Building on an idea first proposed in California, the City of Chicago will hold a hearing over using eminent domain to seize underwater mortgages.
The idea first came under consideration in San Bernardino County, Calif. Venture capital firm Mortgage Resolution Partners is pitching the idea to several cities across the country. Using investor dollars, local governments would seize performing mortgages in negative equity, reduce the principal for the borrower and refinance it into a government-backed loan. Under the MRP proposal, only loans on which payments were current would be eligible for the program, raising the question as to whether the anticipated discounts on value would result.
