lawyers believe that helping borrowers find a sustainable, reasonable monthly payment is a "win-win," even if the lender has to sacrifice some principal.

If you're having trouble making loan payments and your loan servicer has nothing but unhelpful, you should talk to Vincent Howard and the team at Howard Law about your legal options. You can call us toll-free at 1-800-872-5925 or send us a message online.

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