For the better part of a year, we've been writing about the controversial proposal to use the power of eminent domain to condemn underwater mortgages, allowing homeowners to have a new loan that better reflects the underlying value of the property.
While the proposal originates from a private company, Mortgage Resolution Partners, much of the media attention focused on a single geographic location: San Bernardino County, where (at least according to the Wall Street Journal) Mortgage Resolution Partners claims 42,000 of the County's 59,000 privately held mortgages are underwater.
According to a January 24 Los Angeles Times article, San Bernardino County abandons eminent domain mortgage plan, the Joint Powers Authority formed last year by the County of San Bernardino, along with the Cities of Fontana and Ontario, voted unanimously not to move forward. According to the Authority's Chair, San Bernardino County Chief Executive Greg Devereaux, the plan simply did not garner enough public support. Moreover, according to the Times article:
Devereaux also echoed criticisms by the mortgage industry and Wall Street groups, who have argued such a plan would spark lawsuits, higher interest rates and a tightened market for borrowers.
Lest we assume that this is the final death blow to the proposal in San Bernardino County, at least one of the cities making up the Authority, Fontana, announced after the vote that it would continue to explore the idea on its own. As the Times reports:
"It would be irresponsible for the City of Fontana to not examine all options available to strengthen our community by helping our underwater homeowners," Fontana Mayor Acquanetta Warren said. "It is our intention to go forth aggressively to help find local solutions to Fontana's mortgage and foreclosure crisis."
Time will tell whether Fontana -- or any other California city -- will ever actually get so far as filing a condemnation action against a mortgage holder. Based on everything I've already written about this issue, my money remains on the side of "I doubt it." But hey, I've been wrong before.