Curious about the buzz Richmond, CA has been receiving? The city recently proposed using eminent domain as a solution to its bevy of underwater homes–the first real-world application of a strategy created by Century Foundation fellow Robert Hockett.
A new video from The Century Foundation explains how Hockett’s proposal would work.
How Do We Rescue Underwater Mortgages? from The Century Foundation on Vimeo.
The short version: cities could use their powers of eminent domain to create Eminent Domain Trusts (EDTs). Using funds from private and public investors, EDTs would compensate mortgage holders at fair market value.
Individual mortgages could then be written down, enabling homeowners to regain positive equity. Those of you interested in getting into the plan's details can head over to our Q&A with Hockett.
EDTs are a win-win solution, with homeowners gaining financial security and investors gaining valuable loans.
Underwater mortgages remain a huge problem. Six years after the housing bubble burst, more than one in five home mortgages are still “underwater,” with families owing more than their houses are actually worth.
In many cases–like Richmond, CA–entire neighborhoods are filled with underwater homes. These neighborhood-wide defaults can easily cripple cities.
Richmond intends to seize 634 underwater mortgages under its eminent domain plan. As that city banishes the specter of mass default and foreclosure costs, it should inspire cities across the U.S. to move forward with EDT plans and towards a thriving economy.