Wall Street warns against using eminent domain to seize underwater mortgages

Heavy hitters in the financial industry are lining up against a new idea brewing among local government officials to help struggling homeowners by seizing control of their mortgages through eminent domain. With many areas of the country still digging out from the housing crisis, some local governments are considering taking on the underwater mortgages at a substantially lower price, thus making them more affordable for the borrower. With policymakers at the federal, state and local level struggling to find a way to relieve the burden of unaffordable home loans, the eminent domain idea is being met with open ears. The receptive response to the idea has put the financial sector on high alert. Firms are warning that a governmental action to seize private property to reduce its value could throw the entire housing market off-kilter...more