Plan would use eminent domain to reclaim 'underwater' IE mortgages

SAN BERNARDINO, Calif.

Struggling homeowners know how difficult it can be trying to get a loan modification. But in San Bernardino County, there could soon be another option. The county is talking about using the power of eminent domain -- not to take control of the house itself, but to take control of the mortgage instead.

"This isn't about taking anybody's home. This is about plucking a mortgage out of a pool that otherwise isn't going to be rewritten in order to keep people in their homes," said Greg Devereaux, chief executive officer of San Bernardino County.

If the county moves forward with this plan, it says it would start taking mortgages away from private equity groups first before going after banks.

Here's how it would work: The county would decide which homeowners are eligible. Then, using eminent domain, it would seize that home's mortgage, and then offer the homeowner a new loan at or even below current market value.

It's possible this plan could be challenged in court, but Devereaux says not only is it legal, but it's critical for the local economy.

"Until we start having homebuilding be healthy again in San Bernardino County, our economy is not going to get healthy," said Devereaux.

But the Association of Mortgage Investors says this would have a devastating impact on other people. The association said in a statement: "This program would jeopardize retirement benefits because a lot of mortgages are tied to people's 401(k) accounts."

Some area residents said it might be worth it.

At this point, only the cities of Fontana and Ontario, as well as unincorporated San Bernardino County are talking about taking part in this plan. If approved, it could go into effect by the end of the year.

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