Calif. City OK With Seizing Mortgages From Banks

Eminent domain is usually used to seize homes from people, but Richmond, California, in the early hours of this morning gave a tentative green light to a plan that would use it to keep people in their homes. In a contentious 4-3 vote, the city council voted to continue pursuing a plan under which it would offer to buy and modify 624 underwater mortgages from banks—and use eminent domain to seize them if the banks refused, CBS 5 reports. Some 300 residents showed up for the meeting last night, the San Francisco Chronicle reports, with many wearing a yellow or red shirt to signal their stance on the issue.

The council also rejected a proposal to force the investment firm it's partnering with, Mortgage Resolution Partners, to provide insurance against lawsuits from unhappy lenders. Wells Fargo and Deutsche Bank have preemptively sued, in a case that hits court tomorrow. MRP has proposed similar programs elsewhere, but financial industry outrage has prevented it, Reuters explains. But Richmond has an eager Green Party mayor, Gayle McLaughlin, and about half its homeowners are underwater, owing more than their homes are worth. Other towns have also expressed interest in eventually joining in. (More Richmond, California stories.)